Bitcoin miners are struggling as both cryptocurrency prices and the Bitcoin network’s halving event create substantial pressure on their business models. A recent JPMorgan report reveals that mining stocks have seen a sharp decline in market value, with a 22% drop in February alone. The downturn comes as Bitcoin’s price continues to fall, eroding the economics of mining operations.
The Bitcoin halving, which occurred in April 2024, reduced mining rewards from 6.25 BTC to 3.125 BTC per block. This reduction has led to significant declines in both revenues and gross profits for miners. According to JPMorgan, since the halving, average mining revenues have dropped by 46%, and gross profits have fallen by 57%. The challenges were further compounded in February when Bitcoin’s declining price contributed to an additional 9% decrease in gross profits.
In February, several prominent mining companies, including Riot Platforms (RIOT), Bitdeer (BTDR), Marathon Digital (MARA), and Core Scientific (CORZ), reported their Q4 earnings. Despite better-than-expected results from Core Scientific, all these companies saw their stock prices decline following the earnings reports. The overall weakening of the crypto market has created a tough environment for miners, with many finding it increasingly difficult to maintain profitability.
Despite these struggles, miners are turning to alternative revenue streams to offset losses. One promising avenue is the high-performance computing (HPC) market, which is seeing growing demand from artificial intelligence (AI) models. Some mining companies are leasing out their high-performance hardware or selling specialized ASIC microchips to capitalize on this demand. However, even miners with exposure to HPC are facing difficulties. A notable setback occurred in January when the Chinese AI company DeepSeek claimed that its models could deliver results similar to OpenAI’s ChatGPT at a fraction of the cost, casting doubts over the future demand for data center capacity.
Despite these setbacks, certain mining stocks, particularly those with significant AI exposure like Hut 8, are still more highly valued than their peers, according to JPMorgan. This suggests that some miners may continue to see potential in their AI ventures, even amid the broader industry struggles.
Bitcoin miners are facing a challenging environment, as falling cryptocurrency prices, the impact of the Bitcoin halving, and uncertainty in the AI market create a perfect storm. While some miners are optimistic about AI-related ventures, the future of the mining industry remains uncertain as they adapt to shifting market conditions.
