Bitcoin miners are in the toughest situation in the history of the network, and a new report from Wintermute argues that simply waiting for the next bull market is no longer the strategy.
Instead, the company says miners will need to reinvent themselves as infrastructure managers and financial managers if they want to survive the next halving.
Wintermute analyst Jasper De Maere said the current mining cycle is structurally different from previous mining cycles in 2018 and 2022. Bitcoin’s design halves block rewards every four years, but this time the price hasn’t doubled over the same period, meaning miners’ profits are effectively shrinking.
On a four-year rolling basis, Bitcoin has only returned about 1.15x over this period, far below the 10x to 20x seen in previous cycles.
In past cycles, large price increases masked many problems. Miners can count on a bull market to compensate for the drop in profit margins after each halving.
Today, with a mix of institutional investors, ETFs, and corporate treasuries, Bitcoin trades like a mainstream macro asset, making an explosive 20x rally less likely.
For miners that have built their businesses on the premise of perpetual hyper-growth, Wintermute sees this as a change of government rather than a bad quarter.
The margins are disappearing
Under the hood, the cost structure of Bitcoin mining is very simple: energy and compute. This simplicity means there aren’t many ways to protect your profits if revenue declines. According to Wintermute’s analysis, gross margins during this period amounted to approximately 30%, a level that represented the lowest, not the highest, of previous bear markets.
Previous eras saw long periods where miners enjoyed margins of 70-80%. Now the “good times” look like the stress points they used to be.
Transaction fees also don’t save you money. Higher fees related to hype cycles and memory pool congestion appear on the charts, but they quickly disappear and rarely contribute more than a few percent of a miner’s total revenue over time.
Wintermute notes that even when fees are included, the margin lines are barely separated each cycle, especially in the current epoch. In other words, the “secondary revenue stream” built into the protocol is not functioning as a reliable backstop.
AI Pivot is an Opportunity for Few Companies
One way out of this predicament is attracting a lot of attention. It’s a shift to high-performance computing (HPC) and AI workloads. Big tech companies and AI startups are competing for power and data center capacity and don’t want to wait five to 10 years for new grid connections and construction.
Miners, who already control cheap power and built sites, are a natural shortcut.
Wintermute points out that sites that were once worth around $1 to $7 per watt as pure mining operations are now trading closer to $18 per watt after being repositioned for AI computing, with help from HUT and partnerships with Google and Anthropic, among others.
Public market investors have rewarded miners that announce reliable AI plans with higher valuations and cheaper capital through equity and convertible debt.
The problem is that not all miners have the location, balance sheet, or operational capacity to convert into a data center business.
Making “idle” Bitcoin work
So Wintermute looks at a second, less-utilized lever: active balance sheet management. Together, miners hold nearly 1% of all Bitcoin, a legacy of the “HODL” playbook that dominated early cycles.
At the same time, many listed miners are selling off parts of their coffers to cover shrinking margins and debt, and some are eliminating their holdings altogether.
Wintermute argues that miners should treat BTC like a working asset, rather than leaving their reserves sitting idle until they are released in a liquidity crisis. On the “active” side, it means sacrificing some market risk to earn yield from your holdings using derivative strategies such as covered calls and cash-backed puts.
On the “passive” side, miners can deploy their coins to on-chain lending markets and generate interest income, including the new wrapped BTC market on Wildcat highlighted by Wintermute.
Wintermute’s conclusion is that Bitcoin’s design is working, but the easy days for miners are over. Difficulty can still be adjusted, but it won’t overcome slowing price growth, a fee market that won’t grow in size, and rising energy costs that erode the rewards of every block.
The shift to AI could reshape the upper echelons of the industry, turning some miners into full-fledged infrastructure companies.
