Bitcoin (BTC)
mining profitability experienced a slight decline in July compared to the
previous month, according to a recent report from investment bank Jefferies.
The
analysis points to a drop in Bitcoin’s price as the primary factor impacting
miners’ margins. As a result, the institution decided to lower the target price
for the largest Bitcoin miner on Wall Street, Marathon Digital Holdings
(Nasdaq: MARA), by over 20%.
Bitcoin Mining
Profitability Dips in July, Jefferies Reports
The
cryptocurrency’s value fell by over 6% in July, while the network’s hashrate –
a measure of computational power dedicated to mining – remained relatively
stable. This combination of factors put pressure on mining operations, despite
an increase in production share for US-listed companies.
Jefferies
analysts noted that publicly traded mining firms expanded their collective
output, capturing 21.1% of total Bitcoin production in July, up from 20.7% in
June. This growth in market share was attributed to these companies bringing
new capacity online at a faster rate than the overall network expansion.
Jefferies cutting its price target on Marathon to $17 seems like the only choice left to make.
— Joannie (@KatieHinto22878) August 16, 2024
Marathon
Digital Holdings, a prominent player in the sector, stood out with a notable
increase in production. The company mined 692 bitcoins in July, representing a
17% month-over-month rise. Marathon continues to lead the industry in terms of
installed hashrate capacity.
Riot
Platforms also significantly boosted its production by 45%, producing 370 BTC
last month, which is 115 BTC more than the previous month. However, not all
companies experienced such positive results. Argo Blockchain managed to produce
only 48 tokens, marking a 63% decrease compared to June. The fact that the
price of Bitcoin is currently 21% below its historical highs certainly doesn’t
help the situation.
MARA Shares Approach Fair
Value
Looking
ahead, Jefferies anticipates more challenging conditions for miners in August.
The bank’s report highlights a further 5% decline in Bitcoin’s price since the
beginning of the month, coupled with renewed growth in network hashrate, which
could squeeze profit margins even tighter.
In light of
these developments, Jefferies has adjusted its outlook on Marathon Digital. The
bank lowered its price target for the company’s stock from $22 to $17, while
maintaining a “hold” rating.
Is
Jefferies right? Time will tell. For now, Marathon Digital Holdings is taking
steps to capitalize on lower Bitcoin prices by purchasing $249 million worth of
BTC.
“We
currently own and operate approximately 54% of the 1.1 gigawatts of power in
our diversified portfolio of digital asset compute,” commented Fred Thiel,
MARA’s Chairman and CEO. “We will continue making owned and operated sites a
greater percentage of our fleet over time and expect to see cost savings on a
cost per petahash basis as this occurs. Longer-term, our intention is to be
amongst the lower cost operators in the industry.”
The
evolving landscape of Bitcoin mining underscores the industry’s sensitivity to
cryptocurrency price fluctuations and network dynamics. As the sector continues
to mature, miners face the ongoing challenge of balancing operational costs
with volatile market conditions.
The Q2 2024
results published by HIVE Digital Technologies (NASDAQ: HIVE) and TeraWulf
(NASDAQ: WULF) showed that Bitcoin miners are able to withstand negative market
changes following the recent halving. HIVE increased its revenue by 37%, while
WULF saw a 130% increase.
This article was written by Damian Chmiel at www.financemagnates.com.
Source link
