Shares of bitcoin miners are, not surprisingly, highly correlated to spot bitcoin prices. With that trait in mind, it’s expected that these stocks ebb and flow with the largest cryptocurrency.
For the stocks and exchange traded funds such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO), those correlations are double-edged swords. They’re great when Bitcoin is rising and dangerous when the token slumps.
Those dangers were on display during the crypto winter of 2022. It appears some crypto miners, including some SATO holdings, learned a valuable lesson and working to diversify their revenue streams. Alone, that’s a positive. But when considering where some SATO member firms are turning to broaden sales avenues, the allure increases. They’re turning to artificial intelligence (AI).
Mining-to-AI Transition Makes Sense
Experienced investors know that bitcoin mining is a technology-intensive industry, requiring expensive, sophisticated semiconductors and high-level computing power. Because SATO holdings already possess those wares, the transition to the AI realm is practical and smooth.
Additionally, both bitcoin mining and AI require language learning models, meaning the former industry has synergies with the latter. In fact, a recent report by JPMorgan indicates that some miners have recently been selling crypto holdings to speed up AI entries.
“With the rapid growth of AI, the increased demand for HPC is now opening a new and perhaps more profitable avenue for utilizing GPUs previously used for Ethereum mining,” according to the bank.
“HPC” means high-performance computing – a staple of both crypto mining and AI. Currently, some bitcoin and ethereum miners are testing established HPC capabilities to see if they’re AI-ready. Importantly, initial testing is revealing profitability – something that’s often evasive in the crypto mining space.
“In these beta tests, miners are reporting high profitability per unit of power consumption, much above the profitability from bitcoin mining. With bitcoin miners having already secured more than 100MW of long-term contracts with their power grids, if the profitability reported in beta tests is able to be repeated in large scale it would overshadow in the future the revenues coming from bitcoin mining at the moment,” added JPMorgan.
Miners’ ability to find new sources of revenue is important for another reason. The 2024 bitcoin halving is expected to make the mining process of the largest digital currency costlier and less rewarding. That could be all the impetus some SATO constituents need to forge further into AI.
For more news, information, and analysis, visit the Crypto Channel.
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