According to a recent report by JP Morgan, Bitcoin mining profitability has decreased for the third consecutive month, even with an increase in the network’s hashrate. Miners are facing declining revenues and gross profits, highlighting a shift in the dynamics of the Bitcoin mining industry.
Drivers of Profitability Decline
The primary reason for the decrease in Bitcoin mining profitability is the drop in daily block rewards. In September, gross profits from these rewards fell by 6% to $16,100, the lowest point recorded in recent months. Additionally, the contribution of transaction fees to total block rewards was less than 5%, further constraining miners’ earnings.
Rising Hashrate and Competition
The increase in Bitcoin network hashrate is often seen as a positive indicator of the network's security and long-term viability. In September, the hashrate rose by 2% to 643 EH/s. However, for individual miners, this means heightened competition and lower individual rewards. Smaller mining operations face significant challenges in remaining profitable without scaling their operations or improving energy efficiency.
Impact of Lower Bitcoin Volatility
Bitcoin's volatility has decreased significantly in recent months. According to the report, Bitcoin volatility dropped from 62% in August to 44% in September, which may have contributed to lower transaction fees. Lower volatility leads to decreased trading activity, resulting in fewer network transactions and lower fee revenue for miners.
Bitcoin mining profitability has declined for the third consecutive month due to increased competition and lower transaction fees. Despite a 2% increase in network hashrate, miners are experiencing reduced returns. However, the total market capitalization of U.S.-listed miners grew by 4%, indicating investor optimism about the industry's long-term prospects. As the industry prepares for the upcoming halving in 2024, miners will need to adapt to evolving conditions by improving efficiency and reducing costs.
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