Bitcoin mining companies saw a sharp decline in profitability in September, according to an article by David Pan for Bloomberg News, citing a report by J.P. Morgan.
Analysts Reginald L. Smith and Charles Pearce pointed out that the daily block reward gross profit dropped 6% compared to the previous month, marking the lowest point in “recent record.” This was the third consecutive month of falling revenue and profits for miners despite a modest rise in Bitcoin’s average price.
The decrease in profitability is linked to Bitcoin’s halving event, which took place in April. Occurring every four years, the halving reduces the block rewards miners receive by 50%, cutting revenue for miners as a way to prevent inflation and ensure Bitcoin’s supply remains capped at 21 million tokens. Based on current Bitcoin prices, the halving could result in an annual revenue loss of over $10 billion for the mining industry.
The Bitcoin mining sector has expanded dramatically over the years, with 14 major U.S.-listed mining companies now holding a combined market capitalization exceeding $20 billion. However, alongside this growth, miners face increasing challenges. In addition to the halving, heightened competition from large-scale operators in the U.S. has made it more difficult for individual and smaller mining firms to maintain profitability.
Bitcoin mining requires substantial financial investment, with miners spending billions of dollars on specialized equipment to validate blockchain transactions. As more computing power floods the network, the likelihood of individual miners successfully earning rewards decreases.
The impact on the mining industry is clear, as the stock prices of major U.S. miners MARA Holdings Inc. and Riot Platforms Inc. have plummeted by 36% and 54%, respectively, over the course of the year.
