Bitcoin Miners Turn to AI: Escaping the Crypto Cycle, but Entering New Turbulence

The AI computing power sector is also experiencing significant volatility and risks, proving to be no more stable than the cryptocurrency industry.

Written by: Vicky Ge Huang

Compiled by: Chopper, Foresight News

Last year, Ben Gagnon began transforming a facility originally used for Bitcoin mining, hoping to pivot to an AI data center and ride the wave of the artificial intelligence boom. This seemed like a perfect path: avoiding the collapse of the cryptocurrency market and embracing the hottest sector on Wall Street.

However, the reality is that the AI data center business is equally fraught with challenges. The WGMI index, which tracks this sector, surged 72% in 2025 due to the AI boom, but has already fallen 23% this year. The index includes companies like CoreWeave, Nebius, Corz, and CleanSpark, all of which have transitioned from Bitcoin mining to data centers, and thus have faced immense pressure during the current AI sector sell-off.

"We thought that leaving Bitcoin would lead us to a more stable market, but we found that this market is even more volatile than Bitcoin, which was a personal lesson learned," said Gagnon, CEO of Keel (formerly Bitfarms).

Last week, the cracks in the AI trading market widened further as investors aggressively sold stocks of tech giants like Alphabet and Intel. Emerging cloud service providers found themselves at the center of the sell-off, squeezed by heavy debts and rising financing costs. Doubts from prominent industry figures intensified the selling pressure; for instance, Elon Musk warned that for companies without stable, substantial income outside of AI computing power, the debt market has essentially closed its doors.

Musk stated on X: "This means that over 200 emerging cloud computing companies will face a brutal wave of liquidation and consolidation. Only a few will survive, but not many."

CoinShares Bitcoin Mining and Digital Power ETF Trends. Data Source: FactSet

The broader context for Bitcoin miners turning to AI is that the mining business itself is becoming increasingly difficult: competition for computing power has intensified, continuously squeezing profit margins; the Bitcoin halving mechanism cuts miners' block rewards in half every four years, forcing companies to seek new revenue sources; and the downturn in the crypto market has led to a continuous shrinkage of Bitcoin reserves held by miners.

CoreWeave, which initially started as an Ethereum mining project, later transitioned to AI and was once the brightest success story in this sector. With soaring valuations and investments from Nvidia, other miners quickly adopted this transformation path.

Miners, whose profits have been consistently narrowing, soon found themselves riding the wave of AI infrastructure. Their facilities were already equipped with high-capacity power supplies and flexible power contracts; unlike traditional data centers bound by long-term clients, miners can flexibly allocate power resources to supply AI computing power as needed.

For a time, this transformation was indeed smooth sailing. Major cloud providers like Alphabet, Amazon, Meta, and Microsoft ramped up their AI capital expenditures by hundreds of billions, making these data centers with substantial power capacity an immediate necessity. Former crypto miners secured new revenue by signing leases with major clients like Anthropic.

However, the tide turned abruptly as investors began to question whether the massive investments in AI would yield returns. Whenever competition intensified, growth slowed, or news emerged about operational blockages for data center operators, panic spread. Recent high interest rates and geopolitical uncertainties have also led the market to doubt whether heavily indebted computing power developers can sustain rapid expansion.

Once a benchmark for miners transitioning to AI, CoreWeave has now become a typical representative of high-risk AI trading. Its stock price has fallen 25% this year, and in recent weeks, both its stocks and bonds have faced severe sell-offs.

Meanwhile, AI data centers are beginning to face the same public backlash that Bitcoin mining encountered years ago: politicians have started criticizing these facilities for consuming vast amounts of electricity and water, mirroring the resistance faced during the early expansion of mining sites.

Setting aside the macro environment, different data center business models have their own advantages and disadvantages. Companies that completely abandon mining and fully transition to computing centers have one advantage: a singular business model that is easier to gain recognition for valuation on Wall Street.

Gagnon revealed that Keel Infrastructure has completely shut down its Bitcoin mining operations in the U.S., but the new data centers have yet to sign customer contracts. The company expects that once the commercialization process and site construction are in place, three computing sites will generate revenue next year. Keel Infrastructure's stock price has dropped 6.8% this year.

JonesTrading analyst Kevin Dede stated: "Investors tend to label companies. Those that do not fully transition and remain indecisive find it hard to achieve valuations comparable to companies that have completed their transitions and clearly positioned themselves in the investment community."

However, a complete transition to computing centers also means losing the steady stream of mined Bitcoin to support expansion. Once the mining machines are turned off, companies no longer have a stable daily income from crypto, which was originally an important source of funding for capital expenditures.

In 2022, Bitcoin mining equipment at CleanSpark's facility in University City, Georgia.

Needham analyst John Todaro's data shows that publicly listed mining companies in the U.S. sold a total of 48,900 Bitcoins in the first half of this year, setting a historical high for a half-year period. He expects that from the second half of this year until early 2027, mining companies will continue to sell off their Bitcoin reserves to raise funds for new computing centers.

Todaro said: "From these companies, we understand that financing for AI computing projects is becoming more difficult. Therefore, we believe that if there are still Bitcoins on the balance sheet, companies are likely to increase sales to cover capital expenditures and advance projects that have not yet secured funding."

Some mining companies have chosen a middle path, such as CleanSpark, which treats Bitcoin mining as a transitional means for data center development: on the same site, they mine for crypto profits while simultaneously constructing data centers tailored to customer needs; when needed, they can allocate power to the computing business.

CleanSpark holds over $1 billion in Bitcoin on its balance sheet, and its stock price has fallen 19% this year.

CleanSpark CEO Matt Schultz stated: "We do not plan to continuously invest large amounts of capital in mining; rather, we see mining as a tool to secure large power capacity allocations. The Bitcoin on the balance sheet serves as capital reserves.

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