November Sees Significant Drop in Miner Earnings and Network Hashrate
Bitcoin mining profitability experienced a significant decline throughout November, marking the fourth consecutive monthly decrease. This trend was identified through an analysis by JPMorgan, highlighting sustained pressure on the sector.
Daily block reward gross profit saw a substantial decrease of 26% when compared to the figures from October. Concurrently, the network hashrate averaged 1,074 exahashes per second, which represents a 1% drop from the previous month's average.
Analysts Reginald Smith and Charles Pearce from JPMorgan reported that miners earned an average of $41,400 per exahash per second in daily BlockReward revenue during November. This amount signifies a 14% decline from October's earnings and a 20% decrease when compared to the same period in the previous year.
Hashrate Fluctuations and Market Performance of Mining Companies
The decline in the hashrate observed in November followed a period of record highs that were achieved in October. The network hashrate is a critical metric that measures the total computational power dedicated to securing proof-of-work blockchains, serving as a key indicator of industry competition and mining difficulty levels.
The 14 U.S.-listed mining companies that are tracked by JPMorgan experienced a collective decrease in their market capitalization. This combined market capitalization fell by 16% month-over-month, reaching a total of $59 billion.
Among these companies, Cipher Mining posted the strongest performance, achieving a 9% gain. This positive performance was attributed, in part, to its recent agreement with Fluidstack.
In contrast, Bitdeer recorded the weakest performance within the tracked group, with its stock declining by 40% during November. The report from Monday also noted that while there was a general decline in profitability across the Bitcoin mining sector, the results for individual companies varied considerably.
Impact of the Halving Event and Diversification Strategies
Mining revenue has been under sustained pressure since the Bitcoin halving event that occurred in April. This event significantly reduced block rewards from 6.25 Bitcoin to 3.125 Bitcoin, effectively cutting miner income in half.
This reduction in income has occurred while operational expenses, including energy costs, have largely remained stable, further squeezing profit margins for miners.
In response to this margin compression, multiple mining operators have actively pursued revenue diversification strategies. Some firms have expanded their operations to include artificial intelligence infrastructure and high-performance computing services as a means to supplement their traditional cryptocurrency mining activities.
Energy Costs, Regulatory Frameworks, and Future Adjustments
Electricity costs continue to be a determining factor in mining profitability. This reality is driving operators to actively seek out jurisdictions that offer low power rates and supportive regulatory frameworks, which can significantly impact their bottom line.
The recent reduction in the hashrate suggests that certain mining operations may have temporarily shut down some of their equipment as profit margins narrowed, indicating a strategic response to economic pressures.
The Bitcoin network difficulty, which is a measure of how hard it is to mine new blocks, adjusts approximately every two weeks. This adjustment is based on the total computational power on the network. The recent decline in the hashrate could potentially trigger downward difficulty adjustments, which in turn could improve the economic conditions for miners who continue to operate through this challenging period.