Author: Prathik Desai
Article compiled by:Block Unicorn
For over a decade, bitcoin mining facilities have been heavily criticized by the energy and technology sectors. Their massive electricity consumption has triggered congressional hearings, downgraded ESG ratings, and ongoing public backlash. Yet today, these same facilities are signing 15-year lease agreements with companies like Microsoft, Google, and Anthropic. The mining facilities themselves have changed very little. In fact, if there’s one thing these facilities have had in common over the past decade, it’s crisis itself. So what exactly has changed?
There is a fascinating saying about crises: “The best opportunities often arise from the most severe crises.” This has been the experience of Bitcoin miners. From July 2016 to April 2024, they endured three halvings. Each halving cut the block reward in half, forcing miners to seek cheaper electricity in increasingly remote corners of the U.S. power grid, including West Texas, rural Georgia, and the plains of North Dakota.
The weak were eliminated. Some companies transformed in time. Others learned their lessons later.
In today’s story, I’ll explain how the surge in artificial intelligence infrastructure investment aligns with miners’ growing computational power and processing capabilities, helping them regain new momentum.
Now let's continue.
Halving — the first turning point
Bitcoin miners faced their first survival test in April 2024, during the most recent Bitcoin halving. Each halving is a stress test. But with each halving, the reward is cut in half, while the challenges double.
The Bitcoin halving in April 2024 reduced the block reward from 6.25 BTC to 3.125 BTC. In the week following the most recent halving, hash price dropped from $0.12 per terahash to $0.047 per terahash. Hash price refers to the expected revenue miners receive per unit of hashing power. By the first quarter of 2026, hash price fell to its lowest level in five years at $0.023 per terahash per day.
Currently, the average cost to produce one Bitcoin is approximately $81,000. When including other non-production costs required for miners to operate, the total mining cost per Bitcoin exceeds $115,000. Bitcoin is currently trading at $70,760, and over the past three months, its price has never exceeded $80,000. Do the math yourself.
The Bitcoin mining industry can only continuously pursue lower mining costs, but it has no control over Bitcoin's price.
Miners whose primary income comes from the difference between bitcoins earned through mining and those sold on open markets have suddenly recorded losses, prompting them to instead hold onto the bitcoins they mine. Their strategy is to wait for the price of bitcoin to rise high enough to generate a positive return.
This strategy worked well before the price of Bitcoin rose. But market volatility is cyclical. Every bull market is followed by a bear market and pullbacks. The cryptocurrency market is no exception.
10/10 - The second turning point
October 10, 2025: A terrifying day for the cryptocurrency industry, marked by the largest cryptocurrency liquidation in history. Since then, cryptocurrency prices have experienced record-breaking declines, initiating a bear market cycle. This led to the complete collapse of miners’ “mine and hold” strategy.
Some companies have begun to hesitate about changing their strategies. However, others announced strategic shifts within 24 hours of the liquidation event.
On October 11, Bernstein released a report redefining the role of Bitcoin miners, no longer viewing them as hash power producers, but as holders with access to gigawatt-scale secure power grids. Analysts described these miners as “a critical link in the AI value chain.” They unanimously identified IREN (formerly Iris Energy) as the leading example of a company successfully transitioning from Bitcoin mining to becoming a cloud infrastructure provider focused on AI.
Galaxy Digital, a leader in digital assets and an infrastructure provider for artificial intelligence, has announced that it has raised $460 million to convert its Helios mine in Texas into a high-performance computing (HPC) campus for CoreWeave under a 15-year lease, with expected annual revenues exceeding $1 billion.
Following the 10/10 event, a series of systematic balance sheet liquidations ensued—balance sheets that had long defined the industry’s identity through a “mine and hold” strategy. Miners spent at least 18 months accumulating Bitcoin as a reserve asset, viewing unsold Bitcoin as a signal of confidence.
Under the pressure of a bear market, Bitcoin's price dropped approximately 40% from its all-time high of around $126,000 within 45 days, causing this stance to waver. Some publicly traded miners who had never previously sold Bitcoin began liquidating their holdings. Marathon Digital (MARA), the third-largest publicly traded Bitcoin holder in the U.S., broke its streak of holding Bitcoin by selling 15,133 BTC over three weeks.
The company's CEO has long supported and drawn inspiration from it, and the strategic reserve is the largest corporate Bitcoin reserve. Less than two years ago, MARA’s CEO and Chairman Fred Thiel announced that Bitcoin would become its strategic reserve asset.
Last month, Fred completely reversed his stance, acknowledging that selling Bitcoin "enhanced financial flexibility and expanded strategic options as we expanded our business beyond pure Bitcoin mining into digital energy and AI/high-performance computing infrastructure."
But I won’t blame him. Tough times require tough decisions. And MARA is not the only company to abandon Bitcoin as a permanent strategic asset.
While some investors increased their Bitcoin reserves after the liquidation event, others slowed their rate of Bitcoin accumulation or publicly stated they no longer view Bitcoin as a strategic reserve asset.
Bitfarms' CEO openly admitted, "We are no longer a Bitcoin company." Ben Gagnon added that Bitfarms will focus on "building the infrastructure for future computing." CleanSpark, on the other hand, has adopted a different strategy, treating its holdings of over 13,000 Bitcoin as productive capital and implementing a multi-layered covered call strategy.
Even though Bitcoin has not disappeared from their balance sheets, they view it as a resource to strategically drive their infrastructure transformation.
When the old man lost his horse, who knew it wasn't a blessing?
Converting a Bitcoin mining facility into AI infrastructure is not easy. The conversion cost per megawatt ranges from $8 million to $11 million, including new liquid cooling systems, tier-three power redundancy, high-bandwidth fiber optics, and network upgrades required for GPU training clusters.
However, mining infrastructure—including cooling, power, and computational capacity—is closer than any other industry to meeting the needs of the AI and data center sectors. Bernstein analysts noted in their report that miners’ existing infrastructure can reduce deployment times by up to 75%.
Analysts are not the only ones holding this view. Transactions completed by these mining companies over the past few months also confirm this.
IREN signed a $9.7 billion contract with Microsoft to provide GPU cloud hosting services at its campus in Childress, Texas, marking the largest single transaction to date between a miner and a hyperscale data center. Hut 8 entered into a $7 billion deal with Fluidstack, backed by Google, and Anthropic. Cipher Mining signed contracts worth $8.5 billion with AWS and Fluidstack. By the fourth quarter of 2025, AI hosting revenue at Core Scientific—which involves leasing space in data centers for IT equipment—will rise to 39% from 9% four quarters earlier.
Surprise moat
But why would hyperscale data center operators pay mining companies for data center space?
Time is the ultimate advantage. To survive each halving of electricity prices, miners have had to pursue cheaper power. To survive, they’ve adopted various measures: negotiating long-term power supply agreements, acquiring industrial land along low-cost energy corridors, building dedicated substations, and ensuring direct grid connectivity. Modern mining facilities are equipped with specialized high-voltage transformer equipment, redundant power supplies, and thermal management systems designed to operate at full capacity around the clock.
Perhaps this wasn't planned ahead of time—you might say the miners were just lucky. But who gets lucky enough to strike gold while struggling to survive?
Currently, public miners have approximately 6.3 gigawatts of operational capacity, with an additional 2.5 gigawatts under construction. In the United States, interconnection wait times in most markets range from 5 to 7 years. Microsoft’s internal projections indicate that its data center capacity constraints will persist through 2026 and beyond.
This is why hyperscale data center operators overlook mining companies' lack of expertise in AI infrastructure. Instead, they are covering the costs of substations, land use permits, utility relationships, and grid connections—items that often take years to secure elsewhere.
Mining companies can gradually improve performance by repurposing existing equipment for AI applications. MARA recently announced a $1.5 billion investment in energy infrastructure, which will increase its total generating capacity to over 2.2 gigawatts. This enables MARA to convert a depreciated facility into AI infrastructure at a cost unmatched by other AI infrastructure builders.
CEO Fred Thiel described these assets as ready-made infrastructure that would otherwise take up to 10 years and cost $2 to $3 billion to build independently. He said, “Electricity is a scarce input in the AI space, and with the planned acquisition of Long Ridge Energy, we will control an efficient, contracted energy platform.”
Closed window
There’s a trap in this story. Every megawatt of energy shifted from Bitcoin mining to AI infrastructure subsidizes the economic interests of those still engaged in Bitcoin mining. This lowers the mining difficulty, reducing the cost for Bitcoin miners to mine a block.
Some may still choose to repurpose part of their equipment for Bitcoin mining in case prices drop. But this is only feasible for those who can afford the cost of replacing or reserving mining hardware—not everyone can do this. Additionally, those using mining equipment for AI infrastructure cannot repeatedly switch between mining and AI tasks. Mining is an interruptible process: when electricity costs are high, you can shut down your miners. But AI and high-performance computing are not. Once you’ve rented out or committed your computing power, you cannot temporarily cancel the agreement and redirect those devices to mine Bitcoin.
However, this is not a viable option for most miners. They have only a short time window to complete the shift, and such luck does not occur frequently.
Everything has progressed so smoothly it’s almost unbelievable. The Bitcoin halving has compressed the economics of mining to its limits. The subsequent 10/10 liquidation event forced miners to confront reality: holding Bitcoin through a bear market is not a viable strategy. But the booming growth of AI infrastructure has arrived at just the right time, giving miners both the motivation and the assets needed to make the transition.
This scenario is unlikely to be repeated. The mining companies that sign contracts today will reap the economic benefits over the next decade, while later entrants will miss out on these advantages.
That’s all for today—see you in our next article.