Bitcoin’s hashrate declined about 4% through mid-December, marking the sharpest monthly drop since April 2024. According to VanEck analysts, this type of sustained hashrate compression has historically acted as a bullish contrarian indicator for Bitcoin’s price, as it often reflects miner capitulation near cyclical lows. Data going back to 2014 shows that when Bitcoin’s hashrate falls over a 30-day period, the asset posts positive 90-day returns roughly 65% of the time, compared with 54% when hashrate is rising. The signal becomes even stronger over longer horizons, with negative hashrate growth over 90 days followed by positive 180-day returns in about 77% of cases, with significantly higher average gains.

The recent decline highlights growing stress within the mining sector, as falling prices and tougher economics force less efficient operators offline. VanEck notes that breakeven electricity costs for widely used mining hardware, such as the Bitmain S19 XP, have dropped sharply, underscoring how compressed margins have become. Much of the hashrate reduction is believed to be linked to the shutdown of roughly 1.3 gigawatts of mining capacity in China, with some of that power potentially being redirected toward the rapidly expanding AI sector, which could further pressure Bitcoin’s network hashrate.

Despite these challenges, the outlook is not entirely negative for miners. If Bitcoin prices recover, profitability could improve quickly, bringing sidelined machines back online and stabilizing the network. Moreover, Bitcoin mining continues to receive support from several nation-states, including both energy-rich and emerging economies, helping offset regional declines. Taken together, VanEck argues that the combination of miner capitulation, historical return patterns, and ongoing sovereign backing points to a more constructive medium-term outlook for Bitcoin, even amid near-term volatility.