Profitability in the Bitcoin mining sector is under significant pressure due to increased competition and decreasing revenue. As of October, the hashrate, measuring the total computing power securing Bitcoin, soared to a record high of 1.16 ZH/s, while the Bitcoin price dipped towards $81,000 at the start of November. This information was highlighted in a report from The Miner Mag.
The cost of hashes fell below $35 each, sending many mining operations close to breakeven points. The report pointed out that the payback period for mining rigs has extended beyond 1,200 days, exacerbated by rising costs in financing throughout the industry.
Source: The Miner Mag
This decline follows a stable third quarter where the average hash price stood around $55/PH/s, aided by Bitcoin trading near $110,000. Increased competition coupled with the slipping Bitcoin price in November has resulted in historically low mining profitability.
In the past quarter, we also noted an uptick in miner borrowing linked to the launch of nearly zero-coupon convertible bonds. Despite miners advancing towards AI and high-power computing investments, the revenue from such transitions is insufficient to significantly counteract the losses in Bitcoin mining revenue.
Stocks Rally After J.P. Morgan’s Price Target Increases
Despite economic tightening, the leading ten publicly traded mining firms experienced a rise in share prices in the last 24 hours. Stocks such as CleanSpark, Cipher Mining, and IREN noted significant upticks on Monday following a positive J.P. Morgan research note that raised their price targets. This was attributed to an increase in long-term agreements in HPC and cloud computing within the mining sector.
J.P. Morgan reported that Cipher’s share price had approximately dropped 45% from its peak, making it a more attractive opportunity for investors. They also highlighted that the company was positioned well for further agreements with HPC clients. Notably, IREN has established a five-year, $9.7 billion GPU cloud services agreement with Microsoft, allowing access to Nvidia’s GB300 GPUs in their data centers.
The investment bank revised its projections for Marathon Digital and Riot, citing the combined impacts of declining Bitcoin prices and increased share volumes that are burdening their significant Bitcoin holdings.
The recent rise in mining stocks also aligns with a slight recovery in Bitcoin’s price, which increased about 2% in the last 24 hours, hovering near $89,000 according to CoinGecko data during the time of writing.
