If you were to look at the Q4 Bitcoin mining earnings, it would be easy for you to think that everything has been smooth.
A recent JP Morgan study found that Bitcoin miners publicly traded in stock markets lost $23 Billion off of their market cap over the course of the month.
The price of Bitcoin started February at $102,000, then dropped to $78,000 as markets were roiled by Donald Trump’s talk about a trade war.
Stock analysts said that they do not just hope for Bitcoin to rise in price. Decrypt The mining industry is keeping a watchful eye on the data center market, energy prices and ways to make their fleets more efficient.
At the start of the week, Hut 8 reported $162.4 million revenue for 2024—a 69% increase compared to 2023, the company said. Mike Colonnese is a senior crypto analyst and managing director at H.C. Wainwright. He’s optimistic, but not because of that.
“We think Hut 8 is close to signing a major HPC/AI deal with a hyperscaler,” He said Decrypt. “The company would build and operate an HPC/AI data center for a client in a colocation type of model where Hut would generate long-term high margin revenues from a tenant for managing the infrastructure in which that tenant’s GPUs are deployed to run AI workloads.”
The company’s report also stated that they had managed to reduce their energy costs by 30%. This helped the company achieve an increase of 8 points in its gross margin for each Bitcoin mined when comparing Q4 2020 to last year.
This is no small feat, especially when the Bitcoin Network underwent its 4th halving in 2014 and the block reward to miners was slashed by 50%.
Colonnese believes that mining costs in general will increase in 2025 as the difficulty of the network continues to rise along with the growth in network hash rates and because there is no significant upgrade to most popular mining equipment on the horizon.
“However, I expect BTC price appreciation to outpace growth in difficulty,” He added. “so miners should benefit from a significant improvement in mining economics in 2025.”
Nishant Sharma says it is important to monitor how bitcoin miners handle their overhead. He uses a concept he coined, hashcost. The hashcost is calculated by calculating the efficiency of the mining fleet and how much it costs to run Bitcoin mining machines.
Sharma, formerly of Bitcoin mining rig behemoth Bitmain, is the founder of communications and research firm for the mining industry Blocksbridge Capital.
“This provides a clearer picture of how cost-effectively the company mines Bitcoin,” He said Decrypt. “However, when assessing a mining company's stock, investors should look beyond just mining efficiency.”
He noted that many mining companies like Hut 8 have already diversified their revenue streams, by providing data centers to clients in the AI and High-Performance Computing (HPC). This isn’t the only solution.
Core Scientific and others have worked to develop their own ASIC chip. “These strategic moves introduce additional factors that investors must weigh based on their investment thesis and outlook,” He added.
ASICs, application-specific integrated chips, are the most important chip for optimizing hardware to mine crypto. This is what makes the mining rigs more efficient than using a PC to mine crypto.
Core Scientific revealed in 2024 it would team up with Jack Dorsey Block Inc. for the development of ASIC chip. Investors can expect to see these ASIC chips soon.
“We do not expect to increase or refresh our Bitcoin mining fleet until we procure the new Block ASIC chips in the second half of 2025,” Denise Sterling is the Chief Financial Officer of Core Scientific. She said this during Core Scientific’s quarterly earnings call.
Max Shannon told me that Core Science’s quarterly earnings call had been otherwise not remarkable. Shannon is an investor at the crypto firm CoinShares.
“On the mining front, performance was unimpressive and, in fact, slightly deteriorated,” He told Decrypt. “However, the high-performance computing (HPC) segment delivered strong results, with notable client interest.”
Core Scientific announced this week that it had signed a deal worth $1.7 billion with AI hyperscaler CoreWeave. The two companies completed an expansion worth $1.2 billion at a Texas-based data center just last month.
He also said that he was keeping an eye out for Bitdeer, a Bitcoin miner who is now specializing in manufacturing. He said that its SEALminer a2 rigs had already captured approximately 5% market share, based on future projected hashrate increases.
“We believe this could increase further over time,” Shannon said. “This segment offers greater operational flexibility, as the company can utilize machines at cost rather than purchasing at market prices, reducing expenditure.”
Guillermo Jimenez edited the book.
