Core Scientific’s $100M Deal with CoreWeave Expands Miners’ Cash Streams

Bitcoin miner Core Scientific is taking steps to diversify its revenue streams ahead of the upcoming halving event. The company has entered into a deal with artificial intelligence startup CoreWeave to provide data center services, potentially earning more than $100 million in revenue. Core Scientific will be leasing a Tier 3 data center in Austin, Texas, which previously belonged to Hewlett Packard, to host CoreWeave’s infrastructure. This move will allow Core Scientific to expand into high-performance computing (HPC) in addition to Bitcoin mining.

CoreWeave, backed by major financial firms like Jane Street, J.P. Morgan Asset Management, and Fidelity, offers infrastructure for compute-intensive applications like machine learning. The company was valued at $7 billion by the end of December 2023. By partnering with CoreWeave, Core Scientific aims to support its near-term requirements while diversifying its hosting customer portfolio.

The timing of Core Scientific’s expansion is significant as it comes just before the Bitcoin halving event. This event will cut Bitcoin’s block reward revenue in half. In 2024, the block reward for miners will decrease from 6.25 BTC per block to 3.125 BTC per block. The purpose of the halving is to control Bitcoin’s inflation by reducing the supply of new coins over time. While miners will experience a significant reduction in revenue, the costs associated with mining are expected to increase.

According to CoinShares, electricity costs account for about 68% and 71% of miners’ total cost structure before and after the halving, respectively. The average cost of production for crypto miners after the halving is projected to be $37,856. This means that miners will need to find ways to offset the decrease in revenue and manage their expenses effectively.

Core Scientific’s focus on diversifying its revenue streams is a strategic move to mitigate the impact of the halving event. The company became the largest publicly listed crypto mining company in North America in 2023 after mining 19,274 BTC, equivalent to $812 million. It also faced significant financial challenges due to declining BTC prices, rising energy costs, and debts associated with the bankrupt Celsius Network.

By offering data center services to CoreWeave, Core Scientific is positioning itself to tap into the growing demand for high-performance computing. This new business venture will not only provide additional revenue but also diversify its customer base. As the Bitcoin mining landscape changes with the halving, companies like Core Scientific are adapting their strategies to ensure long-term sustainability and profitability.

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