A drop in bitcoin mining levels is frequently seen as indicative of network strain, highlighting decreased miner profits, a falling hashrate, and apprehensions regarding the economic viability of mining activities. This trend is typically regarded as detrimental to bitcoin’s value.
However, digital asset investment firm VanEck contends that phases of declining hashrate — the aggregate computational strength employed by miners to safeguard the bitcoin network and facilitate transactions — have historically acted as contrary indicators, signaling a rise in price momentum instead of a sign of fundamental frailty.
This scenario is unfolding as bitcoin hovers around $87,000, experiencing a 36% decline from October’s peak.
In the last month, bitcoin’s network hashrate marked its sharpest drop since April 2024, as miners dealt with squeezed margins due to a lower BTC price and that month’s “halving,” an event that halves block rewards approximately every four years, reducing new bitcoin supply.
VanEck observes that the decline in hashrate amid falling bitcoin prices indicates miner capitulation, with less efficient or over-leveraged operators ceasing operations or liquidating their bitcoin, adding to sell-side pressure in the market.
In reality, declines in hashrate often trail behind price decreases. According to VanEck, historically, this timing has positioned the market closer to cyclical bottoms rather than peaks. As higher-cost miners exit the market, lesser difficulty adjustments occur, facilitating easier bitcoin mining and ensuring consistent block production. The ensuing enhancement in miner profitability mitigates forced selling.
The present price adjustment seems selective, VanEck pointed out, with operational shutdowns particularly affecting high-cost or geopolitically vulnerable operations.
VanEck found that during periods of negative 90-day hashrate growth, bitcoin has shown positive 180-day forward returns 77% of the time, indicating that the price performance over the subsequent six months is generally better than average compared to periods of increasing hashrate.
The firm estimated that investing in bitcoin during prolonged hashrate corrections has lifted 180-day forward returns by around 2,400 basis points, reinforcing miner capitulation as one of bitcoin’s more reliable contrary signals.
