Bitcoin (BTC) mining companies are experiencing significant challenges as a key measure of profitability has reached its lowest point in recent records.

Analysts from JPMorgan Chase, Reginald L. Smith and Charles Pearce, indicated that daily block reward gross profit for miners declined by 6% month-over-month in September. This marks the third consecutive month of falling daily mining revenue and gross profit, despite a slight uptick in average Bitcoin prices.

Bitcoin Halving Leads To Significant Revenue Decline

According to the analysts, the decline in miners’ revenues can be attributed to BTC’s software update, namely the Halving that took place in April this year, an event that occurs every four years and has a significant long-term impact on the cryptocurrency’s price during each cycle.

This preprogrammed event reduces the block reward given to miners by 50% every four years, a mechanism designed to prevent inflation and maintain Bitcoin’s capped supply of 21 million tokens.

Even more worrying is the fact that the recent Bitcoin Halving is expected to result in an annual revenue loss to businesses of over $10 billion, based on current BTC prices, which stand at around $60,750 at the time of writing on Tuesday.

Rising Competition And Energy Costs

Despite a combined market capitalization of over $20 billion for 14 major US-listed mining companies, the industry is struggling with declining profits. The analysts also point to increasing competition from major operators entering the US market, which is making the situation even worse for smaller miners.

According to Bloomberg, as the number of participants in the BTC mining space grows, individual miners face a tougher landscape, as more computing power means a lower likelihood of securing rewards.

Bitcoin mining is a highly energy-intensive endeavor, requiring miners to invest billions in specialized hardware to validate transactions and compete for a fixed number of Bitcoin rewards.

The financial strain is evident in the stock performance of leading mining companies. Shares of Marathon Digital Holdings Inc. and Riot Platforms Inc., two of the largest publicly traded miners in the US, have plummeted by 36% and 54%, respectively, this year.

At the time of writing, the largest cryptocurrency on the market, BTC, is trading at $60,758, down nearly 5% in the 24-hour timeframe and nearly 6% in the past week alone.

This comes after the cryptocurrency surged to a two-month high of $66,500 last Friday on the back of bullish sentiment surrounding the US Federal Reserve’s (Fed) interest rate cut decision on September 18.

However, as previously reported by Bitcoinist, this price action can be attributed to escalating geopolitical tensions in the Middle East between Israel and Iran, which have prompted investors to sell their coins for “safer” assets such as gold.

Featured image from DALL-E, chart from TradingView.com