🤝 An Outlook: HPC and Bitcoin Mining

🟩 Bitcoin Mining Shifting to HPC or Operating in Symbiosis?

High-Performance-Computing (HPC) is reshaping U.S. energy markets as datacenters gear up to meet the insatiable demand driven by artificial intelligence (AI). The integration of HPC into these facilities is set to double U.S. datacenter energy usage to 35 GW by 2030, driven by the intensive computational needs of AI technologies like large language models.

Major players like AWS are investing billions in new data centers to meet AI's computational demands. Unlike Bitcoin mining, which prioritizes low-cost power for profitability, HPC data centers focus on terminal value by achieving superior AI performance and predictive outcomes, showing a willingness to spend more on computing power. This shift presents an opportunity for Bitcoin miners and we have seen many pure-play Bitcoin miners diversifying their datacenters:

• Core Scientific - signed a $3.5b hosting deal over 12 years with CoreWeave for 200 MW.

• Applied Digital - one of the first to pivot to HPC datacenters

• Bit Digital - Targeting $100m annualized revenue run-rate from HPC by the end of 2024

• Bitdeer - Constructing HPC cluster

• Hive - Targeted $25m annualized run-rate from HPC as of Q1 2024

• Hut 8 - Launched with $20m annual run-rate contract earlier this year

• Iris Energy - Expects $14-17m in annual revenue from AI cloud services

These hybrids can benefit from a data center with a symbiosis of HPC and Bitcoin mining. Bitcoin mining may help data centers monetize unused power between AI jobs or during low-demand HPC periods, optimizing energy usage and enhancing profitability. By leveraging artificial intelligence algorithms, data centers can maximize their power contracts by running HPC jobs when available, mining Bitcoin when returns are high, or curtailing power usage based on grid pricing.

The Core Scientific/CoreWeave deal underscores the escalating power requirements of HPC providers. H.C. Wainwright analyst Kevin Dede highlights the critical need for HPC and the limited availability of swiftly deployable power, making hosting with Bitcoin miners a great option. Core currently possesses 1.2 GW of power, with adaptable infrastructure to meet HPC demands. This flexibility not only alleviates financial constraints for AI companies but also accelerates processor deployment, crucial for maintaining a competitive edge in AI-driven industries.

In conclusion, the convergence of HPC for AI with Bitcoin mining signifies a transformative shift in datacenter dynamics. It not only addresses the escalating computational demands of AI but also presents opportunities to optimize energy usage and operational flexibility in a rapidly evolving energy landscape.

📝 Analysis: Core -Scientific and -Weave

Core announced their plan to add 300 MW of HPC infrastructure and an existing 200 MW committed with CoreWeave. The expansion aims to generate up to $3.5 billion in revenue over a 12-year contract, with potential for two five-year extensions.

Core offers a straightforward hosting model where earnings are guaranteed at $0.085 per kWh over 12 years. This stable and predictable income stream contrasts with the uncertainties of pure-play mining.

For pure-play Bitcoin mining:

• Operational expenses (OPEX) are estimated at $0.075/kWh.

• Capital expenses (CAPEX) for ASIC upgrades are estimated at $0.04/kWh.

Thus, the total expenses for pure-play mining are $0.075 (OPEX) + $0.04 (CAPEX) = $0.111/kWh.

To be more profitable than the hosting model:

• pure-play Bitcoin miners must earn at least $0.085 (Profit from hosting) + $0.111 (Total Expenses) = $0.196 per kWh.

ASIC revenue comparison 

• Current earnings from top-line ASICs, such as the S21 at approximately $0.13 per kWh, indicate profitability, but they need to exceed $0.196 per kWh consistently to justify mining over hosting.

Historical data on ASIC prices and revenue trends show that while new ASICs initially yield high revenues (indicated by the dotted purple line), these decrease over time as newer models enter the market, reducing profitability. This creates a challenging environment for pure-play Bitcoin miners to sustain high earnings over the long term.

Timing is critical in mining profitability, with only select ASIC models like the S9 and S19 averaging revenues over $0.20 per kWh throughout their operational lifetimes. Most models struggle to maintain profitability above this threshold, especially without significant Bitcoin price increases.

In conclusion, Core Scientific’s hosting model provides a stable and attractive alternative to the volatile world of pure-play mining. The guaranteed $0.085 per kWh profit over 12 years offers reliability and avoids the risks associated with mining, such as rapid technological obsolescence and fluctuating Bitcoin prices.

Thanks to @Penny_ether for the analysis.

⛏️ In the News

In recent developments within the Bitcoin mining sector, Riot Platforms has launched a direct challenge against Bitfarms, criticizing its implementation of a poison pill strategy amidst Riot's ongoing takeover bid. Riot also reported having picked up another 0.35% of shares in the market yesterday.

Meanwhile, Bitfarms announced a significant expansion initiative, agreeing to develop 120 MW of capacity in the United States. This move is part of their broader strategy to ramp up operations, with projections indicating they aim to achieve over 35 EH/s by 2025.

In a separate arena, former U.S. President Donald Trump has voiced support for increasing domestic production of Bitcoin. He articulated a desire for all remaining Bitcoin to be “Made in USA” 😀 further reflecting his newfound support for Bitcoin.

Once again, Greenpeace is on their soapbox about Bitcoin mining emissions, aiming for Wall Street with a serious tone. They seem continually focused on highlighting the challenges without wanting to understand the benefits, emphasizing sustainability and corporate responsibility in the cryptocurrency industry.

💰️ May Update

🐝 HIVE Mined 119 Bitcoin

• The company expanded its HODL position by 3% to reach 2,451 Bitcoins by the end of May.

• Operational efficiency remained strong with an average of 24.5 Bitcoin mined per EH/s and a consistent 5.0 EH/s mining capacity throughout May.

• By June 9, 2024, HIVE's HODL position grew further to 2,468 BTC, demonstrating ongoing asset growth.

• An acquisition announcement highlighted plans to add 1,000 Bitmain S21 Pro Antminers, expected to enhance mining efficiency and increase operational capacity.

• The company remained on track to achieve its interim goal of 5.5 EH/s mining capacity and optimize global fleet efficiency to 25 Joules per Terahash (J/TH), enhancing overall operational performance and profitability.

🏰 Stronghold Mined 82 Bitcoin

• The company generated approximately $5.2m in revenue during May, a 46% decrease from April 2024.