Bitcoin’s network hashrate has dropped roughly 22% from its late-2025 peak of 1.3 zettahashes per second, marking what Twenty One Capital CEO Rapha Zagury calls the first sustained “hashrate bear market” in the network’s history.
Zagury delivered the diagnosis during a keynote titled “Here Be Dragons” at Bitcoin Asia 2026 in Hong Kong on Aug. 28. The presentation transcript was later filed with the U.S. Securities and Exchange Commission.
“This has been the longest period that we’ve seen from an all-time high until recovery,” Zagury said. The network has been in a downward trend for approximately 287 days, according to data from Bitcoin Magazine Pro. CoinWarz put the current hashrate at roughly 829 exahashes per second on Sept. 2, well below the late-2025 highs.
Not like the China ban
The 2021 China mining ban wiped out roughly half of Bitcoin’s hashrate almost overnight. But the network recovered within months as machines relocated to North America and Central Asia. This time is different, Zagury argued, because operators are not simply moving the same hardware somewhere else.
Instead, miners are questioning whether new power connections and data-center builds should go toward Bitcoin mining at all. Artificial intelligence and high-performance computing now offer an alternative use for the same scarce resources: power, cooling, land, fiber access, and capital. A mining facility that can be retooled to host GPU clusters serving AI workloads generates revenue that mining alone often cannot match in a tight margin environment.
“If you look at the public mining companies out there, there really isn’t anybody staying the course to mine Bitcoin at scale,” Zagury said. “Pretty much everybody is leaving the industry right now.”
Public miners chase AI revenue
The numbers tell the story. TeraWulf reported $21 million in AI and HPC hosting revenue in the first quarter, overtaking its Bitcoin mining revenue for the first time and making AI its single largest revenue line. The company is building out HPC capacity at its Lake Mariner facility in New York, where it has access to both power infrastructure and Lake Ontario water for cooling.
Cipher secured a $200 million revolving credit facility to fund its expansion into long-term AI data-center contracts. Core Scientific, IREN, and HIVE have all announced or pursued similar pivots, investing in GPU clusters and high-bandwidth networking to serve AI customers.
Some miners, including MARA Holdings, CleanSpark, Riot Platforms, and Bitdeer, still operate substantial Bitcoin mining fleets. But even those companies have explored or announced AI and HPC side ventures, signaling where they see the long-term growth. The divergence is stark: companies like TeraWulf and Cipher have committed heavily to AI, while MARA and Riot still derive most of their revenue from block rewards and transaction fees.
Converting a Bitcoin mining site into an AI facility is not a simple swap. Bitcoin ASICs cannot perform AI workloads. HPC operations require different servers, cooling systems, networking gear and construction standards. But sites that already have secured power connections and fiber access hold an advantage in that transition, avoiding the years-long permitting and interconnection queues that new data-center builders face.
Difficulty adjustment still works
Bitcoin’s difficulty adjusts every 2,016 blocks, roughly every two weeks, to keep average block production near 10 minutes. As miners leave and hashrate drops, difficulty falls, making the remaining miners more profitable per unit of computing power. The network has seen significant downward difficulty adjustments since late 2025, easing the squeeze on operators who stay.
Zagury argued this self-correcting mechanism remains Bitcoin’s core strength. “The miners who survive these periods are the ones with the lowest costs and the strongest balance sheets,” he said, adding that this creates a more resilient network over time, not a weaker one.
Mining difficulty has fallen close to 19.9% from its November high by late July, according to Bitcoin Magazine Pro data. That decline translates directly into lower competition for block rewards among miners still online.
The valuation question
The shift is creating a valuation puzzle for investors. Mining company stocks increasingly behave like AI infrastructure plays with Bitcoin exposure rather than pure-play crypto equities. An index tracking public mining stocks rose roughly 56% in the first five months of 2026, even as Bitcoin itself fell about 17% in the same period, according to 10X Research.
For Bitcoin holders, the long-term question is whether this structural pivot strengthens or weakens the network. More hashrate generally means a more secure network. But if the remaining miners are lower-cost operators who stay through downturns, they provide a more reliable security backstop than miners who join during bull markets and shut down at the first sign of trouble. The hashrate that remains is arguably more committed.
Zagury defended mining’s flexible energy use as a feature, not a bug. Unlike factory manufacturing, which requires consistent baseload power, Bitcoin mining can ramp up and down as prices change. That flexibility, he argued, makes miners ideal buyers of curtailed or stranded energy that would otherwise go unused.
The network’s hashrate has shown signs of stabilizing in recent weeks, with CoinWarz readings briefly climbing back above one zettahash in late August. Whether that marks the beginning of a recovery or a temporary pause remains an open question.
What is clear is that the economics of Bitcoin mining have changed permanently. Power costs, balance-sheet strength, and the ability to pivot into AI workloads now matter as much as Bitcoin’s price. For a network designed around the idea that miners compete solely on hash power, that is a fundamental shift in what it means to be a Bitcoin miner.
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