The Wall Street bank noted that in August, bitcoin miners earned an average of $43,600 per exahash per second (EH/s) in daily block reward revenue, a stark contrast to the peak of $342,000 in November 2021. This sharp decline comes as a result of multiple factors, including rising mining difficulty, an increase in the network hashrate, and a decrease in the price of bitcoin.

Bitcoin Mining Profitability Reaches All-Time Low in August

Bitcoin mining, which once offered lucrative rewards, is now facing significant profitability challenges. According to JPMorgan’s analysts Reginald Smith and Charles Pearce, bitcoin miners’ earnings in August fell to $43,600 per EH/s per day, the lowest rate on record. This is a significant drop from November 2021, when bitcoin’s price soared to $60,000 and the network hashrate was at 161 EH/s, providing miners with much higher block rewards.

The decline in profitability is directly tied to the fall in bitcoin’s price, which has dropped for three consecutive months, as well as the increased competition and mining difficulty on the network.

Impact of Rising Hashrate and Mining Difficulty on Bitcoin Miners

The bitcoin network’s hashrate, a measure of the total computational power used to mine and process transactions, has been steadily increasing. In August, the network hashrate averaged 631 EH/s, up 16 EH/s from the previous month, and 20 EH/s below pre-halving levels, according to JPMorgan. This rise in hashrate indicates increased competition among miners, which further pushes down profitability.

Mining difficulty also rose by 9% in August, making it even more challenging for miners to earn rewards. The report noted that mining difficulty is now 4% higher than it was before the most recent bitcoin halving. With increased difficulty, miners need more powerful and expensive hardware to remain competitive, driving up operational costs and reducing profits.

Market Cap of U.S.-Listed Bitcoin Miners Shrinks by 15%

In addition to the drop in profitability, the total market capitalization of U.S.-listed bitcoin mining companies tracked by JPMorgan fell by 15% in August. The combined market cap of these companies now stands at $20 billion, with only three miners outperforming bitcoin during this period.

This decline reflects the broader challenges facing the bitcoin mining industry, where rising costs, increased competition, and falling bitcoin prices have weighed heavily on miner profitability. Some of the leading mining companies, such as CleanSpark (CLSK), Iren (IREN), Marathon Digital (MARA), and Riot Platforms (RIOT), have seen their stock prices fall, with JPMorgan lowering its price targets for several of these companies.

JPMorgan Sees a $74 Billion Bitcoin Mining Opportunity Despite Challenges

Despite the grim short-term outlook, JPMorgan remains optimistic about the long-term prospects of the bitcoin mining industry. The bank estimates the notional value of the remaining 1.3 million bitcoin to be mined at around $74 billion at current BTC prices. This presents a significant opportunity for miners over the coming years, though it will require navigating a challenging and competitive environment.

According to the report, the four-year block reward revenue opportunity is estimated at $37 billion, representing a 19% decline since June but still an 85% increase year-on-year. This suggests that while the short-term outlook may be difficult, there is still substantial potential for long-term gains in the industry.