Bitcoin
Cryptocurrencies catch 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 has become much less profitable. Analysts at JPMorgan Chase wrote in a report earlier this month that “some operators 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 growing AI sector in need of capacity and bitcoin miners looking for new ways to generate returns on their large capital investments, mergers, financings and partnerships are materializing rapidly.
On Tuesday, US bitcoin miner Scientific Center announced an expanded agreement with CoreWeaveone Nvidia-backed startup that is one of the chipmaker’s leading providers of technology to run AI models. Core Scientific will provide 70 megawatts of computing infrastructure to support CoreWeave’s operations.
Scientific Center said the deal 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 fit 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 that raised $150 million in debt from private equity firm Coatue to help you build your AI data center portfolio.
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.
Asher Genoot, CEO of Hut 8 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 entered into an agreement with a customer to supply 2,048 Nvidia GPUs over three years, doubling the number of processors supplied to the unspecified customer.
To fulfill the contract, Bit Digital ordered 256 servers from Dell Technologiesand 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 is paying for the GPUs, in part, by ditching some cryptocurrencies.
“The company intends to finance the deal with a mix of cash and digital assets on the balance sheet,” 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 to buy T-shirts at a pop-up kiosk of 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 up to $4.4 billion in just two weeks, according to a note from June 17 bank survey.
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 previously rising more than 400% before the news amid speculation of a takeover.
And while most recent cryptocurrency deals involve miners, there has been at least one major notable exception.
Earlier this month, the trading platform Robinhood agreed to 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 Coinbase.
The deal, expected to close next year, comes as Robinhood faces regulatory challenges in the US over its cryptocurrency trading. In May, the company said he received a warning from Wells for its 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.