Bitcoin Enters First Hashrate Bear Market, Says Twenty One Capital CEO

Twenty One Capital chief executive Raphael Zagury described the current decline in Bitcoin’s network computing power as the cryptocurrency’s first “hashrate bear market.” The drop follows a prolonged period in which the network’s hashrate has stayed below its late‑2025 peak.

Hashrate Decline and AI Competition

Zagury’s presentation, delivered at Bitcoin Asia in Hong Kong on Aug. 28, showed a 22%‑24% reduction from the late‑2025 record, with the network’s hashrate falling from around 1.3 zettahashes per second to roughly 829 exahashes per second as of early September. He attributed the slowdown to miners reallocating electricity, cooling and data‑center capacity to artificial‑intelligence (AI) workloads, which compete for the same scarce resources.

Impact on Mining Companies

Public mining firms such as Marathon Digital (MARA), CleanSpark, Riot Platforms, Bitdeer and others continue to run sizable Bitcoin mining fleets, but several companies are expanding AI and high‑performance‑computing (HPC) services. TeraWulf reported $21 million in AI/HPC hosting revenue in Q1, surpassing its Bitcoin mining revenue for the first time, while Cipher secured a $200 million revolving credit facility to fund AI data‑center contracts.

Economic Implications of a Lower Hashrate

When network hashrate falls, Bitcoin’s protocol reduces mining difficulty roughly every two weeks, making it easier for the remaining miners to find blocks. This can increase the revenue share of operators that stay active, though overall profitability still depends on Bitcoin’s price, transaction fees, electricity costs and equipment efficiency.

Strategic Outlook for Investors

Zagury advised investors with limited capital to buy Bitcoin directly rather than allocate funds to mining stocks, suggesting that larger, diversified investors might combine spot Bitcoin exposure with mining assets. He emphasized that mining profitability hinges on operating at low electricity costs and maintaining efficient hardware, especially as the hashprice remains low compared with historical levels.

Future Direction of the Mining Sector

The sector is expected to diverge: some operators will retain pure Bitcoin mining, others will blend mining with AI/HPC hosting, and firms controlling attractive power sites may shift more aggressively toward AI workloads. Upcoming difficulty adjustments and corporate filings will reveal how much capital is directed toward new ASIC equipment versus AI infrastructure.