Bitcoin: Mining Profitability Hits An All-time Low As The Crisis Takes Hold

The last April halving did nothing to help Bitcoin miners, especially the smaller ones. To top it off, BTC’s price still hasn’t taken off, despite optimistic predictions from some analysts. Between decreasing profitability and increasing difficulty, miners find themselves stuck in an increasingly difficult market to navigate.

Bitcoin: profitability in free fall, difficulty on the rise

Mining Bitcoin has never been this unprofitable: miners are at their limit. According to JPMorgan, in August, miners earned an average of only $43,600 per exahash per second, a sadly low record.

Just a reminder, in November 2021, when Bitcoin peaked at $60,000, this figure reached $342,000. The contrast is as brutal as it is discouraging.

This plunge in profitability is explained by a combination of less-than-flattering factors:

• 15% decrease in the market capitalization of publicly traded miners in the US.
• 9% increase in mining difficulty in one month.

This increased difficulty is due to a hashrate that is skyrocketing, reaching a record level despite the challenges: 631 exahashes per second in August, which is an increase of 16 EH/s compared to the previous month. The more computing power on the network, the more complex and expensive it becomes for miners to solve blocks, thus generating enough revenue to cover their costs.

The path is therefore becoming increasingly steep for miners, big and small.

Crypto: volatility and bear market, a double whammy

As if the situation for Bitcoin miners wasn’t bad enough, the volatility of the crypto market has also caused trouble. In August, the annualized Bitcoin volatility index jumped from 45% to 62%, making the terrain even more unstable.

In such a context, miners face a double whammy: a continuous drop in BTC price for the third consecutive month and unpredictable fluctuations that make any long-term strategy difficult.

The stocks of mining companies have also suffered. 

Of the 14 American miners tracked by JPMorgan, only three managed to outperform Bitcoin. Even a temporary increase in transaction fees, reaching 120% of block rewards in August, wasn’t enough to turn things around. This shows how tough times are for these essential players in the crypto world.

Despite these obstacles, miners can still hope for a bright future. The “Goldilocks” scenario could offer them a welcome stability in a chaotic market.