Bitcoin Mining Profitability Has Fallen To An All-Time Low In August, JPMorgan Analyst Says

In the first half of August, Bitcoin (BTC) mining stocks, which had recently benefited from AI-related gains, experienced a sharp downturn. According to a recent report from JPMorgan (JPM), the rise in the Bitcoin network’s hashrate has driven mining profitability to unprecedented lows, affecting the overall performance of mining stocks.

Understanding hashrate is essential to know the workings of Bitcoin mining. For the purpose of mining and processing transactions on a proof-of-work blockchain, it represents the entire the whole computational power. Recent weeks have seen an increase in hashrate, which has made mining Bitcoin more difficult and less profitable.

The overall market capitalization of fourteen U.S.-listed Bitcoin mining companies that JPMorgan tracks has decreased by 18% since the end of July, according to analysts Reginald Smith and Charles Pearce of the bank. These stocks are still trading at twice a proportionate amount of the four-year block reward, despite this decline. This observation emphasizes the constant conflict between market value and the risks that come with mining Bitcoin.

The report does, however, also include some positive developments for the industry. For the fourth consecutive month, the share of miners with U.S. listings in the Bitcoin network’s hashrate has increased. With their current 26% share of the hashrate, American miners have broken previous records.

The Bitcoin network’s hashrate rose by roughly five exahashes per second (EH/s) in the first two weeks of August, a slight 1% rise, to an average of 621 EH/s. The current hashrate is still around 30 EH/s less than what it was before the most recent Bitcoin halving event, regardless of this growth.

The report also emphasized the drop in hashprice, which is a crucial sign of the profitability of mining. The current hashprice is around 40% below pre-halving levels and about 30% below its December 2022 levels. Since miners might find it difficult to remain profitable in the near future, this notable decline might likely slow down hashrate growth.

In terms of Bitcoin’s market performance, the report noted a 5% drop in Bitcoin’s price since the halving. Nevertheless, Bitcoin has still managed to achieve a 35% increase year-to-date and a remarkable 104% gain year-on-year.