Bitcoin Mining Profitability Drops to Record Lows – JPMorgan Report
Once a profitable venture, bitcoin mining is currently facing unheard-of profitability issues. August 2024 witnessed the lowest daily revenue for Bitcoin miners in history, according to a recent JPMorgan analysis. From its peak of $342,000 in November 2021, the average income per exahash per second (EH/s) fell to $43,600, a considerable decrease. Rising mining difficulty, a rise in network hash rate, and the falling price of Bitcoin are all blamed for this slump.
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Bitcoin Mining Profitability Reaches All-Time Low in August 2024
According to research by JPMorgan analysts Charles Pearce and Reginald Smith, the profitability of Bitcoin mining has fallen to an all-time low. The average daily payout for miners in August was $43,600 per EH/s, which is a significant decrease from the high earnings of November 2021 when bitcoin values reached $60,000 and the network hash rate was 161 EH/s.
The prolonged slide in bitcoin’s price over the last three months, together with heightened competition and mining difficulty, are all significant contributors to this steep decline in profitability. The incentives for miners decline as the price of Bitcoin drops, making it more difficult to pay operating expenses and continue to be profitable.
Impact of Rising Hashrate and Mining Difficulty
The Bitcoin network’s hash rate, which measures the total computational power used to mine and process transactions, has been steadily increasing. In August, the network’s hash rate averaged 631 EH/s, a rise of 16 EH/s from the previous month. This increase indicates heightened competition among miners, which further compresses profitability.
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Mining difficulty also rose by 9% in August, making it even more challenging for miners to earn block rewards. According to the report, mining difficulty is now 4% higher than it was before the most recent bitcoin halving. The increased difficulty means that miners need more advanced and expensive hardware to stay competitive, driving up operational costs and further squeezing profits.
Market Cap of U.S.-Listed Bitcoin Miners Shrinks by 15%
The market capitalization of U.S.-listed bitcoin mining companies has also been harmed by the industry’s profitability issues. The combined market capitalization of these businesses decreased by 15% in August, reaching $20 billion, according to JPMorgan. During this time, only three miners outperformed bitcoin, illustrating the wider issues the sector is facing.
The stock prices of major miners, Riot Platforms (RIOT), Iren (IREN), Marathon Digital (MARA), and CleanSpark (CLSK), have dropped. Citing persistent industry problems, JPMorgan has also cut its price targets for multiple of these firms.
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$74 Billion Bitcoin Mining Opportunity Despite Challenges
JPMorgan is still upbeat about the long-term prospects of the bitcoin mining sector, despite the dire short-term forecast. According to the bank, given the current price of Bitcoin, the theoretical value of the remaining 1.3 million Bitcoins to be mined is approximately $74 billion. In the upcoming years, miners will have a great chance because of this, but they will also face a difficult and competitive environment.
The study also projects a $37 billion four-year block reward revenue opportunity, which would be an 85% rise on an annual basis but a 19% decrease since June. This implies that even with the challenging short-term forecast, the industry still has a significant amount of room for long-term growth.
FAQs
A combination of growing mining difficulty, more competition, and a drop in bitcoin price has caused mining profitability to hit all-time lows.
The overall processing power needed for mining is measured by the hashrate of the bitcoin network. Miners become more competitive as the hashrate rises, which lowers profitability.
August 2024: A 15% decline in the market value of bitcoin mining companies listed in the United States. The continuous difficulties in the sector have caused the stock prices of several corporations to drop.
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