Miners pivot from Bitcoin to AI compute

Mining (8)

• Brandon Bailey argues the 2021 China mining ban caused up to 30% of Bitcoin hash rate to relocate to the US, leading to a North American gold rush and the institutionalization of mining.
• Bailey says Bitcoin mining companies like Marathon, Riot, and CleanSpark amassed gigawatts of power portfolios during the 2021 bull cycle because margins were incredible.
• Bailey states Bitcoin miners transitioned to AI compute because a 10-15 year hyperscaler lease offers guaranteed cash flow, unlike volatile mining income.
• He explains Bitcoin miners trade at 4-6 times EBITDA, while traditional data center players like Digital Realty and Equinix trade at 20-24 times EBITDA, creating a massive multiple expansion opportunity.
• Bailey cites Core Scientific, HUT 8, Cypher, TerraWolf, and Applied Digital as pioneers successfully pivoting from mining to AI compute.
• He notes Core Scientific has 590 megawatts of critical capacity leased to CoreWeave and has begun delivering.
• Bailey describes a two-phase re-rating process for Bitcoin miners: signing a lease creates the first valuation pop, and financing and delivering construction removes the remaining execution discount.
• He says smaller Bitcoin miners with 50 MW of power could contribute their assets into a JV at valuations over $1 million per megawatt, far above their current $200k-$400k valuations.

Politics (1)

• Bailey observes political pushback against massive AI data centers is creating more demand for smaller 20-50 megawatt sites.

Big Tech (1)

• Marty Bent notes Google raised $84.5 billion in an equity raise involving Berkshire Hathaway to fund AI CapEx, signaling a shift from stock buybacks to full growth mode.

AI Infrastructure (2)

• Bailey argues counties that reject data centers miss the opportunity to bring new generation, capture capital for local investment, and potentially see lower power rates compared to anti-data center regions.
• He concludes the AI compute rush will push Bitcoin mining towards stranded and distributed power sources, potentially creating a golden era of durable mining economics due to constrained ASIC supply and power availability.

Protocol (2)

• Hayes is currently positioned in cash and T-bills, having sold tokens like Hype and Zcash. He cites risk management, capital preservation, and a search for new asymmetric trades as his reasons for taking profits.
• He views Ethereum as a high-conviction, large-cap investment with a favorable setup, trading well below its all-time high while other major assets have breached theirs. Hayes would allocate a marginal dollar to Ether over Bitcoin on a chart perspective.

Business (1)

• Hayes foresees a significant rally in hydrocarbon prices due to global strategic inventory rebuilding and geopolitical risk, viewing current lows as a buying opportunity for energy equities.

Startups (2)

• He credits BitMEX with inventing the modern perpetual swap, emphasizing the funding rate mechanism and socialized loss model as the key innovations that enable high-leverage, 24/7 trading for retail.
• Hayes believes perpetual swaps will dominate because they cater to retail demand for leverage and continuous markets, and he expects Hyperliquid to eventually flip Binance as the offshore leader due to its superior, cost-efficient product.

Markets (1)

• Despite creating the instrument, Hayes personally trades only spot, advising against leverage for most investors due to crypto's inherent volatility. He occasionally participates as a liquidity provider in perp markets when rates are attractive.

AI Infrastructure (3)

• Google signed a three-year deal to pay SpaceX $920 million per month to rent compute, securing access to at least 110,000 Nvidia GPUs from October 2024 through June 2029.
• Based on the Anthropic and Google deals, xAI will be paid $26 billion per year to license compute from its data centers, implying an 18-month payback period on its $40 billion data center spend.
• Nvidia deepened its memory supply chain with a new multi-year deal with SK Hynix, securing high-bandwidth memory for next-generation Vera Rubin chips amid a global component shortage.

Enterprise (1)

• OpenAI's business customer base drives its revenue shift, with 2 million businesses accounting for 40% of revenue and a target of 50% by year-end, while the company still loses $14 billion annually.

Open Source (1)

• Christian Catalini likened the Fable sanction to the 2008 financial crisis, suggesting it could catalyze a 'Satoshi moment' for local open-source AI.

Protocol (6)

• David explains covenants as proposals to add output requirements to Bitcoin transactions, with various technical implementations like OP_CAT, CSV, and TemplateHash.
• David states covenants would make ARK trustless like Lightning and aid Lightning scaling via channel factories, but their adoption depends on core developer support.
• David describes the 'great consensus cleanup' as bug fixes for Bitcoin, including a flaw allowing rapid mining of remaining Bitcoin.
• David outlines other Bitcoin change proposals: Paul Sztorc's drive chain (eCash), post-quantum cryptography work, and BIP361 for freezing vulnerable coins.
• Steve warns an eCash hard fork could create tax liabilities and operational burdens for businesses, posing a potential attack vector if replicated.
• Steve notes Illinois enacted a 0.2% transfer tax on crypto assets, targeting third-party services, raising questions about its applicability to self-custody transfers.

Politics (1)

• Steve says Alaska's oil revenue payments exemplify a popular model for distributing sovereign wealth fund proceeds directly to citizens.

Fed (5)

• The Fed under Kevin Warsh sharply reduced forward guidance, cutting the FOMC statement by 80% and ending with a succinct commitment to price stability, signaling a break from 15 years of communication aimed at suppressing volatility.
• Markets interpreted the Fed's June meeting as peak hawkishness, pricing in two hikes by mid-2027, but many of those hawkish dots likely came from non-voting regional presidents pushing back against Warsh's new, less communicative approach.
• Warsh's hawkish pivot collides with disinflationary data: oil is down 30% since the last Fed dot plot, inflation swaps have returned to pre-war levels, and shelter inflation appears to be peaking, making actual rate hikes unlikely.
• The flattening yield curve suggests a growth problem, not just an inflation issue, and may be part of a Warsh-Treasury strategy to lower long-term yields to facilitate government debt term-outs and improve housing affordability.
• Record short positioning in SOFR futures and across the Treasury curve creates a potential squeeze, as the market consensus for hikes faces off against weakening inflation data and a cooling labor market.

Markets (3)

• High-yield credit spreads remain resilient despite tightening financial conditions, allowing the AI-driven capex cycle to continue unabated, with data center spending growth slowing from 80% to 45% year-over-year but remaining massive.
• Capital is rotating out of hyperscalers and into AI bottleneck stocks and infrastructure plays, a trend Quinn identified early, as the buildout shifts from being cash-flow funded to requiring significant debt and equity issuance.
• Gold sentiment has reversed violently, with six-month put/call skew at a 10-year high and CTA positioning collapsing to the 1st percentile, showing how government intervention in markets creates extreme sentiment swings across all asset classes.

BTC Markets (2)

• MicroStrategy's distress stems from Saylor's refusal to build cash reserves for dividends and debt, instead levering up to buy more Bitcoin, creating a self-reinforcing downward spiral as Bitcoin price falls and equity issuance dilutes shareholders.
• Bitcoin's narrative struggles in a new era where capital has productive alternatives like AI infrastructure, breaking the TINA dynamic that drove its previous bull cycles and highlighting its role as an insurance asset against future currency dilution.

Regulation (1)

• The crypto industry faces a cleanup phase where scams and misallocated capital from 2022 must be cleared before legitimate projects - like simplified banking rails - can emerge, a process dependent on regulatory clarity and improved traditional market liquidity.