Bitcoin's First-Ever Hashrate Bear Market: A Turning Point for Miners

Raphael Zagury, CEO of Twenty One Capital, has described Bitcoin's current situation as its first-ever 'hashrate bear market'. This refers to a prolonged period where estimated computing power has failed to return to its previous record. The hashrate measures the estimated computing power miners contribute to securing the network and competing for block rewards.

The current decline is different from the 2021 shock caused by China's mining ban, which led to a rapid drop in hashrate followed by a recovery as machines were relocated to other regions. In contrast, this cycle has developed more gradually, with operators reconsidering whether new electricity and data center capacity should be allocated to Bitcoin mining at all.

Zagury highlighted that miners are now redirecting infrastructure investment toward artificial intelligence, which creates a competing use for their power capacity and resources. This trend is most advanced at companies such as TeraWulf, IREN, Core Scientific, HIVE, and Cipher, which have seen significant revenue growth from AI and high-performance computing hosting.

However, declining network hashrate can benefit miners that remain active. Bitcoin adjusts mining difficulty every 2,016 blocks to keep average block production close to ten minutes. When computing power leaves the network, a downward difficulty adjustment can make it easier for remaining miners to find blocks, allowing them to control a larger share of the network.