As a seasoned researcher with a keen interest in the dynamic world of cryptocurrencies and blockchain technology, I find myself constantly intrigued by the ever-changing landscape of Bitcoin mining. The JPMorgan report released this week has once again piqued my curiosity, as it highlights the precarious balance between high hashrate and stagnant prices.
The information originates from a JPMorgan research report published last Friday. The report indicates that the daily block reward net income decreased by 2% in October, reaching its lowest point in recent history. Additionally, mining difficulty peaked at an all-time high during this period, according to the report.
The explanation lies in the fact that despite a high Bitcoin hashrate, the price hasn’t managed to surpass the price range it has maintained since March.
JPMorgan calculated that Bitcoin miners were earning around $41,800 annually per unit of hashrate (EH/s) in daily block reward income. This figure is 1% lower than what was seen in September. The term “hashrate” refers to the collective computational power employed for mining and transaction processing on a proof-of-work blockchain, acting as an indicator of competition and mining difficulty within the sector.
Toward the end of the month, transaction fees peaked at nearly two-thirds of the block reward, offering some respite to mining companies’ daily income, according to the bank. This peak is referred to as the ‘hashprice’, which represents a mining firm’s daily earnings.
In October, the monthly average hash rate for the Bitcoin network hit an all-time high of 702 exahashes per second (EH/s), representing a substantial 9% rise compared to the preceding month, as indicated in the report. Remarkably, analysts Reginald Smith and Charles Pearce stated that the seven-day moving average network hash rate at the end of October was even higher at 748 EH/s, showing a jump of 18% from the end of September and an impressive 62% increase compared to the same period last year.
As an analyst, I’ve noticed a significant surge in the market capitalization. Specifically, the 14 publicly traded mining companies we track at our bank have collectively seen a 14% increase, now standing at approximately $23.9 billion. This growth can be attributed primarily to companies that specialize in high-performance computing (HPC).
Russia to Ban Mining?
Reports indicate that Russia may be experiencing critical energy shortages, leading to a potential ban on cryptocurrency mining as a means to balance its power grid in affected regions. These regions include the Far East, southwestern Siberia, and southern parts of the country, where officials predict an insufficient power capacity lasting until at least 2030.
The new regulation, passed recently, empowers the government to limit cryptocurrency mining in certain areas starting from November 1st. This law not only allows such restriction but also bans any form of advertisement related to cryptocurrencies and services using them. Key Russian corporations like Yandex, the leading search engine in the country, have already started enforcing these advertising restrictions on cryptocurrency-related content.
Pivot to AI
Approximately six months following the Bitcoin halving in April 2024, mining companies find themselves grappling with narrowing income sources, leading them to reconsider their approaches as they navigate an ever-changing environment.
The scheduled event known as halving, which reduces the amount of Bitcoin miners earn for verifying transactions by half, is intended to manage inflation by decreasing Bitcoin’s total supply. However, this time around, it has placed extraordinary strain on miners due to a substantial drop in profits per block mined. Companies like MARA Holdings, Riot Platforms, and CleanSpark, which are publicly traded and specialize in mining, are reacting differently. Some are employing the “HODL” approach—holding onto their Bitcoin in hope of future price rises—while others are shifting toward artificial intelligence (AI) to expand their income sources.
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2024-11-02 17:52