Bitcoin miners, after a period of underperformance, are showing signs of a potential resurgence due to a surprising alliance with the artificial intelligence (AI) industry. Matthew Sigel, VanEck’s head of digital assets research, shared this insight in a recent CNBC interview, suggesting that the large-scale selling pressure on Bitcoin has likely subsided.
Bitcoin itself has rallied by about 35% this year, while Bitcoin miners’ stocks have remained relatively flat. This divergence is atypical, as miners usually experience higher volatility and returns compared to the underlying cryptocurrency. Sigel attributes the recent sell-off in miner stocks to factors like a lack of investor interest, high beta (sensitivity to market movements), and the unwinding of carry trades.
However, the landscape is shifting. Bitcoin miners are increasingly announcing lucrative deals with AI companies, particularly hyperscalers. These deals involve repurposing mining facilities to power AI operations, capitalizing on the miners’ existing grid connections and infrastructure. Sigel believes that even repurposing a small portion of their capacity could significantly boost these companies’ valuations.
The AI boom has created a surge in demand for energy, as GPUs consume significantly more power than traditional CPUs. With grid connection wait times stretching up to four years in some areas, Bitcoin miners offer a ready solution. Their facilities can be adapted for AI use in a fraction of the time, offering substantial cost and time savings.
These AI deals not only provide a new revenue stream but also improve the financial health of Bitcoin miners. Many of these companies have struggled with debt or frequent equity issuance, but the AI partnerships offer a more sustainable financing model.
Sigel also shared his perspective on the broader cryptocurrency market. He noted that Bitcoin’s recent underperformance compared to gold can be attributed to several factors, including the unwinding of carry trades, a correlation with the struggling tech sector, and significant selling pressure from entities like the German and US governments, as well as bankruptcies like Mt. Gox and Genesis.
Despite these challenges, Sigel remains optimistic about Bitcoin’s future. He pointed out that the cryptocurrency typically experiences a lull after halving events (which reduce the rate of new Bitcoin creation) and in the lead-up to elections. However, historical patterns suggest that Bitcoin tends to rebound strongly after these periods.
