Bitcoin Hashrate Decline: A Potential Indicator of Price Recovery, According to VanEck

Bitcoin's network hashrate has experienced a significant decline, which might signal a favorable environment for future price increases. Despite challenges facing miners and short-term holders, long-term interest in Bitcoin remains strong. VanEck's analysis suggests that, historically, decreases in hashrate can precede price rebounds.

Key Takeaways

Bitcoin's hashrate dropped by approximately 4% over the last month, marking the most significant decrease since April 2024.
Miners are facing economic pressures, with breakeven costs for mining operations declining.
Historical data indicates a tendency for Bitcoin to perform better following hashrate declines.
Corporate buyers are increasing their Bitcoin holdings, while short-term holders are selling off.
Long-term holders appear resilient, maintaining their positions despite market fluctuations.

VanEck links falling Bitcoin hashrate to stronger forward returns

Bitcoin's Network Activity and Price Trends

Recent data from VanEck points to a decline in Bitcoin's network hashrate, which dropped around 4% in the past 30 days. This is the most severe decline since April 2024. It follows a challenging month for Bitcoin, which saw a price decrease of 9%, with volatility reaching levels not seen since April, exceeding 45%.

Pressure on Miners Intensifies

The economics of Bitcoin mining are tightening rapidly. The breakeven electricity costs for mining with a 2022-era S19 XP miner fell from $0.12 in December 2024 to approximately $0.077 this month. Additionally, daily fee revenues have decreased by 14% month-over-month, while the growth in new addresses has also seen a slight decline of 1%.

VanEck emphasizes that declines in hashrate frequently occur when miners reduce their operations or go offline altogether. Historically, these moments have indicated market exhaustion rather than the onset of prolonged decline.

Data spanning from 2014 demonstrates that Bitcoin has usually outperformed expectations after experiencing hashrate dips. When the 90-day hashrate growth turned negative, the forward returns for the subsequent 180 days were positive 77% of the time, averaging a gain of 72%. Conversely, during other periods, average returns were around 48%.

The recent slowdown in hashrate is also linked to external influences. In China’s Xinjiang region, around 1.3 GW of mining capacity was reportedly shut down due to heightened policy scrutiny, potentially eliminating up to 10% of the global hashrate. This shutdown may have taken around 400,000 mining machines offline.

Corporate Purchases Increase as Leverage Weakens

While spot Bitcoin ETP holdings saw a decline of 120 basis points month-on-month, totaling 1.308 million BTC, corporate treasuries took a different trajectory. These digital asset treasuries added 42,000 BTC from mid-November to mid-December, increasing their overall holdings to 1.09 million BTC—the largest accumulation since July.

Much of this acquisition came from Strategy, which added 29,400 BTC, maintaining a market NAV above 1. Other firms are now opting for preferred shares to fund further purchases instead of issuing common stock.

On-chain data reveals a distinct division among Bitcoin holders. Coins held for a duration of 1-5 years showed significant balance reductions, particularly a 12.5% drop in the 2-3 year category. Meanwhile, coins held for over five years saw little movement, with balances remaining flat or slightly increased.

Conclusion

Currently, VanEck suggests that the market is experiencing a situation seen in past cycles. Short-term pressures are weeding out weaker traders, miners are experiencing financial strain, and long-term holders are holding steady. Historically, this combination has often paved the way for more stable price developments in the following months.