Bitcoin mining profitability has plummeted to unprecedented lows, according to a recent research report by JPMorgan. The report highlights that miners earned an average of $43,600 per exahash per second (EH/s) in daily block rewards throughout August, marking the lowest profitability rate ever recorded.
This drastic decline in profitability is a stark contrast to the peak in November 2021, when miners earned $342,000 per EH/s, driven by Bitcoin's price hitting $60,000 and a network hashrate of 161 EH/s. The report, authored by JPMorgan analysts Reginald Smith and Charles Pearce, notes that the aggregate market capitalization of U.S.-listed Bitcoin miners dropped by 15% last month, reflecting the challenging environment for the industry.
One of the key factors contributing to the profitability squeeze is the rising network hashrate, which averaged 631 EH/s in August, an increase of 16 EH/s from the previous month. This increase, coupled with a 9% rise in mining difficulty, has made it increasingly challenging for miners to achieve profitability. The report also mentioned that the current hashrate is about 20 EH/s below pre-halving levels, indicating heightened competition among miners.
In addition to these challenges, Bitcoin's price decline over the past three months has further pressured mining operations. Despite a brief spike in transaction fees in August, which momentarily reached 120% of the block reward, the overall outlook for miners remains grim. The increased volatility of Bitcoin, with annualized volatility rising to 62% in August from 45% in July, adds another layer of uncertainty for the industry.
The ongoing difficulties faced by Bitcoin miners underscore the volatility and challenges inherent in the cryptocurrency mining sector, particularly as competition intensifies and market conditions fluctuate.