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Private Equity Makes "Several Approaches" Into Bitcoin Mining Related Firms

TradFi money isn't just being drawn to ETFs; Bitcoin mining is now on the radar of private equity

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Bitcoin miners have caught the attention of private equity (PE) firms due to their data centers that can power artificial intelligence-related (AI) machines.

In an interview with CoinDesk, Core Scientific's Adam Sullivan, revealed that several approaches have been made from private equity firms to finance their AI-related partnerships.

"Private equity is obviously chasing the data center space right now; even private equity firms that haven't necessarily done data centers before are evaluating the space," Sullivan said.

Bitcoin miners can help AI-related firms store their machines in already-built data centre infrastructures, rather than AI firms building these facilities themselves.

"One of the biggest constraints [for data centers] right now is finding sites that have over 100 megawatts of power and have the high voltage substation's transformer in place. Those are difficult sites to find, and it just so happens that's been the criteria for locating bitcoin mining sites for the past four years," Sullivan said.

Bitdeer global marketing manager Retainna Lin told Blockhead at Singapore's inaugural SuperAI event that the firm is venturing into AI to make use of CPUs that were once used for Bitcoin mining, which have now become redundant.

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JP Morgan has said this interest has further validated the Bitcoin mining sector's invovelemt in high-performance computing and could "usher in a new age of mergers and acquisitions for the miners," according to CoinDesk.

Additionally, Bitcoin's halving event, which triggered in April this year, has increase the attention of PE firms.

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“The halving has also caught the attention of private equity firms, which see this event as an opportunity to consolidate smaller firms and fold their existing infrastructure into their own," Core Scientific explained.

PE firms are providing capital to Bitcoin miners to help with the cost of repurposing these data centres, which is steep.

"Many of these Bitcoin mining companies are struggling right now to build their bitcoin mining facilities, and these private equity firms are looking at potential returns, looking at ways that they can grab economic value out of some of these potential conversions [from mining to HCP]," said Sullivan.

Powering these facilities requires a hefty amount of energy too. According to Just Energy, the energy consumption of all crypto assets combined is between 0.4% and 0.9% of annual global electricity usage, or 120 and 240 billion kilowatt-hours per year. These figures amount to more energy usage than all the world’s data centres combined.

Bitcoin mining derives its energy from fossil fuels (43%), hydropower (23%), wind power (14%), nuclear (8%), solar (5%), and other renewables (2%). But now, the crypto industry, as well as other pockets of the tech industry are reconsidering tapping more into nuclear energy.

Consequently, crypto exchange Kraken is now considering using nuclear energy to power its data centres due to increased demand for its services. Although the exchange isn't looking to build its own reactors, it is considering partnering with nuclear power providers with small modular reactors (SMR).

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“With institutions moving into the crypto asset class and activity moving on-chain, the need for reliable fiat onramps continues to grow,” Kraken CTO Vishnu Patankar explained. “Bolstering our energy resiliency means we strengthen a direct avenue into the crypto ecosystem, supporting its continued growth.”