Bitcoin mining profitability hits record lows, with rising hashrates and falling rewards creating a challenging landscape for miners.
Bitcoin mining profitability has plummeted to unprecedented lows, according to a recent report by JPMorgan. The analysis highlights that in August, miners earned an average of $43,600 per exahash (EH/s) in daily block rewards, marking the lowest profitability in Bitcoin’s history. This is a stark contrast to November 2021, when miners were raking in as much as $342,000 per EH/s, thanks to Bitcoin’s soaring price of $60,000 at the time and a lower network hashrate.
The decline in mining profitability is driven by a combination of factors. Bitcoin’s price has now dipped for the third consecutive month, dragging down the value of mining rewards. Compounding this, the network’s hashrate—the total computational power dedicated to mining—has been steadily increasing, averaging 631 EH/s in August. This rise in hashrate indicates heightened competition among miners, which in turn raises mining difficulty and further compresses profitability. The mining difficulty rose by 9% in August, up 4% from pre-halving levels, creating a tougher environment for miners to earn substantial returns.
The impact on the mining sector is significant. According to JPMorgan, the aggregate market capitalization of the 14 U.S.-listed bitcoin miners tracked by the bank dropped by 15% month-on-month, shrinking to $20 billion. Only a few miners managed to outperform Bitcoin’s price during this period, underscoring the mounting financial pressures within the industry.
Despite these challenges, miners experienced a brief uptick in August due to a spike in transaction fees. At one point, fees surged to as much as 120% of the block reward, offering a momentary relief for miners. However, this positive development was short-lived and insufficient to counterbalance the broader downward trend in mining profitability.
JPMorgan also pointed out that Bitcoin’s volatility increased during this time, rising from an annualized rate of 45% in July to 62% in August. This growing volatility adds another layer of unpredictability for miners already grappling with declining returns and tougher market conditions.
As Bitcoin mining becomes increasingly competitive and less profitable, many in the industry are being forced to reevaluate their operations and strategies to survive in this new, more challenging landscape.