Bitcoin miner Iren seeks to restore faith in the digital currency as it reveals AI pivot

The brothers behind a bitcoin empire once worth $1bn have battled dizzying highs and crashing lows. They remain big believers but are diversifying towards AI and cloud computing.

Brothers Will and Dan Roberts are leveraging Iren’s data centres to capitalise on the AI boom. Picture: Tim Hunter

Iren – the company formerly known as Iris Energy – is diversifying from bitcoin, leveraging its data centre network to capitalise on the explosion in artificial intelligence and cloud computing.

The Australian grown company listed on the Nasdaq in 2021 and has experienced the dizzying highs and lows of the bitcoin market, losing two-thirds of its value in 2022.

But Iren, founded by brothers and former Macquarie bankers Dan and Will Roberts, has been steadily rebuilding itself in an industry that’s been tarnished by the collapse of many high-profile cryptocurrency firms, including Sam Bankman-Fried’s FTX.

In the past year, Iren’s shares have soared more than 86 per cent to $US7.74 ($11.83), giving it a market cap of $US519.28m. But its shares are still trading far from its listing price of $US28 when it was valued at more than $US1bn.

Iren's founders Will and Dan Roberts.

While the industry has been rocked by the demise of many high-profile exchanges, Dan Roberts said it hasn’t dampened the appetite for bitcoin, which he describes as cyclical.

“Honestly, it’s like Groundhog Day,” he said.

“We’ve been here since 2013, and it’s the same stuff in every single cycle. People trust these rogue, unregulated casinos to hold their coins, and they inevitably get hacked, coins stolen. You get these FOMO (fear of missing out) cycles where prices go up 10-40x, early adopters get rich, buy their Lambos, mansions … then get washed out on the way down.

“It then kind of flatlines for two or three years, the halving then comes, you get a massive supply shock and away we go again.”

Mr Roberts was referring to the halving of bitcoin, which happens every four years – with the next set to happen in April – which slashes the rate at which new bitcoins enter circulation, fuelling investor euphoria.

Already, Bitcoin has regained a $US1 trillion market cap after the digital asset surged above $US52,000 apiece last week – the highest level since late 2021. This compares with it sinking as low as $US16,000 in late 2022.

Mr Roberts is upbeat on bitcoin’s further recovery – stressing that it’s unlike the digital currencies bet in rogue casinos.

“What people are realising is there’s a fundamental difference between bitcoin and this broader crypto casino. It’s fundamentally different asset classes. Bitcoin is a software protocol, with no central authority. There’s only 21 million. Every 10 minutes is another block mined. And it doesn’t matter what you do, what you say, you cannot stop it because of its nature.

“Everything else in crypto is fundamentally different where you’ve got these individuals, you’ve got the permissions that control the code base, they pivot they change.”

But Mr Roberts says Iren is moving to shield itself somewhat from the volatility by allowing more of its data centres to power AI.

“There’s two very distinct types of computing power. There’s really low latency, high reliability cloud systems for hospitals, governments, corporates. And then there’s just data processing, high performance compute, which needs completely different infrastructure and setups. All we’ve done is focus on the latter.

“We’re not going away from bitcoin. We’re big believers in it. We’re big believers in AI. And we think both have got a huge role to play over the next 10 to 15 years. We’re pretty excited to have a trajectory that involves two massive tailwinds.”

Iren’s bitcoin mining revenue more than double from to $US76.4m in the six months to December 31, compared with $US30m in the previous corresponding period. Its adjusted earnings before interest, tax, depreciation and amortisation swung to $20.7m from a $6.4m loss.

It has tripled the size of its AI cloud services business and to fuel its expansion, it is building a 1400 megawatt data centre in West Texas – an area rich in renewable energy – which is expected to be completed in 2026.

“We’ve always gone to the source of low-cost access to renewables,” Mr Roberts said.

“For years I was in infrastructure at Macquarie and then a funds management business where we just used government incentives and super fund money to build wind and solar farms. But that was all trending towards zero in terms of returns. So why not get on the flip side of it and go monetise all this excess energy that governments are incentivising onto the grid.

“So our Texas site is located up in the north where there’s about 32 gigawatts of wind and solar, but the transmission line is 12 gigawatts to move that power down to Dallas and Houston. It’s government incentives 101, so we go up there to use the excess power.”

Mining cryptocurrency like bitcoin requires a huge amount of electricity and computing power. Iren’s electricity costs during the half year were $US14,000 for every bitcoin mined. But Iren is getting smarter with its energy use.

“So when the wind blows, the sun shines, you’ve just got this flood of cheap power. But when the wind stops blowing, or there’s a weather event or a network outage, we’ve got a software overlay where it automatically puts our machines to sleep, our computers to sleep, and sells that power back into the market,” Mr Roberts says.

“So we’ve got this algorithm that, every 10 minutes, looks at whether it’s more profitable to sell the power into the bitcoin network, or back into the wholesale energy market.”

Asked if he thought AI would overtake bitcoin in becoming Iren’s dominant business, Mr Roberts said there was room for both.

“As we forecast into the medium to long term, if bitcoin goes to $US500,000 a coin, then clearly we’re going to have a large portion of our earnings that are linked to Bitcoin. If AI continues on the exponential trajectory, it’s on them, we’ll have a large proportion of earnings dedicated to AI, but it’s kind of a good problem to have, isn’t it? You’re having to pick between two exponential trends.

“Like if you said to me 90 per cent of your earnings in five years is gonna be AI, I’d think: ‘how good, what a cracker’. But then if you say to me 90 per cent of your earnings in five years is gonna be bitcoin, then ‘cool, what a cracker’. It’s great.”

Mike Colonnese of H.C. Wainwright & Co said Iren’s expansion into the AI cloud service business was off to a “promising start”.

“Assuming $US2.50 per GPU (graphics processing unit) hour, Iren estimates it could generate $US17.4M of annualised gross profits from 816 GPUs, which represents 17 per cent of the total gross profit the company generated from BTC (bitcoin) mining in F2Q24 on an annualised basis,” Mr Colonnese wrote in a note to investors.

“We are encouraged by the initial demand and estimated economics from the AI business, and expect Iren to ink new agreements in the coming months.”