Bitcoin Price Dropping Despite Rise in Bitcoin Mining Profitability
Key Points:
– U.S.-listed mining companies increased their Bitcoin production to 20.8% in June.
– Marathon Digital was the leading producer, mining 590 bitcoins despite the drop in Bitcoin’s price.
– Investment bank Jefferies revised price targets for mining firms from $24 to $22, maintaining a hold rating.
– The increase in mining profitability occurred despite the declining price of Bitcoin, leading to questions about the reasons behind this contradiction.
In June, U.S.-listed mining companies defied market trends by increasing their production of Bitcoin, despite a notable drop in the network hashrate. This increase in mining profitability occurred despite the declining price of Bitcoin, prompting questions about the major reasons for this apparent contradiction.
Last month, Bitcoin’s price increased slightly by 3%, while the network’s mining power dropped by 5%. This unusual combination made Bitcoin mining more profitable than in May. Investment bank Jefferies noted this trend as a recovery from the effects of the halving in April.
Analyst Jonathan Petersen explained that the halving initially slowed Bitcoin’s supply growth by cutting miners’ rewards by 50%, but it is now contributing to improved mining profitability.
During June, U.S.-listed mining firms collectively increased their share of new bitcoins mined, rising to 20.8% of the total network output from 19.1% in May. This increase coincided with these companies ramping up their mining capacities even as the overall network hashrate decreased.
Marathon Digital emerged as the top miner, producing 590 bitcoins, slightly fewer than in May, while CleanSpark saw a 7% increase, mining 445 tokens. Despite these gains, Jefferies revised its price targets downward for several mining companies in response to market conditions.
Marathon Digital’s target was adjusted to $22 from $24, with similar reductions for Argo Blockchain ADRs and U.K.-traded shares. The bank maintained its hold rating on these companies, acknowledging their strategic shift towards high-performance computing (HPC) and artificial intelligence (AI) hosting to diversify revenue streams amidst declining bitcoin mining profitability.
Despite increased Bitcoin production by mining companies in June compared to May, the cryptocurrency’s price has experienced a decline. This drop is largely due to selling and profit-taking activities by large investors (whales) and mid-size miners.
While there have been sales from entities like Mt. Gox and the German government, these have had a limited impact relative to the overall size of the Bitcoin market.
Furthermore, several on-chain metrics indicated oversold conditions once Bitcoin prices dropped to approximately $53,000. This situation potentially triggered a sharp rebound as traders’ unrealized profits reached lows not seen since the FTX collapse, signaling that a market correction was overdue.
Tags: Bitcoin, Mining