Executive Summary

Bitcoin mining shares topped the 2025 dollar pair with a strong annual performance despite a sharp drawdown in December that exposed how sensitive miner economics remain to near-term bitcoin price moves and “sticky” network The firm said the company’s underlying debt was falling by an estimated 6.7 per cent to $49.7bn in the quarter ending December. However zooming out the cohort finished 2025 up 73% in total market value even after retreating from October highs near $70bn an arc that captures the year’

The December numbers were particularly interesting. Bitcoin’s average price fell 8% to $88,950 while annualized volatility fell to 39% from 48% — a calmer tape for the asset class but not necessarily for mining P&L With difficulty higher JPMorgan calculates average daily revenue of $38,700 per exahash the lowest on record and gross profit per EH down 9% to $17.100 meaning gross margins around 44%. Hashrate fell for a second month, down 3% to 1,045 EH/s, suggesting that the marginal operators were squeezed out.

The price of a four-year incentive has cooled from the peak of excitement but remains elevated: miners traded at 107% to end 2015 down from 120% The industry is increasingly treating mining as hybrid digital infrastructure as operators signed a contract to increase more than 3 GW of gross capacity to high-performance computing and AI colocation through 2025. The key question for the next 6-12 months is whether this diversification can sustainably de-risk cash flows or whether Bitcoin price and difficulty will continue to dominate outcomes.

Market Context – Current Space

December’s slump versus the year’s rerating

The December equities sell-off wasn’t simply a function of the weaker bitcoin. In addition the company’s investment into the network conditions and investor positioning were visible in the report. In the cover universe of 14 miners the aggregate market capitalization fell 18% to $43bn on a monthly basis. The drop stands out because it came after a strong year: even with the December drawdown and a pullback from October highs of around $70bn the cohort ended in 2025 up 73% in total market value.

This pattern-sharp reverse nested within a larger upward trend has become characteristic of listed miners. They represent a leveraged expression of the Bitcoin price but with a second layer of access to difficulty fleet efficiency power pricing financing access and equity dilution. When the variables are aligned miners can outperform bitcoin a lot. If they don’t the downside can be rapid.

Bitcoin price and volatility: calmer macro, tougher micro

Bitcoins’ average daily volume fell 8% to $88,950 in December. It was close to a seven-day rolling average of 88,500. The annualized volatility fell to 39% from 48% in September a notable drop that ordinarily supported risk assets tied to bitcoin. For miners however lower volatility doesn’t necessarily translate to improved earnings quality. When price declines coincide with sustained difficulty and a high fixed-cost base (power contracts hosting services labor services, debt service), the operating model can deteriorate rapidly even in a lower-volatility commodity

Difficulty, hashrate and the economics of “crowded” mining

Mining is a commodity business. The equilibrium of the industry is determined by the interaction between the bitcoin price, the block subsidy plus the fees and the total computational power-hash rate which drives difficulty adjustments. When new capacity is added difficulty increases and so revenue per unit of hashrate is compressed. December show that this pressure clearly: JPMorgan reported an average daily income of $38,700 per EH the lowest level on record as bitcoin’s price decline met “sticky” difficulty.

Notably the network hashrate fell to 1,045 EH/s for the second month in a row and the seven-day moving average ended at This matter because a sustained decline in hashrate can eventually lower the industry’s revenue per EH as difficulty adjusts downward. But the adjustment is neither guaranteed nor immediate and it depends on how persistent the exit of marginal operators proves to be and whether large well-capitalized miners continue to bring new rigs.

Power, efficiency and the cost curve

In December network-average fleet efficiency is estimated at around 20 J/TH and average power costs are around 45 per MWh. These two figures are at the heart of mining’s competitiveness. When bitcoin prices fall the most efficient fleets and the highest-cost power contracts become uneconomic first. The Dec. hashrate decline suggests exactly that: a portion of the network was pushed up the cost curve and forced to close or shut down

This creates a bifurcated market for listed miners. Operators with efficient fleets advantaged power and capital can gain share through downturns – especially if competitors reduce their numbers. Those with weaker balance sheets or less flexible power arrangements face a harsher reality: margin compression, dilution risk and decreased ability to fund growth.

Deep Analysis

1) Profitability compression: why December hurt more than the price move implies

Bitcoin is down 8% a month but that doesn’t necessarily explain the intense mining pressure. The biggest driver was lower price and sustained difficulty that decreased realized revenue per EH to a record low. JPMorgan’s estimates point to:

• It was the lowest total mining revenue over the last ten months across the sector.
• Average daily income of $38,700 per EH the lowest ever recorded.
• Gross profit per EH dropped 9% to 17 100.
• Gross margin 44%.

Margin in the – 40 to – 40 % range may sound healthy until one remembers that gross margin isn’t free cash flow. Depreciation on ASIC fleets hosting costs company overhead interest expense and growth capex can quickly consume “gross” profitability. In a capital-intensive business where equipment obsolescence is rapid miners must continuously invest in order to remain competitive. A 9% drop in gross profit per EH can cascade into a much smaller drop in equity value – particularly if investors anticipate additional compression or dilution.

The report also stresses the sector’s high sensitivity to profit per EH – a more informative metric than price alone. When revenue per EH is at new lows investors tend to re-rate miners to worst-case assumptions: higher probability of curtailment slower growth increased funding needs and lower terminal value for ASIC fleet

2) Hashrate decline: early signal of capitulation-or a brief pause?

The second monthly decline in the network hashrate is one of the consequential data points in the JPMorgan note. After years of growth in the hashrate industry often a drawdown suggests a part of the network is now operating at or below cash costs. Not specifically:

• Average monthly hash rate down 33% to 1,045 EH/s in December.
• The moving average for the last seven days ended at 1,043 EH/s down 22 EH/s from a year earlier.

For list miners a falling network hashrate can be bullish if it persists because it’ll eventually lead to lower difficulty and better profits per EH for the But investors shouldn’t over-interpret one or two months of declines. Hashrate may fall due to seasonal power pricing weather-driven curbtailments temporary outages or maintenance cycles that may rapidly reverse. The central question is whether the squeeze had significant negative impacts on the ability of weaker players to return or expand.

From a positioning perspective most investors use hashrate inflections as system signals. A persistent downtrend can mark the start of a “miner recovery” phase where profitability improves without requiring higher bitcoin prices. If the hashrate price falls for the third consecutive month and prices remain flat to bottom then it could come back in November.

3) Valuation: still expensive versus history, even after the pullback

The report is telling: the Miner cohort was trading at 107% of the four-year block reward opportunity as of December 31. That is down from a record 120% but still more than double the historical average of 45%.

In simple terms the market still pays a premium for miners relative to the expected block reward economics over a multi-year period. This premium can only be justified if investors believe one of the following holds:

• Over the next 10 years Bitcoin prices will likely rise dramatically to increase dollar rewards.
• Mining operations will benefit structural advantages (power pricing scale fleet efficiency) that allow them to capture outsized economics versus the network average.
• Business model diversification (HPC/AI) will generate large non-mining cash flows which deserve higher multiples.

It looks less like a valuation reset in that context than more like a reminder that the sector is still being priced for favorable outcomes. If the market’s narrative of “digital infrastructure” shrinks – either due to slower AI colocation contracting, execution risks or lower returns

4) The pivot to HPC and AI: narrative shift or durable transformation?

A major reason mining valuations remain high versus historical averages is a sector-wide rebound: investors increasingly view miner as power-and-datacenter operators rather than pure commodity producers. By 2025 JPMorgan estimates miners will have 2 gigawatts of aggregate capacity available to HPC and AI colocation.

It’s a crucial data point. Three gigawatts is not a marketing footnote but indicates an industry trying to monetize its core asset-power access-over multiple demand curve. If executed properly HPC/AI colocation can offer:

• Is there a more stable and contract-like business in comparison to bitcoin mining that is marked-to-market and difficulty-adjuste
• Higher quality cash flows supporting higher valuation multiples.
• As investors expand beyond crypto-native capital better access to capital.

But the pivot has brought serious complications. HPC workloads have different technical requirements (cooling redundancy, connectivity latency), different capex intensity and different customer contract dynamics. Mining sites optimized for ASICs aren’t always plug-and-play for AI. The market may pay for the optionality before the cash flows are fully proven.

The December dispersal of the performance between the stocks suggests this. Hut 8 rose 2% in December driven by the sale of Fluidstack-an example of how HPC and AI announcements can cushion sentiment even when mining fundamental The biggest downgrade underscored that pure mining exposure (and/or investor-specific concerns) can still dominate near-term price action.

Technical Perspective – Charts and Indicators Analysis

While this note is fundamentally anchored, technical signals in mining stocks matter because flows are often momentum driven and sector correlations change quickly. Based on JPMorgan figures it follows several technically relevant conclusions.

1) Sector market cap: momentum break from October highs

The industry’s aggregate market cap was at around $70bn in October before slipping to $448bn by the end of the year. Technically this is an unsuccessful breakout and a move into a lower range. For investors the key level isn’t just December low but whether the cohort can reclaim and hold intermediate levels that would signal renewed risk appetite.

Actionable technical read: Treat the $70bn region as an “overhead supply” zone. If aggregate valuation approaches this level again without a clear improvement in revenue per EH the risk of another rejection increases.

2) Bitcoin price trend and volatility: lower volatility doesn’t eliminate miner beta

In December Bitcoin averaged 88.950 and ended near 88.500 on a seven-day rolling average. Volatility fell to 39%annualized. Lower vol can reduce forced deleveraging and options-driven hedging pressure which can help miners stabilize. The equity beta of miners can remain high because their earnings are leveraged by price and difficulty.

Actionable technical read: in a declining volatility regime miners may trade more on earnings quality and narrative (HPC/AI execution) rather than purely on intraday bitcoin swings. This increases the dispersal across names.

3) Hashrate as a “hidden macro” indicator for miners

The hashrate of the network fell to 1 045 EH/s (monthly average) with the seven-day moving average at 1 044 Because difficulty follows hashrate with a delay the technical trader’s edge anticipates whether the drawdown is temporary or persistent. Persistent decline can prefigure increased revenue per EH even if prices remain flat.

Actionable technical read: if hashrate declines for multiple difficulty adjustment periods it can provide a constructive backdrop for mining-particularly to the most efficient operators-potentially before visible improvements in reported profitability.

Expert Commentary – Synthesized Viewpoints

JPMorgan’s core message: strong year, fragile month, elevated valuations

The analysts Reggie Smith and Charles Pearce describe a sector that enjoyed a powerful regrowth 2025 but remains vulnerable to short-term profitability shocks. The figures they quote-record-low revenue per EH 44% gross margin and a still-elevated valuation-pose a picture of an industry in transition The market wants to believe miners are becoming infrastructure platforms but the income statement still behaves like a commodity producer when bitcoin pulls back.

The “two narratives” problem: commodity cyclicality versus infrastructure multiple

Investors are trying to reconcile two valuation frameworks:

• Commodity Framework:miner as price takers with volatile cash flows deserving low to mid multiples and frequent dilution risk.
• Infrastructure framework:Miners as owners/operators of scarce power and datacenter capacity deserving higher multiples and longer-duration cash flows assumptions.

In part the December slump was a stress test to see which structure prevails when conditions worsen. The fact that only two of 14 names outperformed bitcoin in December suggests that the market still treats much of the space as a high beta asset.

Dispersion is the new normal

Hut 8 gained 2% in December while CleanSpark dropped 33%. Nine companies outperformed bitcoin in the full year with IREN up 285% and Cipher Mining up 218%. This is a market that’s not happy to buy the miner beta. Investors are separate:

• Operators with credible HPC/AI contracting and execution capabilities
• Operators with advanced power and superior fleet efficiency
• Operators whose growth or balance sheet story is less convincing in a lower revenue-per-EH regime.

In practical terms, stock selection is increasingly important; sector ETFs or baskets may underperform a curated approach when the macro backdrop is mixed.

Investment Implications – Actionable Insights

1) Focus on revenue resilience: efficiency and power costs as primary screens

The estimate of 20 J/TH average fleet efficiency and 45 MWh average power cost offers a useful benchmark. An actionable approach is to prioritize miners that can comfortably operate below the network-average cost curve because they’re best positioned to survive record low revenues per EH without forced dilution or restriction.

What to watch:Disclosures about fleet upgrades, hosting renegotiations and realized power pricing. In a compressed revenue environment small cost differences can rapidly compound.

2) Treat HPC/AI announcements as catalysts-but demand proof in capex discipline and contracting

With 3 GW of gross capacity signed to HPC and AI colocation in 2025 the narrative is real. Investors should distinguish between:

• Contract capacity versus energy capacity
• Gross versus Net economics after required infrastructure upgrades
• Non-binding MoUsversus bankable contracts (terms of tenor, price or take-out)

Actionable approach:reward companies that demonstrate stepwise conversion contracts signed building out commissioning recurring revenue more than those that depend on pipeline language.

3) Use hashrate and difficulty trends as leading indicators for margin inflection

The second month of hashrate loss may be an early sign that the network is self-correcting. If the hashrate continues to fall and the difficulty adjusts down miners’ EH revenue could recover even without a major Bitcoin rally.

Actionable Approach:consider staging exposure when hashrate declines persist over multiple periods focusing on miners with liquidity runway and operational flexibility.

4) Expect continued dispersion; build positions accordingly

In the wake of the gains of IREN Mining 285 and 218% and CleanSpark’s 33% decline, the message is clear that miners aren’t trading as a homogenous group. Portfolios should reflect this dispersal rather than being assumed that all miners move together.

Actionable approach:Pair trades or barbell positioning can be appropriate-owned efficient and well-capitalized operators while hedging with bitcoin exposure or avoiding names with weaker unit economic

Risk Assessment – What Could Go Wrong

1) Difficulty stays high or rises again while bitcoin price stalls

The December stock market crash – down price sustained difficulty – was a toxic combination. If the hashrate rebounds quickly or new capacity comes online difficulty could remain high and the revenue per EH may drop. In this case the record low revenue per EH measure couldn’t be a one-off and equity valuations could face another leg down.

2) Valuation risk: still elevated relative to history

At 107% of the four-year incentive opportunity — more than double the historical average of 45% — the industry maintains significant multiple compression risk. If risk appetite fades or if HPC/AI transformation story loses credibility valuation could mean-revert even though operating performance remains stable.

3) Execution risk in HPC/AI buildouts

HPC/AI colocation is highly operational. Mistakes include cost overruns delayed commissioning insufficient redundancy or failure to meet customer requirements. A miner can spend heavily on infrastructure retrofit but fall short turn the investment thesis into a burden on the balance sheet.

4) Balance-sheet and dilution risk during profitability troughs

When gross profit per ounce falls miners with aggressive expansion plans or debt obligations can face restricted financing options often leading to equity issues at unfavorable prices. The sharp declines in some names in December show the market’s sensitivity to funding and liquidity concerns.

5) Power price volatility and regulatory constraints

The estimate of 45/MWhis by JPMorgan Network is an average. Realized costs can vary widely by region and contract type. Power markets can become volatile and regulatory or community pressures can restrain operations, restrict load or impose new costs – especially during peak demand periods.

Future Outlook – 6-12 Month Projection

Base case: normalization via self-correction, selective equity recovery

The most plausible path for a rapid recovery is a selective recovery rather than a broad-based increase in interest rates. The December hashrate decline suggests the network is responding to compressed economics which could set the stage for improved EH revenue if difficulty adjusts down. In this case base:

• The EH revenue stabilizes and gradually improves if the hashrate weakness persists.
• Equity performance remains dispersed with efficient miners and credible HPC/AI execution outperforming.
• Valuations remain sensitive to the direction of bitcoin prices but could be supported by a growing non-mining revenue visibility.

Upside case: bitcoin recovery plus difficulty relief drives operating tap into

If bitcoin prices hold while the hash rate remains controlled then operating leverage can be strong. Given how quickly revenue per EH can expand when price rises and difficulty lags miners could see a sharp rebound in gross profit per E In this scenario the sector could reach past market cap highs near 70bn faster than fundamentals alone may suggest driven by momentum and renewed inflows.

Downside case: prolonged revenue compression triggers deeper capitulation and multiple contraction

If Bitcoin continues to grow or falls further while the difficulty remains high December’s record-low revenue per EH could persist. Then I’m sure there would be pressure.

• Weaker operators in reductions, asset sales or dilutive financing
• Multiple sectors are smaller with historically higher values versus still-elevated valuations
• What are the timings of HPC/AI if capital becomes scarce or investors demand faster payback

Conclusion – Key Takeaways

The JPMorgan said that the October mining data indicated the state of the bitcoin mining sector in 2025 : a market that delivered substantial annual gains but remains structurally exposed to short-term profitability shocks when bitcoin prices soften The 18% decline in the aggregate market cap to $48bn and a record-low $38,700 in average daily revenue per EH was a reminder that mining remains, at its core

At the same time the sector’s valuation and narrative are changing. Even after contracting from record levels the share prices of miner are trading at 107% of the four-year block reward opportunity far above the historical average reflecting investor belief in structural advantages and increasingly diversification into HPC The signing of more than 3 GW of gross capacity for HPC/AI colocation in 2025 is important but the market will demand proof through commissioned capacity, recurring revenues and disciplined capex.

For investors the actionable framework is clear: prioritize cost-curve winners (efficiency and power), track network – hashrate – difficulty for early margin signals and treat HPC – AI as a differentiation which must be validated through execution rather than press In the next six to 12 months it’s likely that selectivity will be rewarded because of dispersion and not uniform beta become the defining feature of Bitcoin mining.