As Bitcoin’s price tumbled below $57,000—a decline of over 8.70% in just one week—bearish sentiment has intensified. However, U.S.-listed mining companies have bucked the trend by ramping up their Bitcoin production despite a notable drop in the network’s hashrate.
What’s behind this counterintuitive move? Is it a hidden profit opportunity, or a risky gamble? Dive deeper to find out!
A Curious Trend: Rising Mining Profitability Amid Falling Prices
In June, while Bitcoin’s price saw a modest increase of 3%, the network’s mining power fell by 5%. This unusual scenario paradoxically made Bitcoin mining more profitable compared to May.
According to a recent report by investment bank Jefferies, this trend is seen as a recovery from the effects of the April halving, which initially slowed Bitcoin’s supply growth but has now contributed to improved mining profitability.
The Halving Effect
Analyst Jonathan Petersen explains that the halving, which cut miners’ rewards by 50%, initially slowed Bitcoin’s supply growth. However, this reduction in rewards has ultimately led to increased mining profitability as the network adjusts.
In June, U.S.-listed mining firms increased their share of new bitcoins mined to 20.8% of the total network output, up from 19.1% in May. This boost in output coincided with these companies enhancing their mining capacities even as the overall network hashrate declined.
Mining Giants in the Spotlight
Marathon Digital emerged as the leading miner in June, producing 590 bitcoins—slightly fewer than in May. Meanwhile, CleanSpark experienced a 7% increase, mining 445 bitcoins. Despite these advancements, Jefferies revised its price targets downward for several mining companies due to prevailing market conditions. Marathon Digital’s target was adjusted from $24 to $22, with similar reductions applied to Argo Blockchain ADRs and U.K.-traded shares.
The bank maintained its hold rating, noting these companies’ strategic shift towards high-performance computing (HPC) and artificial intelligence (AI) hosting as a means to diversify revenue streams amid declining Bitcoin mining profitability.
The Impact of Market Corrections
Despite the increased Bitcoin production by mining companies in June, the cryptocurrency’s price has fallen. This drop is largely attributed to selling and profit-taking by large investors (whales) and mid-sized miners. Although there have been sales from entities like Mt. Gox and the German government, their impact on the Bitcoin market has been relatively minimal.
Several on-chain metrics suggest that Bitcoin was oversold when its price dropped to approximately $53,000. This oversold condition may have triggered a sharp rebound, as traders’ unrealized profits reached lows not seen since the FTX collapse, indicating that a market correction may be imminent.
Also Read: Bitcoin, Ethereum, And XRP Price Prediction: Has The Bull Rally Resumed?
With on-chain metrics suggesting a potential rebound, will you be ready to catch the next Bitcoin wave?