Bitcoin (BTC) mining profitability has reached unprecedented lows this August, as increasing network hashrates have put pressure on miners, according to a research report released by JPMorgan on August 16, 2024. The report reveals that the decline in profitability has affected Bitcoin mining stocks, erasing gains that had been previously driven by advancements in artificial intelligence (AI) during the early part of the month.
The total market capitalization of fourteen U.S.-listed Bitcoin mining companies tracked by JPMorgan has dropped by 18% since the end of July. Analysts Reginald Smith and Charles Pearce noted that these stocks are currently trading at twice their proportional share of the four-year block reward, indicating the financial strain on the industry.
In the first two weeks of August, the network hashrate—a measure of the computational power used to mine Bitcoin—increased by approximately five exahashes per second (EH/s), marking a 1% rise to an average of 621 EH/s. Despite this increase, the hashrate remains 30 EH/s below the levels seen prior to the recent Bitcoin halving event.
The hashprice, an indicator of mining profitability, has declined sharply, currently standing about 30% lower than in December 2022 and approximately 40% below pre-halving levels. This significant drop in profitability could slow down hashrate growth in the near term, as miners grapple with rising operational costs and diminishing returns.
However, the report does highlight a positive trend for U.S.-listed miners. The share of the Bitcoin network’s hashrate attributed to these miners has risen for the fourth consecutive month, reaching a new record high of 26%. This growth reflects the increasing influence of U.S.-based miners within the global Bitcoin mining landscape.
Despite the challenges, Bitcoin’s price has shown some resilience. While it has decreased by about 5% since the halving, it remains up 35% year-to-date and 104% year-on-year. Nevertheless, the volatility in Bitcoin prices, coupled with rising mining costs, continues to create a tough environment for miners.
As the competition within the Bitcoin mining industry intensifies, miners will need to adapt to these evolving conditions to sustain profitability and remain operational in the ever-changing cryptocurrency market.
