Bernstein believes that Bitcoin mining is a risky activity that requires a steady temperament, and suggests that artificial intelligence could be used to diversify the mining process.

On Friday, July 7, private wealth management giant Bernstein published a report stating that Bitcoin mining companies have been on a roll this year after facing a brutal crypto winter last year in 2022.

Along with the surge in the Bitcoin price, the stock price of public-listed Bitcoin mining companies has also doubled this year. Bernstein noted that the strong recovery in the crypto market along with institutional participation has played a crucial role in boosting the Bitcoin mining industry.

The report also states that some Bitcoin miners have been tapping new opportunities in high-performance computing along with artificial intelligence (AI) as part of their “revenue diversification strategy”. Bernstein analysts led by Gautam Chhugani wrote:

“This is a unique game of survival where the best-in-class miners with low costs and conservative debt profiles can survive, consolidate capacity and market share, to earn hyper-normal profits when bitcoin prices exceed the cost of production.”

Big Crypto Mining Players Will Survive

Bernstein also noted that the crypto mining industry will largely consolidate in favor of big players. This is because crypto mining is becoming more capital-intensive making it difficult for small players to survive.

Bernstein points out that mining companies with substantial debt struggle to survive and often succumb to market downturns, as evidenced by the recent bankruptcy of Core Scientific (CORZQ).

According to the broker, the initial phase of consolidation in the mining industry has already taken place, and the remaining miners are now expanding their capacity in preparation for the upcoming bitcoin halving. This event, which occurs approximately every four years and reduces mining rewards, often leads to an increase in the price of BTC. The next halving is expected around April 2024.

In a similar vein, JPMorgan, a prominent Wall Street firm, stated in a recent report that the Bitcoin mining industry will gradually consolidate and become more competitive. Only miners with lower production costs will be able to sustain their operations in the long run.

Big crypto mining players are already taking bold measures. Crypto mining giant Hut 8 recently secured a $50 million credit line from Coinbase to expand its operations.