Bitrabo Editorial
Bitcoin (BTC) mining firms are facing serious difficulties as a crucial profitability indicator has hit a new low.
JPMorgan Chase analysts, Reginald L. Smith and Charles Pearce, reported a 6% monthly decrease in daily block reward gross profits for miners in September. This decline marks the third month in a row of reduced daily mining revenue and gross profits, despite a minor increase in Bitcoin’s average price.
Impact of Bitcoin Halving on Revenue
According to the analysts, the drop in mining revenues is largely due to the latest Bitcoin Halving, which took place in April this year. This event occurs every four years and significantly affects the cryptocurrency’s price over time.
This scheduled reduction halves the block rewards miners receive every four years, a tactic aimed at controlling inflation and sustaining Bitcoin’s maximum supply of 21 million units.
Additionally, experts predict that this recent Halving could lead to annual revenue losses exceeding $10 billion for mining companies, based on the current Bitcoin price of about $60,750 as of Tuesday’s report.
Intense Competition and Rising Energy Costs
Despite a collective market value of more than $20 billion among 14 prominent US-listed mining companies, the sector is grappling with dwindling profits. Analysts highlight rising competition from larger operators entering the US market, intensifying challenges for smaller businesses.
As noted by Bloomberg, the increasing number of miners means that individual participants are facing steeper challenges, with heightened computing power resulting in a reduced chance of receiving rewards.
Bitcoin mining demands substantial energy resources, compelling miners to invest billions in specialized equipment to authenticate transactions and vie for limited Bitcoin rewards.
This financial pressure is reflected in the stock performances of major mining firms. Shares of leading publicly traded miners, Marathon Digital Holdings Inc. and Riot Platforms Inc., have plunged by 36% and 54%, respectively, this year.
Currently, Bitcoin is trading at $60,758, having decreased nearly 5% in the past 24 hours and about 6% over the past week.
This downturn follows a surge to a two-month high of $66,500 last Friday, spurred by optimistic views on the US Federal Reserve’s interest rate reduction on September 18.
Notably, this recent price fluctuation is influenced by heightened geopolitical tensions in the Middle East, particularly between Israel and Iran, driving investors to move their assets to safer options like gold.
Image sourced from DALL-E, chart from TradingView.com