Opinion: Fakhul Miah, Managing Director, Gomining Institutional
Bitcoin (BTC) mining has never been more attractive to institutional investors. The fintech giant is investing in Bitcoin mining rather than simply accumulating assets, thanks to the US’s lucrative regulatory environment and the profitability margins of BTC.
Since then, many companies have diversified by assigning their computing power to AI, further strengthening economics and thus strengthening the appeal of investment. For now, it appears that the future of the basics of the Bitcoin network could mark a new era of Gasher.
Is Bitcoin mining beneficial?
Bitcoin mining is still beneficial. Coinshares, a digital asset investment company, shared that the average cost of 1 BTC for US listed miners reached $55,950 in the third quarter of 2024.
On the very same day on February 20th, Macromicro.ME data shows that there is an average cost to produce one BTC hover, over $92,000. GlassNode’s difficulty regression model estimates the cost of mining a Cryptocurrency at around $98,300 on that day, with one BTC of about $34,400.
On a global scale, mining costs vary based on region. For example, the electricity cost to produce one BTC in Ireland is around $321,000, while it’s just over $1,300 to mine one BTC in Iran. Electricity is just part of the equation. Hardware, labor costs and maintenance costs also play important roles.
Recent data from Coinshares and Macromicro.Me draws challenging yet subtle pictures for US Bitcoin miners. While some institutional miners are still profitable, the wider landscape reveals an increased operational pressure that could restructure the mining industry.
What if the issue is not addressed? Profitable mining agencies can begin to expand their operations, attracting miners struggling with bargain prices, putting retailers and small miners at risk.
Sustainable economics for investment appeal
In addition to receiving block rewards, miners also benefit from trading fees on Bitcoin networks, which rely on network use. Data shows that daily Bitcoin trading fees have hovered between $360,000 and $1.3 million over the past month, reaching an average of $595,000 each day.
This additional revenue stream bolsters the economic appeal of Bitcoin mining and enhances the resilience of the mining business model by diversifying revenue streams.
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Mining is not the only place where mining hardware is used. With high calculation power, prisoner power and ready-made infrastructure, miners are uniquely equipped to support AI and high-performance computing. Simply put, mining companies can now rent hardware and handle AI tasks, rather than focusing solely on Bitcoin.
The combination of revenue growth in transaction fees and diversification in AI computing creates a more resilient and profitable industrial model (the existing industrial model has not been very appealing to institutional investment in the US).
Increasing institutional investment
The attractive revenues of Bitcoin mining have attracted a lot of attention from institutional investors. This process is easy to find. The US Bitcoin Mining Pool accounted for more than 40% of the global Bitcoin network’s hashrate in 2024.
A survey by Ey-Parthenon and Coinbase shows that 83% of 352 global institutions plan to increase their crypto allocation this year, while 51% of asset managers are considering investing in digital asset companies, including mining companies. That’s why it’s not surprising to see massive investments in riot platforms, CoreWeave and other players in the mining industry.
Advantageous market sentiment paves the way for more early public offerings (IPOs) and specialized funds targeting mining companies. In addition to securing a $650 million investment, CoreWeave aims to publish it at a $4 billion IPO to help an NVIDIA-backed company get a $35 billion valuation.
Bgin Blockchain, a Singapore-based Crypto Miner manufacturer, recently submitted it for release to the US. Investment advisory firm Renaissance Capital hopes that BGIN blockchain will raise $50 million in its IPO.
This surge in institutional momentum is set to benefit Bitcoin mining by increasing demand and tightening the available supply in the market. As larger players accumulate and hold Bitcoin, the market rarity increases, supporting higher prices, and thus increasing profitability for the miners.
Optimism for the future is more than concrete
After Donald Trump won the US presidential election in November 2024, the optimism around code-friendly policies has increased dramatically, resulting in strong support from institutional investors.
The company established a strategic Bitcoin Reserve in early March, which was considered a major policy change, causing positive tests in the crypto and mining sectors. This sector has become important. Last year, the Bitcoin mining business contributed significantly to the US economy, generating approximately $4.1 billion in domestic production and creating more than 31,000 jobs nationwide. The industry is also revitalizing rural areas by generating tax revenue and reusing remote areas for mining operations. It sounds like the era of the oil industry erupting a century ago.
Latest investments, leadership appointments and IPOs show that Bitcoin mining companies have a significant tailwind. On the other hand, they no longer are about BTC, but become data infrastructure providers for the AI sector and giants of hybrid data processing.
Using this shift, the US could potentially become a leader in the digital assets and Bitcoin mining space due to the Trump administration’s custody stance, achieving its stated goal of being “world crypto capital.”
As institutions double the convergence of Bitcoin mining and AI, the question is not that the industry evolves, but who leads the bill. A modern digital gold rush is underway, and the smartest capitals have already argued for it.
Opinion: Fakhul Miah, Managing Director, Gomining Institutional.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
