Bitcoin Miner Profit Measure Fell to ‘Recent Record’ Low, JPMorgan Says

Bitcoin mining companies saw a key measure of profitability reach the lowest point in “recent record” during September, according to a JPMorgan Chase & Co. estimate.

Daily block reward gross profit declined 6% month-over-month in September, reaching “the lowest point on recent record”, JPMorgan analysts Reginald L. Smith and Charles Pearce wrote in a report on Tuesday. Daily mining revenue and gross profit declined for the third consecutive month even with the moderate increase in average Bitcoin prices, according to the report.

Revenue for Bitcoin miners has plummeted since a Bitcoin software update in April. Called the halving, the preprogrammed event cuts block reward to miners by 50% every four years. It aims to keep the digital currency from being inflationary and maintain the hard cap of 21 million tokens. The halving this year can result in over $10 billion annual loss in revenue based on the current Bitcoin prices.

With over $20 billion of combined market capitalization for 14 major US-listed mining companies, the industry has seen exponential growth along with the surge in Bitcoin prices over the last several years. However, miners are seeing dwindling profits due to the halvings and increasing competition with an influx of large-scale operators in the US.

Bitcoin mining is an energy intensive process in which miners spend billions of dollars on specialized computers to validate encrypted transactions on the blockchain and compete for the fixed amount of Bitcoin rewards. The more computing power there is, the less likely for each miner to get the reward.

Shares of MARA Holdings Inc. and Riot Platforms Inc., two of the largest publicly-traded US miners, have dropped 36% and 54%, respectively, this year.