Bitcoin Miners Dominate, Stocks Fall

Public Bitcoin miners are increasingly taking control of the Bitcoin network’s security, yet their stock values have consistently dropped throughout the year. This raises questions about the sustainability of their business models.

According to JP Morgan’s “September ’24 Bitcoin Mining Halftime Report,” released on Monday, publicly listed Bitcoin mining companies in the U.S. improved their share of the network hash rate for the fifth consecutive month. Their collective hash rate reached a record 26.7%, indicating an increased commitment to securing the network.

What is Hash Rate and Why Does it Matter?

The hash rate is a measure of how quickly miners can solve the complex mathematical puzzles needed to add the next block to the Bitcoin blockchain. A higher hash rate means more computational power and electricity are expended, making the network more secure but also more competitive for miners.

Key Players in Bitcoin Mining Growth

In August, JP Morgan tracked 14 publicly listed miners. Canadian firm IREN added 5.5 exahashes per second (EH/s), and Marathon Digital—the world’s largest corporate miner—contributed 3.7 EH/s. Together, these efforts boosted their collective hash rate by over 50% since the start of the year, reaching 175 EH/s, which accounts for 26.7% of the entire network.

Despite the increased hash rate, revenue gains for many of these public Bitcoin miners have lagged behind. IREN was the only company to mine more Bitcoin in August compared to the previous month. This decline is attributed to the Bitcoin halving event in April, which halved the block reward from 6.25 BTC to 3.125 BTC, impacting miners’ profitability.

JP Morgan analysts observed that the amount of Bitcoin mined per exahash of operating capacity has significantly decreased this year. Increased network difficulty and higher hash rates have caused this drop, which tends to be exacerbated during summer months when mining operations are often limited.

Since the beginning of September, Bitcoin’s hash rate has hit all-time highs even as the price of Bitcoin trends lower. This has resulted in a challenging environment for many public miners, leading to a drop in their stock values. For example, CleanSpark (CLSK) saw a 12% decline.

The Valkyrie Bitcoin Miners ETF (WGMI), a diversified indicator for the mining industry, has decreased by 2% year to date, while Bitcoin’s price has gone up by 30%. JP Morgan added that the aggregate market cap of the 14 U.S.-listed Bitcoin miners dropped by 3% since the end of August. The current market cap sits just under twice their proportional share of the four-year block reward, which is the lowest since May ’24.

Edited by Andrew Hayward

Curious about trading strategies? Click Here For More Trading tips and strategies.