Bitcoin miners’ profits fell to an all-time low in September, according to JPMorgan.
“The daily profit from Bitcoin mining block rewards fell 6% from August, the lowest on record,” JPMorgan analysts Reginald Smith and Charles Pearce wrote in a report on Oct. 1. “Bitcoin mining revenue and daily gross profit declined for the third consecutive month, despite a slight increase in the average price of Bitcoin.”
Specifically, the hashrate (the computing power of the blockchain mining system) increased for the third consecutive month to 643 exahashes per second (EH/s), which also means the difficulty increased. The group estimates that miners earned an average of nearly $42,100 per EH/s in daily block rewards in September, the lowest in years, thereby causing profits to decline sharply.
There are now about 14 major Bitcoin mining companies listed in the US with a combined market capitalization of more than $20 billion. The sector has seen strong growth in recent years due to the rise in Bitcoin prices, but has declined in the past three years due to the decline in the value of the cryptocurrency, as well as increasing competition from large-scale mining systems in the US. Shares of Mara Holdings and Riot Platforms, two of the largest Bitcoin mining companies in the US, have fallen 36% and 54%, respectively, this year.
Previously, data released by blockchain market research firm CryptoQuant on August 19 showed that the Hash Ribbons index – reflecting the difficulty and financial challenges for Bitcoin miners – had a higher moving average in the 30 days as of August 11 than in the previous two months. CoinTelegraph commented that this is a disadvantageous parameter for miners, signaling that their profits continue to decline.
Since the fourth Bitcoin halving, miners’ earnings have plummeted, as evidenced by their profitability. Miners’ daily revenue dropped 63% in the two months after the halving due to lower rewards and higher transaction fees. Meanwhile, the need for upgrades to their mining rigs has put miners on the brink of “giving up and turning off the machine”.
“Miners’ total daily revenue in early March was $79 million, but now it’s down to $29 million. Revenue from transaction fees also accounts for only 3.2% of total daily revenue, the lowest level since April 8,” CryptoQuant reported in early July.
To curb inflation as too many people participate in mining cryptocurrency, Nakamoto Satoshi, the father of Bitcoin, added a piece of code so that every 210,000 blocks mined, the reward for miners will be halved. This algorithm is called Bitcoin halving and occurs on average every four years. During the first halving, the reward was reduced from 50 to 25 Bitcoins per block. The fourth halving is scheduled for April 20, and when it happens, miners will receive just 3,125 Bitcoins for creating a new block.