Bitcoin (BTC) mining companies are facing major challenges as the key profitability ratio has reached its lowest point in recent records.
Analysts from JPMorgan Chase, Reginald L. Smith and Charles Pearce, have shown that the daily block rewards large profits miners down 6% month-on-month in September. This marks the third month in a row of declining daily mining revenue and profits, despite a slight increase in average Bitcoin prices.
Bitcoin Halving Leads to Significant Drop in Revenue
According to for analysts, the decrease in the income of miners can be caused by the revision of the BTC software, i.e. the Halving that happened in April this year, an event that happens every four years and has a significant long-term impact on the price of the cryptocurrency each time. cycle.
This planned event reduces the block reward given to miners by 50% every four years, a method designed to prevent inflation and maintaining a limited Bitcoin supply of 21 million tokens.
Even more worrying is that the recent Bitcoin Halving is expected to result in annual revenue losses for businesses of over $10 billion, based on current BTC prices, which stand at around $60,750 at the time of writing on Tuesday.
Increasing Competition and Energy Costs
Despite a combined market capitalization of more than $20 billion for the 14 largest US-listed mining companies, the industry is struggling with declining profits. Analysts also point to increasing competition from major operators entering the US the marketmaking the situation even worse for small miners.
According to Bloomberg, as the number of participants in the BTC mining community increases, individual miners face a tough situation, as more computing power means less chance of receiving rewards.
Bitcoin mining is a labor-intensive endeavor, requiring miners to invest billions in the technology hardware ensuring transactions and competition with a fixed number of Bitcoin rewards.
Financial difficulties are reflected in the performance of stocks in leading mining companies. Shares of Marathon Digital Holdings Inc. and Riot Platforms Inc., two of the largest publicly traded miners in the US, are down 36% and 54%, respectively, this year.
At the time of writing, the largest cryptocurrency on the market, BTC, is trading at $60,758, down nearly 5% in the past 24 hours and nearly 6% in the past week alone.
This comes after the cryptocurrency rose to a two-month high of $66,500 last Friday after the US Federal Reserve’s (Fed) decision to cut interest rates on September 18.
However, as previously reported by Bitcoinist, this price action can be attributed to the escalation of geopolitical conflicts in the Middle East between Israel and Iran, which has prompted investors to sell their coins for “safe” assets such as gold.
Featured image from DALL-E, chart from TradingView.com