A recent research report by JPMorgan highlights a concerning trend in the mining industry. For the third consecutive month, daily mining revenue and gross profit have declined. This downward trajectory has raised concerns about the profitability of mining operations.
September’s Performance
According to the report, September marked a significant decline in daily mining revenue and gross profit. The bank noted that the network hashrate rose 2% from August, but this increase did not compensate for the decrease in revenue and profit.
- Daily Mining Revenue: The average daily mining revenue declined significantly in September, with estimates suggesting a 6% month-over-month (m/m) decline.
- Gross Profit: The gross profit from daily block reward revenue also fell to its lowest point on recent record. Analysts estimated that the gross margin was 38.4%, down from previous months.
Average Bitcoin Price and Network Hashrate
While the average bitcoin price and network hashrate rose slightly in September, the overall trend remains concerning for miners. The increase in hashrate is a positive sign, but it may not be enough to offset the decline in revenue and profit.
- Bitcoin Price: The average bitcoin price saw a modest increase in September, but this growth was not sufficient to boost mining profitability.
- Network Hashrate: The network hashrate rose for the third consecutive month, increasing by 2% from August. This rise is a positive development, but it may not be enough to mitigate the decline in revenue and profit.
Transaction Fees
Transaction fees, which account for a small portion of block reward revenue, were subdued in September. The authors noted that transaction fees did not exceed 5% of the block reward, further contributing to the decline in mining profitability.
- Transaction Fee Revenue: Transaction fee revenue was lower than expected in September, adding to the overall decline in mining profitability.
- Block Reward Revenue: Block reward revenue remains a crucial component of mining income. However, the decline in this revenue stream has had a significant impact on mining profitability.
Market Cap of U.S.-Listed Miners
The total market cap of the 14 U.S.-listed miners tracked by JPMorgan rose 4% to $21 billion in September. This growth is a positive sign for the industry, but it may not be enough to offset the decline in mining profitability.
- Hut 8 (HUT): Hut 8 outperformed the market with a 21% gain last month, making it one of the top performers among U.S.-listed miners.
- CleanSpark (CLSK): CleanSpark was at the bottom of the pile, with a 13% decline in September. This performance raises concerns about the miner’s profitability.
Bitcoin Annualized Volatility
The report also notes that bitcoin annualized volatility dropped to 44% last month, down from the 62% seen in August. While this decrease may be a positive sign for investors, it has had little impact on mining profitability.
- Volatility: The decline in volatility is a welcome development for investors. However, its impact on mining profitability remains limited.
- Mining Profitability: Mining profitability continues to be a concern, with many miners struggling to maintain profitability in the face of declining revenue and profit.
Conclusion
The recent research report by JPMorgan highlights a concerning trend in the mining industry. For the third consecutive month, daily mining revenue and gross profit have declined. While there are some positive signs, such as the increase in network hashrate and the rise in market cap of U.S.-listed miners, these developments may not be enough to offset the decline in mining profitability.
As the industry continues to evolve, it is essential for investors and miners to monitor the trends and make informed decisions. The current state of mining profitability remains a concern, but there are opportunities for growth and development.
Recommendations
Based on the report’s findings, here are some recommendations for investors and miners:
- Monitor Trends: Continuously monitor trends in the industry, including changes in revenue, profit, and market cap.
- Diversify: Diversify investment portfolios to minimize risk and maximize returns.
- Adapt to Changes: Be prepared to adapt to changing market conditions and adjust strategies accordingly.
By following these recommendations, investors and miners can better navigate the complexities of the mining industry and make informed decisions about their investments.