Bitcoin Hashrate Experiences 4% Decline in December, Indicating Possible Bullish Trends: VanEck

Bitcoin's hashrate dropped by 4% during December up to the 15th, a trend that analysts from VanEck suggest could pave the way for a stronger price resurgence in the months to come.

Key Takeaways:

Bitcoin's hashrate saw a 4% decrease in December, historically indicating potential price increases according to VanEck.
The profitability of miners is being challenged due to decreased BTC prices and escalating operational costs.
The reduction in hashrate may represent a long-term shift, as mining capabilities are increasingly being allocated towards artificial intelligence tasks.

In a recent note, Matt Sigel, head of crypto research at VanEck, along with senior investment analyst Patrick Bush, indicated that ongoing reductions in hashrate traditionally signal bullish trends for Bitcoin prices.

Hashrate measures the overall computational power that supports Bitcoin's network security and serves as an indicator of miner confidence and profitability.

“When hashrate compression continues for extended periods, it often leads to more frequent and larger positive returns in the future,” the analysts explained.

Bitcoin Hashrate Drops 4% in December, Signaling Potential Bullish Turn: VanEck

Bitcoin Shows Stronger Price Performance After Hashrate Declines: Insights from VanEck

Since 2014, Bitcoin’s 90-day returns have been positive 65% of the time after a 30-day hashrate decrease, compared to a 54% success rate following hashrate increases.

This pattern becomes even more significant over longer time frames. VanEck’s data reveals that after experiencing a decline in hashrate over 90 days, Bitcoin has recorded positive returns over the next 180 days 77% of the time, averaging a gain of 72%.

In contrast, Bitcoin produced a positive return only 61% of the time after hashrate increases.

This downturn in hashrate occurs at a challenging juncture for miners. Currently, Bitcoin is valued around $88,400, nearly 30% lower than its all-time high of $126,080 set on October 6, as per CoinGecko.

With falling prices and rising operational expenses in various regions, miners are feeling the squeeze on their profit margins.

Sigel and Bush pointed out that the break-even electricity cost for a 2022-model Bitmain S19 XP miner—one of the most common mining devices—has decreased nearly 36%, from $0.12 per kilowatt-hour in December 2024 to about $0.077/kWh by mid-December.

This significant drop indicates that many miners have been compelled to cease operations or are now running at a loss.

The analysts also noted that a substantial portion of December’s hashrate reduction, the sharpest observed since April 2024, relates to the shutdown of approximately 1.3 gigawatts of mining capacity in China.

Furthermore, they mentioned that some of this mining power might be reallocated to artificial intelligence, which could potentially eliminate as much as 10% of Bitcoin’s hashrate from the network.

Expansion of State-Supported Bitcoin Mining Amid Miner Challenges

Despite experiencing immediate pressures, there is a notable growth in state-supported mining initiatives.

VanEck projects that around 13 countries currently endorse Bitcoin mining activities, which include nations like Russia, France, Bhutan, Iran, El Salvador, the UAE, Oman, Ethiopia, Argentina, Kenya, and Japan.

For investors, the analysts suggest that instances of miner capitulation have often signaled phases of consolidation that lead to more extensive market recoveries.

Recently, K33 also indicated that the persistent selling pressure from long-term Bitcoin holders may be nearing its limits after several years of consistent distribution.

This insight could provide a silver lining as the market adjusts and positions itself for future movements.