As a seasoned crypto investor with memories of the 2017 bull run still fresh in my mind, I can’t help but feel a sense of deja vu reading about the current state of Bitcoin mining companies. The halving-induced revenue decline and the increasing competition seem all too familiar.
Bitcoin mining firms are encountering major hurdles because the main indicator of their profitability has plunged to its lowest levels in years.
According to analysts Reginald L. Smith and Charles Pearce from JPMorgan Chase, the profit earned daily by miners due to block rewards decreased by 6% compared to the previous month in September. This is the third straight month that daily mining revenue and profit have dropped, even though there was a slight increase in the average price of Bitcoin.
Bitcoin Halving Leads To Significant Revenue Decline
Based on expert analysis, it appears that the decrease in miners’ earnings might be due to Bitcoin’s software update known as Halving, which happened in April of this year. This event takes place every four years and significantly affects Bitcoin’s long-term price during each cycle.
Every four years, this built-in process lowers the amount of new Bitcoins awarded to miners by half, which is intended to control inflation and preserve the fixed total of 21 million Bitcoins in circulation.
Additionally troubling is the prediction that this latest Bitcoin Halving could cost businesses over $10 billion annually, given today’s Bitcoin prices hovering approximately $60,750, as observed on Tuesday.
Rising Competition And Energy Costs
Regardless of the collective market value exceeding $20 billion among 14 significant U.S.-listed mining companies, the sector finds itself grappling with a downward trend in earnings. Moreover, analysts highlight the intensifying competition from prominent players venturing into the American market, which further aggravates the already challenging conditions for smaller-scale miners.
As reported by Bloomberg, with an increasing number of individuals joining Bitcoin mining, they are encountering a challenging environment, since a rise in computational power reduces their chances of receiving rewards due to the competitive nature of the process.
Mining Bitcoin involves a significant amount of energy usage, as miners must purchase expensive, customized equipment to confirm transactions and vie for a limited quantity of Bitcoin incentives.
It’s clear that these mining companies are feeling the pinch financially, as indicated by the poor performance of their stocks. Specifically, shares from Marathon Digital Holdings Inc. and Riot Platforms Inc., two of the biggest publicly traded miners in the US, have dropped significantly this year – a decrease of 36% for Marathon and 54% for Riot.
As I pen this analysis, Bitcoin, the foremost digital currency, stands at a price of approximately $60,758. Over the last 24 hours, it has experienced a decline of almost 5%, while in the past week, its value has dipped nearly 6%.
Over the weekend, I witnessed an exciting rise in the value of my cryptocurrency investments as it hit a two-month peak of $66,500. This surge was fueled by optimistic expectations surrounding the U.S. Federal Reserve’s (Fed) interest rate cut decision on September 18th.
However, as previously reported by Bitcoinist, this price action can be attributed to escalating geopolitical tensions in the Middle East between Israel and Iran, which have prompted investors to sell their coins for “safer” assets such as gold.
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2024-10-02 04:41