Unchained Podcast: "Bits + Bips: Bitcoin Miners Turn to AI for a Boost as BTC Falls"

Host: Steve Ehrlich (guest hosting for Laura Shin)
Guests: John Todaro (Needham & Company), Zach Pandal (Grayscale Investments)
Release Date: February 16, 2026

Episode Overview

This episode dives deep into the rapidly shifting dynamics for Bitcoin miners in 2026, focusing on two major developments:

• The financial and operational pressures on miners as Bitcoin's price struggles below $70k.
• Miners’ strategic pivot toward supplying data center capacity for AI/High-Performance Computing (HPC) workloads, taking advantage of the surging demand from hyperscalers like Google.

The conversation critically explores the interconnected economics of Bitcoin mining, the ongoing tech and crypto market sell-off, and how miners are adapting business models for a volatile future. The episode also touches on the latest with Coinbase, the correlation between Bitcoin and tech/gold, as well as challenges like political pushback around data center expansion.

Key Discussion Points & Insights

1. Bitcoin Miners’ Pivot Toward AI HPC (03:47–10:19)

• Miners Doubling Down on AI Capacity:

  • Despite Bitcoin price weakness, miners are accelerating efforts to provide AI-focused data center capacity—“If anything, they've gone more into that with the bitcoin weakness.” [John Todaro, 03:47]
  • Recent lucrative contracts, notably Hut 8's 15-year, Google-backed lease, showcase strong and improving demand.

• Impact of Hyperscaler CapEx:

  • The announcement of $660 billion in AI CapEx from major tech companies initially spooked markets, but for miners, it's a bullish indicator for continued demand.
  • "From a bitcoin miner standpoint, you want the major hyperscalers to continue to spend money on data center, build out, sign leases, put more towards capex." [John Todaro, 05:48]

• Contract Structures Favorable for Miners:

  • Miners largely provide colocation leases—hyperscaler tenants supply their own GPUs, leaving miners less exposed to hardware depreciation risks.
  • “They’re doing colo leases…you at least don’t have that very real and significant depreciation on the GPUs.” [John Todaro, 06:31]

Notable Quote:

“The demand is still very strong. If anything, it’s gotten better…The terms have improved since last summer.”
– John Todaro, 03:47–05:29

2. Economics & Value Proposition of Miner-AI Contracts (07:11–12:17)

• Hut 8's Standout Deal Structure (07:28):

  • Full credit backstop from Google enables easier/cheaper financing and longer execution timeframes—“the best contract we have seen so far.”
  • Higher upfront revenue and 3% escalators; longer executable windows mean less risk from delays.

• Comparison to Data Center REITs:

  • If miners can consistently secure power and execute, they stand to close the valuation gap with established data center REITs (like Equinix).
  • However, (1) continuous access to power and (2) operational execution are crucial—failure means trading at a discount.

Notable Quote:

“If you can show consistency, maybe they start to look value relative to those names. But if you are one and done…it’s 40-50% lower equity value.”
– John Todaro, 10:19–12:17

3. Current State and Challenges for Bitcoin Mining (14:07–22:51)

• Hash Rate, Hash Price & Miner Margins:

  • Mining is approaching break-even for many: "Some miners might be higher on cash production. When you factor in the depreciation...a lot of them are above where the bitcoin prices are." [John Todaro, 15:17]
  • The question of “when do miners have to turn off rigs?” becomes more urgent as hash price falls.

• AI Pivot Not Caused By Price Fall:

  • The move to AI was not reactive to bitcoin’s decline but a structural shift: “I think it was more so a light bulb moment...the train has left the station.” [John Todaro, 17:51]

• Hash Rate Drawdown Explained:

  • High-cost and older rigs are exiting.
  • Some capacity is being reallocated to HPC/AI, foreshadowing more hash dropping off as AI centers come online in the next 12–24 months.

Notable Quote:

“…public U.S. hash…should come down and that’s likely going to happen over the next 12 months…probably about 25% of that comes offline over the next two-ish year time frame.”
– John Todaro, 21:09–23:01

4. Miner Bitcoin Selling & Financial Stress (23:12–28:05)

• Are Miners Forced to Sell BTC?

  • Public miners (especially those with AI contracts) are not forced to sell BTC for operations—they can access capital markets at attractive rates due to AI contracts.
  • Some miners have a standing policy of selling a chunk of produced BTC for operational expenses—no recent shift in response to market lows.

• Danger Zones & Debt:

  • "I've always considered it somewhat of a danger zone when you're at your break even cost…in the 50s, low 60s…you're putting margin under pressure and then you have to think—the next halving is coming." [John Todaro, 26:31]
  • Current miner debt is generally AI-related, not from over-extended Bitcoin mining capex, unlike the last cycle.

5. Political/Regulatory Risks (28:18–29:40)

• Power Access Uncertainty:
  • A growing issue: “You are seeing a bit more pushback at the state level around…granting all this power to data centers…protests in some cases.” [John Todaro, 28:18]
  • ERCOT (Texas electricity market operator) rules and political blowback might limit projected miner data center expansion.

6. Coinbase Earnings Preview & Business Evolution (29:40–38:03)

• Earnings Expectations:

  • Retail take rates and altcoin trading activity are virtual unknowns and critical for Q1 outlook.

• Diversification and Regulation:

  • Coinbase is uniquely vulnerable to both trading and yield legislation (unlike Robinhood or Circle).
  • The company is diversifying into prediction markets, tokenized stocks, agent-to-commerce, and more.

• Policy & Yield Risks:

  • The Clarity Act’s stablecoin yield provisions could significantly impact Coinbase’s USDC-driven profits, but the direct magnitude is difficult to forecast.
  • “If [yield on USDC] goes away, that could be a significant problem…very hard to determine how much USDC on Coinbase is ultimately just to get yield.” [John Todaro, 34:10]

7. Market Sentiment, Prediction Markets, & Coinbase’s Branding (36:55–39:36)

• Prediction Markets:

  • Investors are watching adoption details—is it pulling in new users, cannibalizing legacy trading, or simply repackaging existing demand?
  • The space is rapidly commoditizing (Robinhood, Gemini launching products).

• Coinbase’s Super Bowl Ad – Mixed Sentiment:

  • Both John Todaro and Steve Ehrlich comment on widespread “crypto fatigue” and mainstream negativity, noting the challenge for Coinbase/crypto’s public image.
  • “Sentiment’s really low. And when sentiment gets really low, that usually means…good time to buy crypto assets.” [John Todaro, 39:19]

8. Bitcoin vs. Tech and Gold: Trading Narratives (43:08–54:00)

• BTC Now Trades With Tech, Not Gold (43:41):

  • “The price of bitcoin went up with other frontier technology assets and it went down with those types of assets as well…What changed was risk taking in markets." [Zach Pandal, 43:41]
  • Bitcoin’s short-term “digital gold” narrative is challenged by its high correlation to tech sell-offs, not precious metals.

• Market Dynamics & Precious Metals:

  • Recent metals rally was driven by supply squeeze and ETF inflows more than a macro “debasement” trade—correlations have reverted as squeezes resolve.

• Looking Ahead: Differentiation Trade:

  • Next phase in markets: differentiate between tech that’s truly at risk from AI and that which is complementary (public blockchains seen as more complementary).

• Allocating in Crypto’s Next Phase:

  • Focus on adoption trends—stablecoins, tokenized assets, privacy/prediction markets, and perpetual futures.
  • “These are the innovation trends…allocate capital to those places first.” [Zach Pandal, 51:58]

Notable Quotes & Memorable Moments

• Miners’ Relevancy in System:
  “None of this works without miners. But their stocks were always trailing.”
  – Steve Ehrlich, 02:21

• On Miners’ Strategic AI Shift:
  “Most of these miners have made up their mind…the train has left the station.”
  – John Todaro, 17:51

• On Political Barriers:
  “…starting to see a bit more pushback from a political standpoint at the state level around…all this power and compute going to AI workloads.”
  – John Todaro, 28:18

• On Coinbase’s Super Bowl Ad:
  “Your average person is not a big fan of crypto right now…I didn’t love that. Sentiment is way low.”
  – John Todaro, 39:19

Timestamps – Key Segments

• 03:47 – Miners pivot to AI data centers, improvement in contracts and demand
• 07:28 – Breakdown of Hut 8 / Google lease structure
• 10:19 – Miner valuation frameworks; importance of continued power access
• 15:17 – Mining at or near cash break-even; operational stress
• 17:51 – Structural, not reactive, shift toward AI workloads in mining
• 21:09 – Hash rate drawdown timeline (12–24 months)
• 26:31 – Danger zone economics and looming halving
• 28:18 – Political pushback and power constraints
• 30:08 – Coinbase earnings preview and business risks
• 34:10 – Clarity Act, USDC yield, and binary regulatory threats
• 36:55 – Prediction markets and Coinbase innovation efforts
• 39:19 – Mainstream crypto negativity and Coinbase’s Super Bowl ad
• 43:41 – Bitcoin tracking tech, not gold; narrative implications
• 49:23 – Next market phase: differentiation, not blanket tech sell-off
• 51:58 – Fundamental trends for deployment in crypto (“the three Ps”)

Summary Conclusion

As Bitcoin’s price falters and traditional mining profitability wanes, miners are seeking survival—and new upside—by shifting to AI/HPC data center service. This transition brings new financial models, improved financing, and contractual stability—but also new risks (power access, political resistance, operational execution).

For the broader market, the hope-for Bitcoin/gold de-correlation has not materialized; Bitcoin now trades like tech. The coming months will test miners’ adaptability, the durability of AI demand, and the ability of crypto firms (like Coinbase) to innovate amid regulatory and public perception headwinds.

Bottom Line:
The episode gives an unvarnished, nuanced look at how crypto mining, markets, and narratives are being redefined in real time—making it essential listening for anyone following the future of crypto infrastructure and digital asset investing.

For more detailed breakdowns, notable quotes, or to dive into a specific segment, refer to the timestamps provided.