Many Bitcoin miners are struggling to turn a profit this market cycle due to diminishing returns, so they may need to pivot to artificial intelligence hosting or put their holdings to work to generate yields, says market maker Wintermute.
Wintermute said in a blog post on Thursday that Bitcoin ($BTC) miners have spent years building large-scale power infrastructure in low-cost energy markets, and they now find themselves “sitting on exactly what the AI industry needs most urgently and cannot easily replicate.”
It said that Bitcoin mining is a “structurally rigid business model,” and while the AI pivot is a compelling one, it is also a “drastic and capital-intensive step.”
The report comes as mining giant MARA Holdings is the latest to eye AI, filing with the SEC on March 3 to signal its intent to sell some of its $BTC to pivot to the technology. Meanwhile, publicly listed miners have sold more than 15,000 Bitcoin since October.
Miners hanging onto Bitcoin is “legacy of the HODL era”
Wintermute said that Bitcoin miners are collectively holding close to 1% of the total $BTC supply, which it argued was a “legacy of the HODL era,” and that the “full toolkit of treasury management remains largely untapped.”
Crypto yield generation has been traditionally limited to staking and DeFi, but Wintermute said miners could tap yields through active management, such as monetizing market risk through derivatives structures, covered calls, and cash-secured puts.
Passive management options include deploying $BTC into lending protocols to earn interest.
Bitcoin revenue and gross margins are way down from previous cycles (epochs). Source: Wintermute
“We believe active balance sheet management is the most underutilized lever available to miners and one that deserves far greater strategic attention,” Wintermute said. “The miners who treat their $BTC holdings as a working asset rather than a passive reserve will carry a structural edge into the next halving.”
Related: Mining companies move deeper into AI, HPC as MARA may sell Bitcoin
Wintermute said that for the first time in a four-year market cycle, Bitcoin has failed to deliver the two-times price return needed to offset halving-driven revenue cuts, and gross margins have peaked at levels that previously marked bear market floors.
Additionally, the transaction fee market has not filled the gap as it is “episodic” and not structural. At the same time, energy costs continue to squeeze margins.
The company noted that data suggests this squeeze is unlike previous cycles in 2018 and 2022, describing it as a “healthy shakeup” that fits within the design of Bitcoin and will make the mining industry “more efficient as a result.”
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