When it comes to Bitcoin lately, you’ve probably noticed things haven’t been looking great. Not only is the price of Bitcoin down 3.6% at $56,630, but Bitcoin miners are also feeling some pains. According to a recent report from JPMorgan, mining profitability is now at record lows, and that’s not the only bad news in the crypto world today.
Why Is Mining Profitability So Low?
The report reveals that Bitcoin miners earned an average of $43,600 per exahash per second (EH/s) in daily block rewards last month, marking the lowest earnings on record. For context, this is a far cry from November 2021, when miners were raking in $342,000 per EH/s, back when Bitcoin was trading at $60,000. The increased network hashrate—up to an average of 631 EH/s in August—means more competition among miners, which drives up Bitcoin mining difficulty and squeezes profits even further.
The rising difficulty, which climbed 9% last month and now sits 4% higher than it was before Bitcoin’s last halving, doesn’t help either. As more miners join the network, it becomes tougher and more expensive to validate transactions, leading to lower rewards for everyone involved.
What Does This Mean for Bitcoin Price?
Historically, when miners are less profitable, it can create downward pressure on Bitcoin’s price. Miners often sell their Bitcoin to cover operational costs when profits dwindle, increasing the selling pressure in the market. This selling can lead to price drops, which, in turn, can further hurt mining profitability—a vicious cycle that doesn’t bode well for Bitcoin’s immediate future.
Today’s 3.6% drop in Bitcoin’s price isn’t solely due to mining woes. Yesterday, the Bank of Japan announced further interest rate hikes, which rattled investors across the board. And with uncertainty surrounding U.S. economic data due in the next couple of days, it’s no surprise that investors are feeling skittish. On Tuesday alone, Bitcoin ETFs saw more than a quarter-billion dollars in outflows, which is just how uneasy the market feels right now.
It’s Not Just Miners Feeling the Heat
Mining stocks are also taking a hit. JPMorgan reports that the total market cap of the 14 U.S.-listed miners they track fell 15% last month to $20 billion. Only three of these miners managed to outperform Bitcoin during that period. The combination of rising mining difficulty, increased competition, and a falling Bitcoin price creates a tough environment for these companies.
To make matters worse, Bitcoin’s annualized volatility jumped to 62% in August, up from 45% in July. While volatility can create opportunities, it’s also a sign of uncertainty—something that doesn’t pair well with already shaky market sentiment.
What’s Next?
Whereas last week we reported that data showed Bitcoin miners are stacking up their Bitcoin, which is usually a bullish sign, it remains to be seen now for how long they can manage to keep hold of their Bitcoin, and what the price will do in that time, before they might be forced to sell some of their holdings.
The current low profitability of miners is just one piece of a larger puzzle. Interest rate hikes, economic data uncertainty, and shifting investor sentiment are all playing a role in today’s market dynamics. If mining profitability remains low and miners are forced to sell more of their Bitcoin to cover costs, we could see further downward pressure on the price.
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