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Crypto for Advisors: Bitcoin Mining Will Be Different in 2025
In today’s issue, Ben Harper from Luxor Technology provides an update on what’s happening with bitcoin mining this year.
Then, Colin Harper from Blockspace Media answers questions on the topic of mining and AI in Ask and Expert.
You’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.
Bitcoin Mining Has Changed — It’s No Longer Just About the Price
The bitcoin mining investment thesis used to be simple — miners thrived when bitcoin’s price soared, and when it fell, they suffered. But in 2024, that equation changed. Bitcoin ETFs, hashrate markets and AI have fundamentally reshaped the industry, reducing miners’ dependence on bitcoin’s price. Here’s why mining is no longer just a bet on bitcoin, and what this means for investors.
2024: The Year Bitcoin Mining Diverged From Bitcoin’s Price
In 2023, Bitcoin mining stocks behaved like a high-beta proxy for Bitcoin, amplifying its moves — soaring higher when bitcoin rallied and crashing harder when it fell. But in 2024, this pattern broke down. Despite bitcoin reaching new all-time highs, mining stocks failed to reclaim their previous peaks.
The table below illustrates the shifting correlation between Hashrate Index’s Crypto Mining Index and bitcoin’s price, comparing weekly prices and returns before and during 2024:
Source: Hashrate Index, June 2020 — December 2024
The takeaway is clear: Bitcoin mining stocks are no longer just a straightforward bet on bitcoin’s price. This divergence stems from four key trends shaping the sector:
1. Institutional Bitcoin Adoption: The Advent of Spot ETFs
The launch of spot bitcoin ETFs in January 2024 reshaped institutional investment in bitcoin. With ETFs amassing over 1.3 million BTC and surpassing $100 billion in assets under management, the appeal of mining stocks as a bitcoin proxy faded. Instead of using miners as an indirect exposure, capital flowed directly into Bitcoin via ETFs, fundamentally shifting market dynamics.
2. The Halving and Its Aftermath: A Squeeze on Miner Economics
Bitcoin’s fourth halving in April 2024 cut the block subsidy from 6.25 BTC to 3.125 BTC per block, slashing miners’ primary revenue source in half. Historically, post-halving bitcoin price surges have helped offset lower rewards, but this time, miners faced additional headwinds:
Record-high network difficulty. Rising competition reduced individual miner rewards.
Falling transaction fees. Lower demand for blockspace diminished a crucial secondary revenue stream.
Hashprice collapse. Despite bitcoin’s rally, hashprice, an all-in measure of mining revenue per unit of computation (i.e., hashrate), plummeted 75%.
While bitcoin’s price soared 120% throughout the year, miners struggled to maintain profitability, leading to consolidation and strategic pivots within the industry.
Source: Hashrate Index
3. The Rise of Hashrate Derivatives: A Game-Changer for Miners
One of the most significant financial developments in bitcoin mining in 2024 was the rapid expansion of the hashrate derivatives market. This emerging market allowed miners to hedge future revenue streams and reduce exposure to bitcoin price volatility, fundamentally changing how they manage risk.
Traditionally, mining revenues were at the mercy of bitcoin’s daily price swings, making it difficult for operators to forecast cash flows or secure financing. However, with the rise of hashrate forward markets, miners could sell future hashrate production at a fixed price, locking in revenue months in advance. This financial instrument functions similarly to commodity futures in the energy sector, where electricity producers pre-sell power contracts to stabilize income.
In 2024, these once-nascent markets saw explosive growth. Over-the-counter (OTC) volumes surged more than 500% year-over-year on Luxor’s hashrate forward market, with contract durations extending up to 12 months. Meanwhile, regulated exchange trading took a major step forward with Bitnomial launching hashrate futures, making it the first regulated exchange to offer a bitcoin mining derivative product.
The maturation of hashrate forward markets signals a new era in mining finance — one where miners have greater control over their revenue streams, better access to capital, and improved resilience against bitcoin price volatility.
4. Bitcoin Mining Meets AI & HPC: A Convergence of Industries
With mining profits under pressure, many firms are pivoting to AI and high-performance computing (HPC) to diversify revenue. Bitcoin mining infrastructure shares key similarities with AI data centers — both require vast power and cooling capacity. However, the shift isn’t easy: AI infrastructure is more expensive per megawatt (millions vs. hundreds of thousands for bitcoin mining), requiring significant capital investment.
Some miners are embracing hybrid models, allocating some of their computing power to AI workloads while maintaining bitcoin mining operations. Firms like HIVE Digital Technologies, Hut 8, Core Scientific, and Bit Digital have already made the leap, securing lucrative AI contracts to grow and stabilize their cash flows.
Final Thoughts
Bitcoin mining in 2025 is no longer just about bitcoin’s price. Institutional capital, hashrate derivatives and AI-driven diversification are reshaping the industry, giving miners new tools to manage risk and optimize revenue. At the same time, post-halving pressures, rising competition and infrastructure costs have made efficiency and adaptability more critical than ever.
For investors and advisors, understanding these shifts is essential. Mining stocks no longer move in lockstep with bitcoin, and new financial instruments are changing how miners operate. As the industry continues to mature, those who recognize these structural changes will be better positioned to navigate the opportunities ahead.
— Ben Harper, director, Luxor Technology
Ask an Expert
Are bitcoin miners actually serious about breaking into the AI market?
Absolutely. Since 2022, bitcoin miners have been increasingly exploring AI and high-performance compute (HPC) business lines. Some of the earliest movers in this shift were Hut 8, Hive, IREN, Core Scientific and Bit Digital. More recently, Riot put its 600 MW expansion at Corsicana on pause to evaluate the site for AI load, Cipher received a $50 million investment from SoftBank for its own AI project, and Lancium and Crusoe Energy are building a multi-gigawatt campus for AI as part of Project Stargate.
How will bitcoin miners tackle their AI transitions? Is there a one-size-fits-all approach?
AI/HPC strategies vary from miner to miner. Hut 8 and Bit Digital, for example, have opted to acquire existing data center businesses rather than build their own data centers from scratch or retrofit existing infrastructure. Core Scientific, on the other hand, is converting the massive power assets and infrastructure it has on hand for AI/HPC load in its partnership with CoreWeave (Riot could follow a similar model should it decide to convert portions of its Corsicana campus into an AI data center). And others, like Hive and IREN, have purchased GPUs to operate AI/HPC cloud services within their existing facilities. Each of these strategies have tradeoffs (the Hut 8 and Bit Digital model are low risk, low reward, while Core Scientific’s approach is high risk, high reward), and we will have a better idea of which approach is the most successful over the next few years.
With strong market demand for AI, will bitcoin miners still mine bitcoin?
For now, plenty of bitcoin miners — including MARA, Cleanspark and Bitfarms — are still focusing on bitcoin mining instead of chasing the AI/HPC golden rabbit. Even if bitcoin miners convert parts of their infrastructure into AI/HPC load, they will likely still mine bitcoin, even if they reduce their focus on this pursuit. Ultimately, bitcoin mining and AI/HPC are more complementary than competitive, as miners can use bitcoin mining to monetize energy that they have already paid for when AI/HPC demand is low.
— Colin Harper, editor-in-chief, Blockspace Media
Keep Reading
The first ever bitcoin mining ETF is live, recently launched by Grayscale.
Sixteen U.S. states are eyeing bitcoin strategic reserves, along with the federal government.
At a press conference on Tuesday, U.S. crypto and AI czar David Sacks discussed regulatory clarity, fostering innovation, consumer protection, bitcoin reserves and stablecoins, among other topics.
Uncategorized
Bank of England’s Proposed Stablecoin Ownership Limits are Unworkable, Says Crypto Group
The Financial Times (FT) reported on Monday that cryptocurrency groups are urging the Bank of England (BoE) to scrap proposals limiting the amount of stablecoins individuals and businesses can own.
The group warned that the rules would leave the UK with stricter oversight than the U.S. or the European Union (EU).
According to the FT, BoE officials plan to impose caps of 10,000 british pounds to 20,000 british pounds ($13,600–$27,200) for individuals and about 10 million british pounds ($13.6 million) for businesses on all systemic stablecoins, defined as tokens already widely used for payments in the U.K. or expected to be in the future.
The central bank has argued the restrictions are needed to prevent outflows of deposits from banks that could weaken credit provision and financial stability.
The FT cited Sasha Mills, the BoE’s executive director for financial market infrastructure, as saying the limits would mitigate risks from sudden deposit withdrawals and the scaling of new systemic payment systems.
However, industry executives told the FT the plan is unworkable.
Tom Duff Gordon, Coinbase’s vice president of international policy, said “imposing caps on stablecoins is bad for U.K. savers, bad for the City and bad for sterling,” adding that no other major jurisdiction has imposed such limits.
Simon Jennings of the UK cryptoasset business council said enforcement would be nearly impossible without new systems such as digital IDs. Riccardo Tordera-Ricchi of The Payments Association told the FT that limits “make no sense” because there are no caps on cash or bank accounts.
The U.S. enacted the GENIUS Act in July, which establishes a federal framework for payment stablecoins. The law sets licensing, reserve and redemption standards for issuers, with no caps on individual holdings. The European Union has also moved ahead with its Markets in Crypto-Assets Regulation (MiCA), which is now fully in effect across the bloc.
Stablecoin-specific rules for asset-referenced and e-money tokens took effect on June 30, 2024, followed by broader provisions for crypto-assets and service providers on Dec. 30, 2024. Like the U.S. approach, MiCA does not cap holdings, instead focusing on reserves, governance and oversight by national regulators.
Fears of a downside for bitcoin (BTC) and ether (ETH) have eased substantially, according to the latest options market data. However, the pace of the next upward move in these cryptocurrencies will largely hinge on the magnitude of the anticipated Fed rate cut scheduled for Sept. 17.
BTC’s seven-day call/put skew, which measures how implied volatility is distributed across calls versus puts expiring in a week, has recovered to nearly zero from the bearish 4% a week ago, according to data source Amberdata.
The 30- and 60-day option skews, though still slightly negative, have rebounded from last week’s lows, signaling a notable easing of downside fears. Ether’s options skew is exhibiting a similar pattern at the time of writing.
The skew shows the market’s directional bias, or the extent to which traders are more concerned about prices rising or falling. A positive skew suggests a bias towards calls or bullish option plays, while a negative reading indicates relatively higher demand for put options or downside protection.
The reset in options comes as bitcoin and ether prices see a renewed upswing in the lead-up to Wednesday’s Fed rate decision, where the central bank is widely expected to cut rates and lay the groundwork for additional easing over the coming months. BTC has gained over 4% to over $116,000 in seven days, with ether rising nearly 8% to $4,650, according to CoinDesk data.
What happens next largely depends on the size of the impending Fed rate cut. According to CME’s Fed funds futures, traders have priced in over 90% probability that the central bank will cut rates by 25 basis points (bps) to 4%-4.25%. But there is also a slight possibility of a jumbo 50 bps move.
BTC could go berserk in case the Fed delivers the surprise 50 bps move.
«A surprise 50 bps rate cut would be a massive +gamma BUY signal for ETH, SOL and BTC,» Greg Magadini, director of derivatives at Amberdata, said in an email. «Gold will go absolutely nuts as well.»
Note that the Deribit-listed SOL options already exhibit a strong bullish sentiment, with calls trading at 4-5 volatility premium to puts.
Magadini explained that if the decision comes in line with expectations for a 25 bps cut, then a continued calm «grind higher» for BTC looks likely. ETH, meanwhile, may take another week or so to retest all-time highs and convincingly trade above $5,000, he added.
Good Morning, Asia. Here’s what’s making news in the markets:
Welcome to Asia Morning Briefing, a daily summary of top stories during U.S. hours and an overview of market moves and analysis. For a detailed overview of U.S. markets, see CoinDesk’s Crypto Daybook Americas.
Hyperliquid’s validator community has chosen Native Markets to issue USDH, ending a weeklong contest that drew proposals from Paxos, Frax, Sky (ex-MakerDAO), Agora, and others.
Native Markets, co-founded by former Uniswap Labs president MC Lader, researcher Anish Agnihotri, and early Hyperliquid backer Max Fiege, said it will begin rolling out USDH “within days,” according to a post by Fiege on X.
According to onchain trackers, Native Markets’ proposal took approximately 70% of validators’ votes, while Paxos took 20%, and Ethena came in at 3.2%.
The staged launch starts with capped mints and redemptions, followed by a USDH/USDC spot pair before caps are lifted.
USDH is designed to challenge Circle’s USDC, which currently dominates Hyperliquid with nearly $6 billion in deposits, or about 7.5% of its supply. USDC and other stablecoins will remain supported if they meet liquidity and HYPE staking requirements.
Most rival bidders had promised to channel stablecoin yields back to the ecosystem with Paxos via HYPE buybacks, Frax through direct user yield, and Sky with a 4.85% savings rate plus a $25 million “Genesis Star” project.
Native Markets’ pitch instead stressed credibility, trading experience, and validator alignment.
Market Movement
BTC: BTC has recently reclaimed the $115,000 level, helped by inflows into ETFs, easing U.S. inflation data, and growing expectations for interest rate cuts. Also, technical momentum is picking up, though resistance sits around $116,000, according to CoinDesk’s market insights bot.
ETH: ETH is trading above $4600. The price is being buoyed by strong ETF inflows.
Gold: Gold continues to trade near record highs as traders eye dollar weakness on expected Fed rate cuts.
Elsewhere in Crypto:
Bank of England’s Proposed Stablecoin Ownership Limits are Unworkable, Says Crypto Group
What’s Next for Bitcoin and Ether as Downside Fears Ease Ahead of Fed Rate Cut?
Asia Morning Briefing: Native Markets Wins Right to Issue USDH After Validator Vote
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