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Hashrate decline marks uncharted territory
Bitcoin hashrate approached 1.3 zettahashes per second late last year before entering a prolonged decline. Zagury's presentation materials calculated a drawdown of approximately 22% to 24% from the peak. The term hashrate bear market is his description of the current cycle rather than an official Bitcoin network classification, referring to the unusually long period during which estimated computing power has failed to return to its previous record.
Network estimates vary because Bitcoin does not publish an exact count of active machines. Analysts infer hashrate from block production rates and mining difficulty, which means daily readings can fluctuate sharply. CoinWarz estimated hashrate at about 829 exahashes per second on Sep. 2, after readings moved above one zettahash during several days in late August. Longer moving averages provide a clearer measure than daily estimates.
Previous analysis found that Bitcoin mining difficulty had fallen 19.9% from its November peak by late July. Hashrate had remained in a downward trend for approximately 287 days, according to data cited in that report.
Current decline differs from 2021 China ban
Zagury contrasted the current decline with the disruption caused by China's 2021 mining ban. Hashrate fell rapidly during that episode as companies shut down Chinese facilities, but recovered as machines moved to North America, Central Asia and other regions. The present cycle has developed more gradually.
Rather than relocating the same machines, operators are reconsidering whether new electricity and data center capacity should be allocated to Bitcoin mining at all. This has been the longest period that we have seen from an all-time high until recovery, Zagury said during his presentation.
Tether-backed Bitcoin treasury company Twenty One Capital subsequently filed the prepared transcript with the U.S. Securities and Exchange Commission, making the analysis part of the public record.
AI creates competing demand for mining infrastructure
Bitcoin miners and AI data centers compete for several of the same resources. Both require large power connections, cooling systems, land, data center buildings and access to capital. AI facilities require different chips, networking equipment and construction standards from Bitcoin mines. Converting a mining site is more complicated than replacing ASIC machines with graphics processors, though sites with secured power and fiber access can provide a starting point for high-performance computing development.
Zagury said this option changes the hashrate cycle because miners can now direct capital toward another computing market instead of automatically expanding their Bitcoin fleets. If you look at the public mining companies out there, there really isn't anybody staying the course to mine Bitcoin at scale, he said. Pretty much everybody is leaving the industry right now.
The statement describes a broad trend. MARA, CleanSpark, Riot, Bitdeer and other publicly traded companies continue operating large Bitcoin mining fleets, even as some explore or build AI infrastructure. The shift is most advanced at companies such as TeraWulf, IREN, Core Scientific, HIVE and Cipher. TeraWulf reported $21 million in AI and high-performance computing hosting revenue during the first quarter, exceeding its Bitcoin mining revenue for the first time.
Surviving miners could gain network share
Zagury rejected the idea that Bitcoin mining is inherently a poor business. He argued that profitability depends on where an operator sits on the industry's cost curve. A miner with efficient equipment and low electricity costs can remain profitable under conditions that force a higher-cost competitor to shut down. Capital structure also matters because heavy debt and short repayment schedules can create pressure even when a facility remains operationally competitive.
Hash price, which measures expected miner revenue for a unit of computing power, remains low compared with historical levels. However, declining network hashrate can benefit miners that remain active. Bitcoin adjusts mining difficulty every 2,016 blocks, or approximately every two weeks, 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.
The beautiful thing about Bitcoin mining being in a bear market of hashrate is that, for those that stay around, they naturally get a higher share of the market, Zagury said. He added that mining has the best chance of outperforming Bitcoin when the asset's price increases faster than network hashrate growth.
