Bitcoin miners are facing pretty tough times as their profits have reached an all-time low.
Halving, increased competition, and rising energy costs made the sector more challenging.
Declining profits and the market aren’t good either
JPMorgan Chase’s new report shared that Bitcoin miners saw their daily block reward gross profit drop by 6% in September.
This is third month in a row that revenues have fallen, even though Bitcoin’s average prices have seen a slight increase.
The main reason for this revenue decline is likely the Bitcoin halving that took place in April.
Analysts predict that this halving could lead to a giant $10 billion annual revenue loss for mining companies. Ouch.
Next to the halving, rising competition is putting additional pressure on miners. New major players entering the U.S. market have made it harder for smaller mining operations to turn a profit.
With more participants in the mining industry, there is increased computing power and a lower chance of earning rewards. And Bitcoin is a permissionless network, anyone can join, any time.
Costs are rising, and this comes with a price
Mining Bitcoin requires big investments in both hardware and energy to validate transactions, which makes it a capital-intensive business.
The challenges faced by miners are evident in the stock performance of major U.S.-listed companies like Marathon Digital and Riot Platforms.
Their shares have dropped by over 30% and 50% respectively this year. When mining becomes harder, the feedback is instant.
Global sh*tshow and circus
Market sentiment has also been affected by recent geopolitical events, such as tensions in the Middle East, leading some investors to seek safer assets like gold.
Yes, there were brief price jumps following the Fed’s decision to cut interest rates in September, but the overall trend remained negative for Bitcoin miners.
With profits being squeezed by the halving and external factors driving up costs, the outlook for mining companies continues to be quite difficult, let me say this.
