Bitcoin Miners Struggle as Profitability Falls for Third Month

Third Consecutive Decline in Bitcoin Mining Profitability Amid Network Hashrate Increase

Bitcoin mining profitability has taken a downturn for the third consecutive month in September, despite an uptick in the network’s hashrate, according to a recent report from JP Morgan. The financial institution, citing data from CoinDesk, revealed that Bitcoin miners are grappling with declining revenue and gross profit, even as the network’s processing power continues to grow.

This trend reflects a broader shift in the dynamics of the Bitcoin mining industry, where increased competition and lower transaction fees are squeezing profit margins.

The Bitcoin mining profitability decline has been a notable trend over the past few months, with miners earning less despite a robust increase in network activity. September saw the third consecutive drop in daily mining revenue and gross profit, marking a concerning period for many within the industry. Miners earned an average of $42,100 per exahash per second (EH/s), which is a 6% decline from the previous month.

This steady decline in profitability is alarming, especially as the network hashrate—the total computing power used to process and verify transactions—rose by 2% to 643 EH/s in September. The mismatch between rising hashrate and falling profits suggests that miners are working harder for diminishing returns.

What’s Driving the Profitability Decline?

Several factors are contributing to the decline in Bitcoin mining profitability. One key issue is the reduced revenue from daily block rewards. In September, gross profits from these rewards dropped by 6% to $16,100—the lowest point recorded in recent months. This sharp decline underscores the challenge miners face in maintaining profitability, even as the Bitcoin network becomes more secure and resilient with increased hashrate.

Another factor exacerbating the profitability issue is the low contribution of transaction fees to block rewards. Transaction fees made up less than 5% of the total block rewards in September, which further constrained miners’ earnings.

Bitcoin’s transaction fees fluctuate based on network demand, and during periods of lower activity, fees tend to decrease, leaving miners to rely more heavily on the fixed block rewards that decrease over time.

U.S.-Listed Bitcoin Miners See Market Cap Growth

Despite the ongoing Bitcoin mining profitability decline, the total market capitalization of 14 U.S.-listed Bitcoin miners tracked by JP Morgan increased by 4% in September. This growth, in contrast to the drop in mining revenue, indicates that investors remain bullish on the long-term prospects of these companies. One standout performer was Hut 8, which saw its market cap rise by an impressive 21% during the same period.

Hut 8’s strong performance amidst declining profitability suggests that some miners are still managing to thrive, either through strategic operational efficiency, access to cheaper energy sources, or better scaling of their operations. For investors, the market’s resilience shows confidence in the mining sector’s ability to weather short-term challenges, despite fluctuating profit margins.

Conclusion

The Bitcoin mining profitability decline has entered its third consecutive month, as rising competition and lower transaction fees continue to squeeze miners’ earnings.

Despite a 2% rise in the network hashrate, miners are facing diminishing returns, with daily block rewards dropping by 6% and average earnings per EH/s falling to $42,100.

However, the total market cap of U.S.-listed miners grew by 4%, showing that investors remain optimistic about the long-term future of the industry.