Block reward miners can’t pivot to AI fast enough

Block reward miners are learning that the economics of mining no longer work, accelerating their ‘pivot to AI’ and calling into question the future security of the BTC network.

As of the afternoon of November 13, the price of a single BTC token had sunk to $98,500, while the cost of mining that token was $113,307. The network difficulty rate hit an all-time high in late October, and while it beat a slight retreat this week, the rate remains unmanageable for all but the largest miners with the most up-to-date ASIC rigs.

This is the third time this month that BTC has slipped below the $100,000 mark, and fears are mounting that an even deeper downturn—perhaps back to the ~$76,000 range seen this spring—may be imminent.

Compounding these fears is the fact that miners have taken on an enormous level of debt, with VanEck analysts putting sector-wide debt at $12.7 billion as of mid-October, up from $2.1 billion one year ago, and this total doesn’t include a recent flurry of 10-figure debt-issuing efforts by multiple firms.

Fred Thiel, CEO of BTC miners MARA Holdings (NASDAQ: MARA), offered a Darwinian perspective in a recent Coindesk interview, saying BTC mining “is a zero-sum game. As more people add capacity, it gets harder for everybody else. Margins compress, and the floor is your energy cost … The global hashrate keeps growing, which means everyone else’s margins keep shrinking.”

Thiel echoed the views of other mining CEOs who believe access to cheap electricity means the difference between profiting and perishing. “By 2028, you’ll either be a power generator, be owned by one, or be partnered with one. The days of being a miner plugged into the grid are numbered.”

Depending on your worldview, miners’ current problems could be viewed as self-inflicted wounds. The original plan for Bitcoin laid out by inventor Satoshi Nakamoto was for transaction fees to initially supplement and eventually supplant the block rewards, which are due to halve again in 2028.

But controversial changes to the Bitcoin protocol a decade ago meant transactions remain expensive, with the result that nobody is actually using BTC for day-to-day transactions. This leaves miners almost entirely reliant on block rewards, the value of which (as discussed above) is notoriously unpredictable.

As Thiel grimly noted, the revenue transition from block rewards to transaction fees “hasn’t happened. If Bitcoin [‘s fiat value] doesn’t grow at 50% or more annually, the math gets very tough after 2028—and even tougher in 2032,” when the block reward will fall below 1 BTC per block mined.

AI pivot… pivot… PIVOT!!!

Miners are increasingly ‘pivoting’ to serving as data centers for AI and other high-performance computing (HPC) companies because the revenue is far more predictable.

Some companies have continued their mining operations while building dedicated AI/HPC facilities, while others, like Bit Digital (NASDAQ: BTBT), have given up on doing, well, anything, settling instead for joining the digital asset ‘treasury’ club.

Bit Mining Ltd (NASDAQ: BTCM) announced last month that it was changing its name to SOLAI Ltd to reflect its “strategic pivot into artificial intelligence and blockchain technology,” the latter focused on the Solana network.

On November 12, Ben Gagnon, CEO of Bitfarms (NASDAQ: BITF), announced that his company planned to “wind down our Bitcoin mining business in 2026 and 2027.” Gagnon dropped this bomb while announcing that BitFarms’ 18MW mining facility in Washington State would be the first of its sites “fully converted to support HPC/AI workloads.”

Pouring salt on this wound, Gagnon noted that despite the Washington site “being less than 1% of our total developable portfolio,” he nonetheless believes the converted site “could potentially produce more net operating income than we have ever generated with Bitcoin mining, providing the Company with a strong cashflow foundation.”

Last month, Bloomberg quoted Needham & Co. analyst John Todaro saying that, while miners have enjoyed significant share price gains this year, “investors are almost exclusively valuing Bitcoin miners for their HPC/AI opportunities at this point … The revenue per megawatt and EBITDA margins are far higher for HPC and AI colocation than for mining. Capital markets are rewarding AI-focused data centers with much higher multiples than traditional miners.”

On November 6, Cango (NYSE: CANG), which only began mining a year ago but almost immediately became one of the top monthly producers, announced that it viewed its mining ops “not as an endpoint but as the foundation of our expansion into energy and HPC.” As this expansion unfolds, Cango said it would focus on “optimizing our core Bitcoin mining business over expansion,” relying on efficiency moves rather than boosting costly mining capacity.

On October 20, CleanSpark (NASDAQ: CLSK) announced a similar “business evolution from pure-play Bitcoin miner to include AI compute.” This pivot will start with its Georgia facility but the company is “reviewing [its] entire portfolio from first principals to evaluate AI suitability.”

On October 28, CleanSpark CEO Matt Schultz revealed that his company had beat out tech giant Microsoft (NASDAQ: MSFT) in the bidding to run a 100MW AI data center in Cheyenne, Wyoming. Schultz said this victory was because miners are “uniquely positioned in that we have the ability to build out and energize data centers very rapidly.”

That same day, CleanSpark announced a strategic partnership with AI data center designers/builders Submer to build “an infrastructure platform that integrates power generation, data center development, and AI-service delivery.”

Microsoft isn’t totally getting the bum’s rush from miners, as IREN (NASDAQ: IREN) announced a five-year, $9.7 billion GPU cloud services contract with the tech giant this month. IREN will provide Microsoft with access to Nvidia (NASDAQ: NVDA) GB300 GPUs, which IREN will acquire from Dell Technologies at a cost of $5.7 billion.

IREN’s AI dealmaking appears to be a signal to the market that its BTC mining days are now a distraction from its broader ambitions. IREN hasn’t released a monthly BTC production report since July, apparently conditioning investors to put less focus on this aspect of its operations going forward.

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It was the best of quarters, it was the worst of quarters

MARA previously announced plans to take a nearly two-thirds stake in French utility Exaion to power its AI ambitions. MARA just announced a new natural gas and renewable energy-producing offshoot (MPLX) that is teaming with Marathon Petroleum Corporation (no relation to MARA) to advance MARA’s plan to “control our power generation” and “vertically integrate the full energy stack, from fuel to compute.”

Bitdeer (NASDAQ: BTDR) reported Q3 revenue of $169.7 million, up 173.6% year-on-year, but booked a net loss of $266.7 million due to $247.6 million in negative fair value changes for its convertible senior notes. Sales of Bitdeer’s Sealminer mining rigs accounted for $11.4 million of its Q3 revenue total, but the company has increasingly chosen to use its rigs for its own mining operations as everyone else pivots to AI.

Bitdeer’s chief business officer Matt Kong said the company isn’t blind to the AI opportunities, and has “intensified our focus and investment to capture the surging global demand for compute.” Kong believes that “allocating 200MW of power capacity to AI cloud services could generate an annualized revenue run-rate exceeding $2 billion by the end of 2026.”

Optimism aside, Bitdeer’s shares have taken a proper pounding this month. On November 7, Bitdeer was trading at $22.00, but the shares closed on November 13 at just $11.11. In addition to the nine-figure Q3 loss and the crash in BTC’s price, a fire broke out at Bitdeer’s mining facility in Massillon, Ohio, this week. Bitdeer claims the incident won’t impact its operational hashrate, but investors ran for the hills regardless.

Bitfarms’ Q3 revenue from continuing operations shot up 156% year-on-year to $69 million, but its net losses grew to $46 million, nearly twice the Q3-24 loss, although this included a non-cash depreciation of $27 million and a $9 million impairment charge.

Hut 8 (NASDAQ: HUT) reported revenue of $83.5 million, nearly twice the amount from the year before, of which $70 million came from its ‘compute’ stream aka its mining and AI data center operations. This spring, Hut 8 offloaded much of its mining business to the Trump-linked American Bitcoin Corp (NASDAQ: ABTC), but the latter is pretty publicity-shy, so Hut 8 shoulders this reporting load for now.

Hut 8 reported net income of $50.6 million, a 50x improvement from Q3-24. However, this was goosed by $76.6 million in gains on the BTC tokens it holds, meaning the picture would be broadly negative if, say, the value of BTC tanked, as it has in the current quarter.

Riot Platforms (NASDAQ: RIOT) reported revenue of $180.2 million, nearly $100 million better than the same period last year, while enjoying a profit of $104.5 million versus a net loss of $154.4 million in Q3-24.

The gains came courtesy of BTC’s higher price and Riot producing 1,406 BTC in Q3, 300 more than last year. Riot also enjoyed $30.6 million in ‘power curtailment credits’—money earned for not mining, paid by utilities looking to ease the strain on their overloaded grids—versus just $12.4 million from credits in Q3-24.

Riot said it’s making “decisive progress in the development of our data center business” in Q3, making “key advancements in our efforts to transform Riot into a large-scale, multi-faceted data center operator.”

BitFuFu (NASDAQ: FUFU) saw its revenue double year-on-year to $180.7 million, while posting a profit of $11.6 million versus a loss of $5 million in Q324. Unlike its rivals, BitFuFu appears disinterested in joining the cool kids at the AI/HPC table.

IREN’s revenue was up an astonishing 355% to $240.3 million while net income swung from a net loss of $51.7 million to a profit of $384.6 million. However, that latter figure was goosed by a number of “unrealized gains, primarily on prepaid forwards and capped calls in connection with convertible notes.”

IREN is still reliant on mining ($232.9 million) for the bulk of its revenue, with its AI cloud services revenue adding a mere $7.3 million to the Q3 total. But as detailed above, the Microsoft deal will significantly impact these ratios going forward.

TeraWulf (NASDAQ: WULF) nearly doubled its Q3 revenue year-on-year, thanks in part to $7.2 million in HPC lease business that didn’t exist last year. Mining revenue of $43.4 million resulted in an overall total of $50.6 million, but a $424.6 million charge in fair value on liabilities resulted in a net loss of $455 million. Good times.

Finally, Cipher Mining (NASDAQ: CIFR) saw its Q3 revenue nearly triple year-on-year to $71.7 million but still suffered a net loss of $3.3 million. Cipher also announced plans to raise $1.4 billion to finance “a portion” of the cost of building its HPC data center near Colorado City, Texas. Nobody said this pivot would be easy, or cheap.

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October’s tale of the tape

MARA is usually among the first miners to issue its monthly production reports, but we’re halfway through November and as yet there’s no sign of these figures. Also missing from the below stats is Cipher Mining, which is also generally pretty fast off the mark, but not this month for whatever reason.

As ever, these October 2025 production reports are listed below in descending order of magnitude.

• CleanSpark mined 612 BTC in October, down from September’s 629, even as average operating hashrate rose one point to 46.6 EH/s. But CleanSpark sold much more BTC last month (589) than it did in September (445), leaving its BTC treasury up only a fraction to 13,033 tokens.
• Cango mined 602.6 BTC in October, down from 616.6 in September, despite a one-point rise in average operating hashrate rising to 46 EH/s. Cango (currently) has a ‘never sell’ policy when it comes to its BTC, and October’s addition pushed its total up over 6,412 tokens.
• Bitdeer had another positive month in October, with self-mined production hitting 511 tokens, up from 452 in September (and 375 in August). Self-mining hashrate shot up 6.2 points to 41.2 EH/s thanks to the ongoing deployment of thousands of new in-house SEALMINER A2 units. Bitdeer’s self-mining rig total now stands at 166,000, while its hosted rig total remains at 88,000. Bitdeer’s BTC treasury hit 2,233 tokens in October, up from 2,029 the previous month.
• Riot Platforms collected 437 BTC in October, eight fewer than the previous month, despite average operating hashrate rising one point to 33.2 EH/s. On the plus side, Riot’s ‘power credit’ revenue improved by 55% month-on-month to $2.1 million. Riot sold 400 tokens in October, down from 465 in September, leaving its treasury at 19,324 tokens, 37 more than September.
• Hive Digital (TSXV: HIVE) saw its October production hit 289 tokens, 22 better than September and a new monthly high for the year as average hashrate rose 2.5 points to 21.9 EH/s.  This figure has since risen to 24 EH/s following completion of the expansion of Hive’s Phase 3 Valenzuela site in Paraguay and Hive says it will top 25 EH/s this week, two weeks ahead of its Thanksgiving target.
• BitFuFu saw its October production fall to 253 tokens from 329 in September (and from 408 in August). Self-mined BTC totaled 30 (-3) while cloud-mining customers added 223 (-73). BitFuFu blamed the decline on a combination of rising network difficulty, power curtailment programs at some of its sites, and the “expiration of a portion of third-party contracted hashrate.” Total hashrate fell 15% to 30.5 EH/s in October but BitFuFu says it “executed an additional hashrate contract” this month “to supply the growing demand for cloud mining.” BitFuFu’s treasury fell by six tokens to 1,953.
• Finally, Canaan Inc. (NASDAQ: CAN) produced 92 BTC in October, the same amount as September, while its month-end operating hashrate remained similarly unchanged at 7.85 EH/s. Canaan’s BTC treasury grew by 28 tokens to 1,610, while its ETH treasury (purchased, not earned) shot up by 1,120 tokens to 2,830.

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