Bitcoin: Mining Profitability Collapses Despite Record Hashrate

The Bitcoin mining sector is going through a difficult period. According to a recent report by JPMorgan, the profitability of mining operations has hit historic lows, a consequence of falling prices and increasing network hash rate.

A double whammy hits Bitcoin miners

The first half of September has been particularly challenging for publicly traded mining companies in the United States. Two main factors explain their difficulties:

On the one hand, the price of Bitcoin is stagnating below the symbolic $60,000 mark, limiting the revenues generated by extracting new blocks. This price drop mechanically reduces the value of the rewards obtained by miners.

On the other hand, the Bitcoin network hash rate has returned to pre-halving levels, indicating increased competition among miners. This rise in overall hashrate means that each miner must deploy more computational power to stand a chance of winning the race to validate blocks.

This double-edged phenomenon, decreasing revenues and increasing costs, drastically squeezes the margins of industry players. JPMorgan estimates that the “hash price,” a key indicator of miners’ daily profitability, has dropped by more than 50% compared to its pre-halving level.

A mining landscape in full transformation

Despite this bleak context, some interesting developments are taking shape:

Publicly traded American miners seem to be pulling through, with their share of the global hashrate reaching a record level of 26.7%. This continuous increase over the past five months demonstrates the resilience and adaptability of these players.

The combined market capitalization of these companies remains substantial, at nearly $20 billion, despite a 3% drop since the end of August. Some players like Hut 8 even manage to show positive performances.

The drop in the “hash price,” coupled with seasonal trends, could slow down the growth of the hash rate in the short term. This temporary respite would allow miners to catch their breath and optimize their operations.

In conclusion, the Bitcoin mining sector is going through a critical post-halving adjustment phase. While the challenges are numerous, the industry’s capacity for innovation and adaptation suggests promising prospects for the most resilient players.