Bitcoin mining profitability has reached unprecedented lows, according to a recent research report by JPMorgan.
The report, cited by CoinDesk, highlights that Bitcoin miners earned an average of $43,600 per exahash per second (EH/s) in daily block reward revenue in August, marking the lowest rate on record. This represents a steep decline compared to the peak of $342,000 per EH/s in November 2021, when Bitcoin’s price surged to $60,000, and the network hashrate stood at 161 EH/s.
The decline in mining profitability has been exacerbated by Bitcoin’s falling price, which has dropped for the third consecutive month. In parallel, the Bitcoin network hash rate — the total computational power used to mine and validate transactions — has been rising, further increasing competition among miners. According to JPMorgan analysts Reginald Smith and Charles Pearce, the network hash rate averaged 631 EH/s in August, up by 16 EH/s from July. This figure, however, still remains roughly 20 EH/s below pre-halving levels.
Mining companies have not been immune to these challenges. The total market capitalization of the 14 U.S.-listed mining companies tracked by JPMorgan shrank by 15% month-over-month to $20 billion. Only three of these miners managed to outperform Bitcoin during this period, signaling the widespread difficulty in maintaining profitability within the sector. Mining stocks overall have seen steep declines as rising costs and increased competition have weighed heavily on their bottom lines.
The rising hash rate serves as a proxy for the increasing difficulty in mining Bitcoin, making it more challenging and costly to earn block rewards. Mining difficulty, which adjusts roughly every two weeks to ensure blocks are mined at a consistent rate, rose by 9% in August and is now 4% higher than it was before Bitcoin’s most recent halving event. Halvings, which occur roughly every four years, reduce the block reward miners receive, further tightening miners’ profit margins.
Despite the bleak outlook, there was a brief silver lining for miners in August. A temporary spike in transaction fees led to transaction fees contributing as much as 120% of the block reward at one point, according to the report. This spike provided a temporary but “incremental positive” boost for miners, helping offset some of the losses from declining block rewards.
Another challenge facing Bitcoin miners is the increasing volatility in Bitcoin’s price. The report noted that Bitcoin’s annualized volatility rose from 45% in July to 62% in August, making it more difficult for miners to predict revenues and manage operating costs. This heightened volatility, combined with rising hash rates and declining rewards, paints a challenging picture for the Bitcoin mining industry moving forward.
Bitcoin is trading at $56,722 at the time of this writing, down 3.6% over the past 24 hours, according to CoinGecko.