JPMorgan Reports Historic Lows in Bitcoin Mining Profitability

Bitcoin Mining Profitability at Historic Lows, Says JPMorgan

According to a research report released by JPMorgan on Tuesday, the profitability of Bitcoin (BTC) mining has reached unprecedented lows. Analysts Reginald Smith and Charles Pearce estimated that Bitcoin miners generated an average of $43,600 per exahash per second (EH/s) in daily block reward revenue during August, marking it the lowest figure recorded to date.

This figure starkly contrasts with the peak revenue of $342,000 recorded in November 2021, a time when Bitcoin’s price soared to $60,000 and the network’s hashrate was at 161 EH/s. The decline in profitability can be attributed to a combination of falling Bitcoin prices and an increasing network hashrate.

Mining stocks have also faced a downturn, as the average price of Bitcoin has fallen for three consecutive months, coinciding with a rise in the network hashrate—a measure of the total computational power dedicated to mining and processing transactions on a proof-of-work blockchain.

• The total market capitalization of the 14 U.S.-listed mining companies monitored by JPMorgan plummeted by 15% month-over-month, settling at $20 billion.
• Only three of these mining entities managed to outperform Bitcoin during the same period.

JPMorgan’s report further highlighted that the network hashrate, which serves as a proxy for industry competition and mining difficulty, has seen an increase for the second consecutive month. The average hashrate in August was 631 EH/s, which represents a rise of 16 EH/s from the previous month, though it remains about 20 EH/s below levels seen prior to the most recent halving event.

Additionally, the bank noted a 9% rise in mining difficulty last month, which now stands at 4% higher than before the halving, indicating a more competitive environment for miners.

Interestingly, there was a temporary spike in transaction fees in August, reaching as much as 120% of the block reward, which the report described as an “incremental positive” for miners. The report also mentioned that Bitcoin’s annualized volatility rose to 62% in August, up from 45% in July, adding another layer of complexity to the current mining landscape.