Bitcoin (BTC) mining companies are experiencing significant challenges as a key measure of profitability has hit the lowest point in recent records.
JPMorgan Chase analysts Reginald L. Smith and Charles Pearce indicated that daily blocks reward gross profit for miners fell by 6% month-on-month in September. This marks the third month in a row of declines in daily mining revenue and gross profit, despite a slight increase in average Bitcoin prices.
Halving Bitcoin leads to a significant drop in turnover
According to According to the analysts, the decline in miners’ revenues can be attributed to BTC’s software update, namely the halving that took place in April this year, an event that takes place every four years and has a significant long-term impact on the price of the cryptocurrency during every year. cycle.
This pre-programmed event reduces the block reward given to miners by 50% every four years, a mechanism designed to prevent this inflation and maintain Bitcoin’s limited supply of 21 million tokens.
Even more worrying is the fact that the recent Bitcoin halving is expected to result in annual revenue losses for businesses of over $10 billion, based on current BTC prices, which at the time of writing on Tuesday are around $60,750.
Increasing competition and energy costs
Despite a combined market capitalization of more than $20 billion for fourteen major American publicly traded mining companies, the sector is struggling with declining profits. The analysts also point to increasing competition from major operators entering the US marketwhich makes the situation even worse for smaller miners.
According to Bloomberg, individual miners face a tougher landscape as the number of participants in BTC mining grows, because more computing power means a lower chance of reaping rewards.
Bitcoin mining is a highly energy-intensive endeavor, requiring miners to invest billions in specialized investments hardware to validate transactions and compete for a set number of Bitcoin rewards.
The financial pressure is clearly visible in the stock performance of leading mining companies. The shares of Marathon Digital Holdings Inc. and Riot Platforms Inc., two of the largest publicly traded miners in the U.S., have plunged 36% and 54% respectively this year.
At the time of writing, the largest cryptocurrency on the market, BTC, is trading at $60,758, down almost 5% in the 24-hour time frame and almost 6% in the past week alone.
This comes after the cryptocurrency rose to a two-month high of $66,500 last Friday following bullish sentiment surrounding the US Federal Reserve’s (Fed) interest rate cut decision on September 18.
However, as before reported by Bitcoinist, this price action can be attributed to escalating geopolitical tensions in the Middle East between Israel and Iran, which has prompted investors to sell their coins for “safer” assets like gold.
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