Many bitcoin miners are struggling to make a profit during this market cycle due to declining revenue, so they need to switch to AI hosting or leverage their assets to generate revenue, market maker Wintermute says.
In a blog post on Thursday, Wintermute said that Bitcoin (BTC) miners have spent years building a large infrastructure to power low-cost energy markets, and now they are “exactly what the AI industry needs quickly and cannot easily replicate.”
It says that bitcoin mining is a “structurally rigid business model” and that while the AI wheel is an interesting one, it is also “an extreme and capital-intensive step”.
The report comes as mining giant MARA Holdings is AI’s latest, filing with the SEC on March 3 to indicate its intention to sell some of its BTC to transition to the technology. Meanwhile, publicly listed miners have sold more than 15,000 Bitcoins since October.
Miners hanging on to Bitcoin are a “legacy of the HODL era”.
Wintermuth said that bitcoin miners collectively hold about 1% of the total BTC supply, which he sees as a “legacy of the HODL era” and that “the full treasury management suite remains largely underutilized.”
Crypto yield generation has traditionally been limited to staking and DeFi, but Wintermute said miners can generate yield through active management, such as monetizing market risk through derivative structures, covered calls and cash staking.
Passive management options include placing BTC in lending protocols to earn interest.
“We believe active balance sheet management is the most underutilized lever for miners and it deserves more strategic attention,” Wintermuth said. “Miners who treat their BTC holdings as a working asset, not a passive reserve.”
related to: Mining companies move deeper into AI, HPC as MARA can sell Bitcoin
Wintermuth said that for the first time in a four-year market cycle, Bitcoin failed to double its price to compensate for the decline in revenue, and gross margins reached levels that previously marked the floors of the bear market.
In addition, the transaction fee market has not filled the gap because it is “episodic” and not structured. At the same time, electricity costs reduce margins.
The company noted that the data shows that this compression is different from the previous periods in 2018 and 2022, describing it as a “healthy change” that fits the design of Bitcoin and makes the mining industry “more efficient” as a result.
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