Bitcoin
Crypto Catches M&A Frenzy as Bitcoin Miners Chase AI Boom
Whinstone CEO Chad Harris takes CNBC on a tour of North America’s largest bitcoin mine.
Meanwhile, mining companies need to diversify. Following the bitcoin halving In April, an event that happens roughly once every four years, the business of generating new tokens became much less profitable. JPMorgan Chase analysts wrote in a report earlier this month that “some traders are feeling the financial pinch from the recent block reward halving, which cut industry revenues in half, and are actively exploring exit strategies.”
With the burgeoning AI industry in need of capacity and bitcoin miners looking for new ways to generate returns on their hefty capital investments, mergers, financings and partnerships are coming together quickly.
On Tuesday, US bitcoin miner Scientific Center announced an expanded agreement with CoreWeaveone NvidiaThe backed startup is one of the chipmaker’s main suppliers of technology for running AI models. Core Scientific will provide 70 megawatts of computing infrastructure to support CoreWeave’s operations.
Scientific Center said the agreement The deal will generate an additional $1.2 billion in revenue over 12 years, in addition to an existing deal expected to generate $3.5 billion. In total, the company plans to deliver approximately 270 megawatts of infrastructure to CoreWeave by the second half of 2025, with the possibility of adding an additional 230 megawatts to other Core Scientific facilities.
Earlier this month, CoreWeave offered to buy Core Scientific for $1.02 billion, not long after the initial deal. Core Scientific rejected the offer. The company, which returned to the public market in January, after going through bankruptcy, it is currently worth about $1.8 billion.
“The world is changing, and many data centers built in the last 20 years are not well-suited to support future computing requirements,” Core Scientific CEO Adam Sullivan said in Tuesday’s press release.
A day before this announcement, bitcoin mining group Hut 8 said this raised $150 million in debt from private equity firm Coatue to help develop your data center portfolio for AI.
Cabin 8based in Miami, is one of many cryptocurrency mining companies that are moving towards AI. The company said in its first quarter earnings report last month that it had purchased its first batch of 1,000 graphics processing units (GPUs) from Nvidia and secured a customer deal with a venture capital-backed AI cloud platform. Hut 8 generates 6% of sales with AI, according to CoinShares.
“The broader market is beginning to appreciate the scarcity of high-quality energy assets, and Hut 8 has built a deep pipeline of highly attractive expansion assets,” Coatue partner Robert Yin said in the funding announcement.
Cabana 8 CEO Asher Genoot recently told CNBC that his company has “finalized commercial agreements for our new AI segment under a GPU-as-a-service model, including a customer agreement that provides for fixed infrastructure payments in addition to revenue sharing.”
Bit Digital, a bitcoin mining company that now derives about 27% of its revenue from AI, he said on Monday that it had reached a deal with a customer to supply 2,048 Nvidia GPUs over three years, doubling the number of processors it supplies to the unspecified customer.
To fulfill the contract, Bit Digital ordered 256 servers from Dell Technologies, and will soon deploy them in a data center in Iceland. The company said the contract is expected to generate $92 million in annual revenue. It’s paying for the GPUs, in part, by dumping some cryptocurrencies.
“The company intends to fund the deal with a mix of cash and on-balance sheet digital assets,” Bit Digital said.
Bit Digital has also entered into a so-called sale-leaseback agreement for half of the new GPUs, “which will proportionally reduce the company’s capital outlay.” With the lease, another company owns those GPUs and Bit Digital leases them back, generating revenue by providing the technology to customers.
People wait in line for T-shirts at a pop-up kiosk for online brokerage Robinhood on Wall Street after the company went public with an IPO early July 29, 2021 in New York City.
Spencer Platt | Getty Images
The combined market capitalization of the top 14 U.S.-listed bitcoin miners tracked by JPMorgan hit a record $22.8 billion on June 15 — adding $4.4 billion in just two weeks, according to a June 17 research note from the bank.
The mining space, more broadly, has been going through a period of consolidation. On Thursday, bitcoin miner CleanSpark reached a deal to acquire a rival company GRID for $155 million in an all-stock deal.
GRIID shares plunged more than 50% on news of the deal, after soaring more than 400% ahead of the news amid speculation of a takeover.
And while most recent crypto deals involve miners, there has been at least one major notable exception.
Earlier this month, trading platform Robinhood agreed with a agreement to buy Bitstampa Luxembourg-based cryptocurrency exchange, for around $200 million in cash.
Bitstamp holds 50 active licenses and registrations worldwide and is popular in Europe and Asia. Buying helps Robinhooda retail-focused trading app, bolsters its crypto operation to better take on Binance and Coin base.
The deal, which is expected to close next year, comes as Robinhood faces regulatory challenges in the US over its crypto trading. In May, the company said he received a warning from Wells for their crypto operations. The Securities and Exchange Commission has also sued Coinbase and Binance.
Robinhood had $4.7 billion in cash and cash equivalents at the end of the first quarter. Its shares are up 75% this year.