Tech • IA • Crypto
I’ll say it bluntly: AI threatens the next Bitcoin cycle
8/10TL;DR
The rapid expansion of AI computing demand is diverting resources from Bitcoin mining, lowering hash rate and potentially reshaping the cryptocurrency’s price dynamics without necessarily ending its long-term cycle.
KEY POINTS
Declining Bitcoin hash rate
Bitcoin’s hash rate, a measure of total computing power securing the network, has entered a sustained decline. This indicates that a growing number of miners are disconnecting their machines, either due to reduced profitability or shifting business priorities. A falling hash rate can weaken network activity and signals structural changes in mining economics.
AI inference outcompetes mining profitability
AI inference workloads, which power services like large language models, are significantly more profitable than Bitcoin mining. Estimates suggest electricity yielding around $0.05 per kWh in mining can generate $0.12–$0.15 in AI-related revenue. This margin gap is incentivizing operators to reallocate hardware toward AI tasks.
Mining firms pivot to AI infrastructure
Several mining companies are repurposing their facilities, leveraging existing energy access and data center infrastructure. Firms such as Hut 8 have seen strong market performance after shifting toward AI computing. Some operators have even sold Bitcoin holdings to finance purchases of Nvidia GPUs, accelerating the transition.
Impact on Bitcoin production cost
The hash rate directly influences mining difficulty and production costs. As miners exit, the network adjusts, lowering difficulty and reducing the average cost to produce one Bitcoin. Current estimates place production costs roughly between $48,000 and $80,000, with a lower bound potentially decreasing if the trend continues.
Price dynamics tied to production levels
Historically, Bitcoin prices tend to gravitate toward production costs during downturns. When prices approach these levels, miners reduce selling pressure and institutional demand often increases, forming market bottoms. A prolonged drop in production cost could therefore pull price ranges downward in the medium term.
Halving cycle remains a stabilizing force
Despite current pressures, the four-year halving cycle continues to underpin long-term price structure. The next halving in 2028 is expected to double production costs, potentially pushing them into a $96,000 to $160,000 range. This mechanism may counterbalance short-term distortions caused by AI competition.
Explosive AI demand offsets efficiency gains
While AI models are becoming more efficient, user demand is growing even faster. Some services have reportedly expanded from 4 million to 100 million users within weeks, maintaining strong pressure on global GPU supply. This demand surge sustains high profitability for AI infrastructure over mining.
Market implications and risks
If hash rate continues to decline significantly, Bitcoin could face downward pressure toward lower production-cost bands, possibly below $50,000 in bearish scenarios. However, a total collapse remains unlikely unless hash rate drops dramatically. Energy prices and future AI market cycles will also influence outcomes.
CONCLUSION
AI’s growing dominance in compute markets is reshaping Bitcoin mining economics, but structural factors like halving cycles and production costs suggest the cryptocurrency’s long-term trajectory remains intact despite short-term pressures.