The AI wave of disruption that has been affecting multiple industries this year has also extended its roots into the Bitcoin mining industry.
In a surprising turn of events, some Bitcoin mining companies have been jumping ship in favor of AI, courtesy of higher profits for their computing power.
One of the best examples was Cipher Mining, a company that previously conducted Bitcoin mining operations. It recently made the transition, supported by tech titans such as Google and Amazon.
Cipher Crypto investors were also on board with the move, judging by the 50% plus rally that the company’s stock achieved in the last few weeks.
Cipher’s transition underscores the attractive nature of the AI segment. This may entice more Bitcoin companies to go down that direction.
Impact of AI Migration on Bitcoin Mining Hash Rate
While the migration of mining companies in favor of AI highlights shifting dynamics, it may not necessarily underscore a major impact.
This is especially when factoring in that Bitcoin mining difficulty has been rising over time. Higher difficulty means lower profitability, particularly with more mining companies joining the segment.
Moreover, volatile Bitcoin prices also influence the level of profitability. Some analysts believe that AI may offer an alternative revenue generation avenue for crypto mining companies.
The crypto market experienced a bearish retreat for the last few weeks, which consequently affected miner profitability.
Recovery periods still allow Bitcoin mining companies to benefit. Canaan is one of the best examples of such a scenario. The company specializes in mining equipment and also engages in BTC mining.
Canaan's stock price performance revealed that it was just as severely affected by the recent crypto crash. The stock price traded as high as $2.05 on October 20, but was down to $1.11 by November 4.
Despite the crash, the stock price still bounced back up by about 16% on Wednesday.
This provides further confirmation that crypto stocks, including Bitcoin mining company stocks, were also affected by recent market-moving forces.
Global Governments Increase Involvement in Bitcoin Mining
Concerns that companies may migrate from Bitcoin mining in favor of AI may be genuine. However, they may not have a significant impact on the Bitcoin hash rate.
This is because the hash rate is largely driven by profitability. The gap left by exiting companies is often quickly filled by other participants.
Speaking of participants, governments across the world have been getting more involved in crypto mining.
Recent Bitcoin news revealed that at least 11 governments across the world sponsor Bitcoin miners.
The current list highlights the steady shift from anti-crypto sentiment among governments observed just 5 years ago.
Only two countries were on-board with Bitcoin mining in 2020, a reflection of the changing crypto landscape.
This dynamic shift has also encouraged countries to push for Bitcoin mining, especially using clean energy.
This has been paving the way for more miners across the world, thus enhancing Bitcoin’s decentralization.
Bitcoin’s hash rate reflects such developments, considering that it has been rising over the years. This outcome also reflects the rising demand for the cryptocurrency.