Bitcoin Miners Choose Between Hodling and AI Strategies Post Halving
Following the Bitcoin halving in April, major Bitcoin miners are faced with a decision between two strategies — hodling the BTC they mine or investing in artificial intelligence (AI). The halving event reduces miners’ earnings by half every four years, serving as a deflationary mechanism to uphold the hard cap of 21 million Bitcoin.
Well-known public miners such as MARA Holdings, Riot Platforms, and CleanSpark have opted to hodl the BTC they mine, anticipating a potential increase in its value over time.
Wolfie Zhao, an analyst at research firm TheMinerMag, explained to Bloomberg:
“By refraining from selling Bitcoin immediately at a loss, miners can keep their losses unrealized and position themselves for gains in case of a bullish market trend.”
On the other hand, the prevailing strategy among crypto mining stock traders involves investing in AI technologies. For example, Core Scientific’s stock witnessed a significant surge following the announcement of multi-billion-dollar contracts with AI startup CoreWeave. This success story comes after Core Scientific successfully emerged from bankruptcy earlier this year.
Conversely, stocks of miners like MARA and Riot, who are focusing on hodling BTC, have experienced declines of 20% and 36% respectively this year. In contrast, companies like Iris Energy and Bit Digital, which have directed their investments towards AI, have shown more favorable stock performance compared to those holding BTC.
While hodling BTC may seem like a viable strategy for miners such as MARA and Clean Spark, who are running profitable operations, it is crucial to consider the risks involved, especially in a volatile market environment.
With the resurgence of the Bitcoin market, miners have once again resorted to borrowing and issuing more shares. Companies like MARA are utilizing these funds to acquire more cryptocurrency, taking a page from the playbook of MicroStrategy.
However, Ethan Vera, the chief operating officer at Luxor Technology, a Bitcoin mining software and services firm, issued a word of caution:
“While hodling may yield significant profits in a bullish market, it can result in catastrophic losses if Bitcoin prices plummet. Miners must be wary of the potential consequences, including negative profits and operational challenges.”