Earlier this year, bitcoin went through its latest quadrennial halving, which reduces the rewards accrued by miners of the largest cryptocurrency, thus boosting its scarcity. Increased difficulty in the bitcoin mining process can lead to higher costs in the form of increased energy output and lower profits due to the reduced rewards. On the surface, that sounds ominous for crypto miners, including those residing in the VanEck Digital Transformation ETF (DAPP ), but some of those companies are surviving and thriving in the post-halving world thanks in large part to artificial intelligence (AI).
Due to the computing power required by AI, crypto miners, including DAPP holdings, have core competencies needed to further the emerging technology.
Crypto Miners Evolution Is Essential
AI presents cryptocurrency miners with a platform for not only diversifying their revenue streams, but evolving with the times as well – both of which are critical at a time when being a pure play crypto mining entity is less lucrative.
“Jefferies said North American publicly traded mining firms minted a smaller share of new bitcoin in August compared to July, falling to 19.9% of the total network. They’re still spending on equipment upgrades, meaning efficiency is improving but economics are getting worse,” reports MacKenzie Sigalos for CNBC.
For its part, DAPP has been sturdy on a year-to-date basis, gaining almost 5%. While that’s not a market-beating performance, it is a testament to the exchange traded fund’s diversity. Said differently, DAPP isn’t entirely dependent on crypto miners and that’s a positive as the industry grapples with increased difficulty and reduced profitability in mining bitcoin.
Regarding DAPP’s roster, it features exposure to some of the potential crypto mining turned AI winners, including Core Scientific (CORZ). That company, which has expertise in high-performance computing (HPC), emerged from bankruptcy protection in January and could be at the right place at the right time regarding the AI revolution.
“In a note this week, Bernstein singled out Core Scientific as the best-performing publicly traded bitcoin miner, noting that of the miners that have diversified into AI and HPC, Core is the ‘only one with a material co-location contract with a leading GPU Cloud provider,’” according to CNBC.
Core Scientific could eventually become the third-largest data center for AI companies and that’s noteworthy for investors considering DAPP because the stock is the ETF’s fifth-largest holding at a weight of 5.80%.
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