Original Author: ChandlerZ, Foresight News
Bitcoin's hash rate has increased approximately 10-fold since 2020, but has shown a noticeable decline in recent months.
Data shows that the Bitcoin network's hash rate has fallen about 15% from its October high, with miner capitulation persisting for nearly 60 days. The network's average hash rate dropped from about 1.1 ZH/s in October to approximately 977 EH/s, indicating that miners are shutting down machines or capitulating as profitability declines.
Furthermore, Glassnode's Hash Ribbons indicator reversed on November 29th. This indicator tracks short-term and long-term hash rate trends to reflect miner capitulation. The short-term supply pressure on the Bitcoin market may further increase, and the Bitcoin mining difficulty is expected to undergo its seventh reduction in the past eight adjustments on January 22nd, dropping to around 139 T.
Mining Profitability Declines for Five Consecutive Months
JPMorgan stated that the Bitcoin network's hash rate decreased by approximately 3% month-over-month to 1045 EH/s in December 2025, indicating some easing in miner competition, but mining profitability continues to decline.
Data shows that in December 2025, miners' average daily block reward revenue per EH/s was $38,700, a 7% decrease from November and a 32% decrease year-over-year, hitting a record low.
VanEck's report analysis suggests that the Bitcoin mining industry is experiencing significant pressure. On one hand, the periodic halving of block subsidies causes a "step-like" decrease in miner revenue; on the other hand, the global hash rate has expanded at a compound growth rate of about 62% since 2020, forcing miners to continuously invest CAPEX to increase hash power to avoid being淘汰. If the coin price cannot offset the rising unit costs caused by subsidy reductions and hash rate growth, miner profits will be systematically compressed.
The deterioration of miner profitability can be seen intuitively from the electricity cost breakeven point. Taking the 2022-generation miner S19 XP as an example, its bearable breakeven electricity price dropped from about $0.12/kWh in December 2024 to about $0.077/kWh in December 2025. This means that against the backdrop of recent weak BTC prices, the marginal economics of mining have significantly worsened, and the industry's reliance on low-cost electricity resources, economies of scale, and operational efficiency has further increased.
Although the global hash rate has accumulated a growth of about 10 times since 2020, calculated on a 30-day moving average, the network hash rate has decreased by about 4% over the past 30 days, the largest drop since April 2024. Simultaneously, supply-side disruptions are also affecting the hash rate, such as the shutdown of approximately 1.3GW of capacity (estimated about 400,000 mining machines) at mining farms in Xinjiang due to regulatory scrutiny.
Mining Farms Actively Transitioning to AI Data Centers
A report by Sinolink Securities shows that in the third quarter of 2025, the mining cost including depreciation for US-listed companies had risen to $112,000, higher than the current Bitcoin price. Encryption mining farm companies possess powered-on computing infrastructure with high communication bandwidth near major metropolitan areas, and their electricity costs are generally between 3~5 cents, making them naturally suitable for AI cloud service businesses. With the growth in AI computing demand, the transition of encryption mining farms to AI data centers is an inevitable choice.
14 major US-listed mining farm companies are expected to reach a power capacity of 15.6GW by 2027. Their transition business models are primarily cloud computing leasing and IDC power leasing.
Encryption mining farms transitioning to AI data centers mainly adopt two business models.
The first is similar to CoreWeave and Nebius, purchasing chips for cloud computing leasing. IREN currently uses this model. IREN has a gross power capacity of 2.91GW, corresponding to about 1.9GW of core capacity. Its market capitalization per watt is lower than CoreWeave and Nebius, and it has already cooperated with Microsoft on a 200MW core capacity project.
The second is a power leasing model similar to IDCs, only renting out the right to use the data center building and power capacity, with servers and electricity bills paid by the tenant. Most encryption mining farms currently adopt this hosting model. Some companies have signed leasing contracts with Google, Amazon, CoreWeave, and others. Most other companies, having transitioned later, are still seeking partners.
VanEck: Hash Rate Decline Could Actually Be a Positive Factor
However, VanEck's report also suggests that the hash rate decline could be a positive factor. By comparing the 30-day change in Bitcoin's hash rate since 2014 and the expected return over the subsequent 90 days, they found that when the Bitcoin hash rate decreases, the probability of a positive expected return is higher than when the hash rate increases. When the Bitcoin hash rate decreases, the average expected 180-day return is about 30 basis points higher than when it increases.
When hash rate compression lasts for a longer period, positive forward returns tend to be more frequent and of greater magnitude. Since 2014, during the 346 days when the 90-day hash rate growth was negative, the probability of a positive 180-day Bitcoin forward return was 77%, with an average return of +72%. For all other periods, the probability of a positive 180-day Bitcoin forward return was about 61%, with an average return of +48%.
Therefore, historically, buying BTC when the 90-day hash rate growth is negative has increased the expected 180-day return by 2400 basis points.
Even during periods of weak economics, many entities choose to continue mining. Short-term profit pressure and hash rate fluctuations are more likely to lead to accelerated industry consolidation and concentration, not necessarily indicating the long-term decline of the mining industry.
