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Bitcoin Mining Stocks Decline Amid Rising Hashrate and Profitability Challenges
Explore the recent decline in Bitcoin mining stocks as rising hashrate and profitability challenges reshape the market. Understand the factors influencing this trend and what it means for investors in the cryptocurrency space.
Bitcoin Mining Stocks Experience Decline Amid Rising Hashrate
In the first two weeks of August, Bitcoin (BTC) mining stocks have retraced some of their earlier gains associated with artificial intelligence (AI), as reported by JPMorgan (JPM) in a recent research analysis. The primary factor contributing to this downturn is the significant increase in the network hashrate, which has led to a decline in mining profitability, reaching record lows.
Hashrate, defined as the total combined computational power utilized for mining and processing transactions on a proof-of-work blockchain, plays a crucial role in the mining ecosystem. According to JPMorgan’s findings, the total market capitalization of the fourteen U.S.-listed miners monitored by the bank has dropped by 18% since the end of July. Analysts Reginald Smith and Charles Pearce noted that these stocks are now trading at twice their proportional share of the four-year block reward.
Despite these challenges, there are some positive developments within the sector. The share of U.S.-listed miners in the Bitcoin network hashrate has risen for the fourth consecutive month, reaching a new record high of 26%. This indicates a growing presence of U.S. miners in the global landscape.
The network hashrate itself has witnessed an increase of approximately five exahashes per second (EH/s), marking a 1% gain and bringing the average to 621 EH/s during the initial weeks of the month. However, this is still 30 EH/s below the levels observed prior to the halving event.
Mining profitability, measured by the hashprice, remains a concern, as it is currently around 30% lower than the figures recorded in December 2022 and approximately 40% below pre-halving levels. This decline in profitability may hinder hashrate growth in the near term, as highlighted in the report.
Furthermore, the report also pointed out that the price of Bitcoin has experienced a decline of about 5% since the halving, although it remains up 35% year-to-date and has increased by an impressive 104% year-on-year.