Bitcoin Mining Profits Plummet to Record Lows Amid Rising Hashrate

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Bitcoin mining profitability has reached a new low, according to a recent research report from JPMorgan. The report, published on Tuesday, highlighted that BTC miners earned an average of $43,600 per exahash per second (EH/s) in daily block reward revenue in August, marking the lowest point on record.

This figure stands in stark contrast to the peak of $342,000 per EH/s in November 2021, when Bitcoin was trading at $60,000, and the network hashrate was significantly lower at 161 EH/s.

The decline in mining profitability has had a notable impact on the stock prices of companies in the sector. The report noted that the total market capitalization of the 14 U.S.-listed mining companies tracked by JPMorgan shrank by 15% month-over-month, down to $20 billion. Of these companies, only three managed to outperform Bitcoin during this period, reflecting the broader challenges facing the industry.

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Rising Network Hashrate

One of the key factors contributing to the reduced profitability is the rising network hashrate, which serves as a proxy for competition and mining difficulty. The network hashrate averaged 631 EH/s in August, an increase of 16 EH/s from the previous month, and just 20 EH/s below the levels seen before the most recent Bitcoin halving event.

Additionally, mining difficulty rose by 9% in August and is now 4% higher than before the halving, further squeezing miner margins.

Positive Developments

Despite these challenges, there was a brief positive development in August when transaction fees spiked to as much as 120% of the block reward. While this provided a temporary boost to miner revenue, it was not enough to offset the overall trend of declining profitability.

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Moreover, Bitcoin’s annualized volatility also rose sharply in August, climbing to 62% from 45% in July, adding another layer of uncertainty for miners.

Last month, Bernstein, a research and brokerage firm, gave “outperform” ratings to Riot Platforms (RIOT), CleanSpark (CLSK), Iris Energy (IREN), and Core Scientific. It indicated confidence in these companies’ ability to navigate the challenging environment and deliver solid returns for investors.

In a related development, Malaysia made headlines for its aggressive crackdown on illegal Bitcoin mining operations, destroying around 1,000 mining machines valued at approximately $452,500. This action underscores the growing regulatory scrutiny on Bitcoin mining, particularly in regions where power theft and other illicit activities are linked to the practice.