According to a recent report from Jefferies, Bitcoin (BTC) mining profitability declined in September while the network hash rate continued to rise.
Bitcoin mining profitability is on a downward trend
In a report published on Sunday, investment bank Jefferies explained that Bitcoin mining profitability fell in September compared to August. Specifically, daily revenue per exahash decreased by 2.6% month over month.
For starters, daily revenue per exahash refers to the amount of Bitcoin miners earn for every exahash – 1 quintillion hashes – of computational power they contribute to the network daily.
The metric helps measure the profitability of mining operations by showing how much revenue miners generate based on the collective power they devote to solving Bitcoin’s cryptographic challenges.
During the same period, while Bitcoin’s average price remained stagnant, its network hash rate rose by 1.7%, indicating that more computational power is being allocated to securing the network, making it more resilient to attacks. However, a higher hash rate also reduces miners’ profit margins due to increased mining activity and competition.
Notably, North American-based Bitcoin mining companies increased their share of total Bitcoin production, rising from 19.9% in August to 22.2% in September. The report attributes this increase to better uptime for these companies due to lower overall temperatures.
Among the Bitcoin mining companies, Marathon Digital mined 705 Bitcoin, followed by CleanSpark, which mined 403 Bitcoin. Marathon also leads the industry with the highest hash rate of 36.9 exahashes per second (EH/s) as of September 30, 2024. Riot Platforms follows closely behind at 28.2 EH/s.
Although Chinese mining pools still control most of Bitcoin’s hash rate, US-based mining pools are quickly catching up. As of September 23, China and the United States collectively Controlled 95% of Bitcoin’s total hash rate, raising serious concerns about the network’s decentralization narrative.
October is expected to be a challenging month
In the report, Jefferies posited that October will likely be a tougher month for the Bitcoin mining sector. The report stated the following:
October is currently expected to be a more difficult month, with Bitcoin prices up only around 5%, while the network hashrate has increased by +11% more than offsetting this growth.
In April 2024, Bitcoin underwent a fourth halving which effectively cut mining rewards in half, from 6,250 BTC to 3,125 BTC. According to analysts, it is half expected Which leads to annual revenue loss for companies worth more than $10 billion.
The report concludes that regardless of who wins the upcoming US presidential election in November, there are chances of seeing “increasingly favorable policies towards industry”.
In contrast, another US-based investment firm, Bernstein He believes A win for Republican candidate Donald Trump could push Bitcoin’s price to all-time highs (ATH). At the same time, the market requires a clearer position from Democratic candidate Kamala Harris. Bitcoin is trading at $65,073 at press time, up 4.0% in the past 24 hours.
Featured image from Unsplash.com, charts from Blockchain.com and TradingView.com