According to a recent report from the US bank, JPMorgan Chase, the profitability of the digital Mining sector continued to plummet during the month of September. With this, the Bitcoin mining industry reaches the third consecutive month of contraction in its profitability. This scenario remains despite slight improvements in the broader Cryptocurrency market.
During the just-ended month of September, the Bitcoin Blockchain hashrate rose marginally by 2%. Meanwhile, the price of the currency on the spot market performed much better. However, this did not prevent companies dedicated to the mining business from remaining in an extremely complex terrain.
The bank’s report, cited by CoinDesk, states that, compared to August (which was disastrous) mining profitability in September fell 6%. Meanwhile, the gross profit per block per day went to the lowest point ever recorded.
“We estimate that daily block reward gross profit decreased 6% month over month (m/m) to $16,100 per EH/s (38.4% gross margin) in September, the lowest point on record recently,” notes the bank. With these data reaching the sector, it can be said that the future in the short and medium term for Bitcoin mining companies becomes more complicated.
Bitcoin mining sector faces serious problems
The most important companies in the mining industry are struggling to overcome the complicated panorama before them. Some of them, such as Marathon, Hut 8, Core Scientific and others, are struggling to diversify their services into the field of artificial intelligence (AI). With this, they seek to increase their income and compensate for the bad moment derived from the mining sector.
Although this step is eminently positive, the environment remains difficult for all companies. For example, mining firms listed on the stock exchange face notable apathy on the part of institutional capital despite growth in capitalization.
According to the aforementioned media, the market capitalization of the 14 main mining companies listed on the stock market rose by 21% in September. Despite this, this growth is linked to expansion into other areas and not precisely with the improvement of the outlook in the Bitcoin mining industry.
Although the price of BTC improved, this increase is not enough to cover production costs in digital mining. According to data from MacroMicro, the price of mining a Bitcoin strongly exceeds the exchange value of the currency in the spot market.
The average production price of a BTC continues well above the purchase and sale price of the currency. Source: MacroMicro
Buying BTC is cheaper than mining
Considering the sharp drop in the profitability of the mining sector, producing a BTC is much more expensive than buying it. Operating costs remain well above the price of the currency on the spot market. The average price of generating one BTC is currently $77,700.
As you can see, this is a differential of more than $15,000 that weighs on the performance of the companies. In short, it can be said that Bitcoin mining companies depend on a dramatic rise in the price of the currency.
If for some reason a black swan causes the price of BTC to crash, bankruptcies in the mining sector would be widespread. Ultimately, this would be detrimental to the hashrate and security of the network.
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