In a glimmer of good news for the battered crypto industry, bitcoin mining economics continued to improve in December, according to a new report from JPMorgan. The bank’s analysts found that the hashprice, a key measure of miner profitability, rose 5% from the end of November. This comes as a welcome reprieve for miners who have struggled through a brutal bear market.
Hashprice Hits 7-Month High
The hashprice, which measures daily mining revenue per unit of computing power, reached its highest level since May, averaging $57,300 per exahash per day over the first two weeks of December. Reginald Smith and Charles Pearce, the JPMorgan analysts behind the report, attributed the rise to bitcoin’s price rally outpacing growth in the network hashrate.
The network hashrate, which indicates the total computational power dedicated to mining bitcoin, increased 6% month-to-date to an average of 773 exahashes per second (EH/s). However, with bitcoin prices surging over 16% in the same period, miner revenue growth exceeded rising competition.
“We note miners earned about $57,300 in daily block reward revenue per EH/s over the first two weeks of December,” the analysts wrote, adding that this is the highest level in the last seven months.
JPMorgan Analysts Reginald Smith and Charles Pearce
Margins Still Below Pre-Halving Levels
Despite the improvement, miner earnings remain about 40% below the levels seen before bitcoin’s third halving in May 2020, which cut the block reward from 12.5 BTC to 6.25 BTC. The halving put immense pressure on miner margins, leading to a wave of bankruptcies and fire sales of mining rigs.
JPMorgan tracks a group of 14 major U.S.-listed mining companies, including Marathon Digital, Riot Blockchain, and Hut 8 Mining. The bank noted that the combined hashrate of these miners has nearly doubled year-to-date to 222 EH/s, now accounting for about 29% of the global network.
Miner Market Caps Tumble $1.5B in Two Weeks
However, the recent profitability boost has not translated to miner stock prices. The total market capitalization of the tracked miners fell 4%, or $1.5 billion, in the first two weeks of December. This comes after a more than 50% surge in November on the heels of the U.S. presidential election.
According to JPMorgan’s estimates, the U.S.-listed mining sector is currently trading at about two times its proportional share of the four-year block reward opportunity. In other words, the market is pricing in expectations that these miners will generate twice as much revenue per unit of hashrate compared to the overall network.
Challenges Remain for Bitcoin Miners
While the December data paints a rosier picture for bitcoin miners, significant challenges remain. The cryptocurrency market is notorious for its volatility, and any sharp price drops could quickly erode mining profitability. Furthermore, competition among miners continues to intensify, with the network hashrate consistently hitting new all-time highs.
Industry consolidation is also a concern, as larger, well-capitalized mining companies acquire distressed assets and expand their market share. This could lead to increased centralization, potentially undermining bitcoin’s decentralized ethos.
“The mining industry is in a much healthier position today than it was six months ago, but it’s not out of the woods yet. Miners need to remain agile and efficient to navigate the ever-changing market conditions.”
Industry Analyst, who asked to remain anonymous
As the bitcoin mining industry continues to evolve, investors and observers will be closely watching key metrics like the hashprice, network hashrate, and miner revenues. While December brought some much-needed relief, the coming months will test the resilience of the mining sector as it seeks to emerge from a prolonged crypto winter.
