Bitcoin falling mining activity is often interpreted as a sign of strain on the network, reflecting lower profitability of miners, a decline in hashrate, and concerns about the economic sustainability of mining operations. This is widely believed to be bad for the price of Bitcoin.
Digital asset investment firm VanEck, however, says that periods of declining hashrate – the total computing power used by miners to secure the Bitcoin network and process transactions – have historically functioned as a contrarian indicator, indicating improving price momentum rather than a signal of structural weakness.
This dynamic appears as Bitcoin trades around $87,000, following a 36% peak-to-trough decline from October’s all-time high.
Over the past 30 days, the Bitcoin network’s hashrate recorded its largest decline since April 2024, as miners faced squeezed margins due to a weaker BTC price and that month’s “halving,” an event that reduces block rewards by approximately 50% every four years, reducing the issuance of new bitcoins.
VanEck notes that the decrease in hashrate when bitcoin prices fall reflects the capitulation of miners, with inefficient or highly leveraged operators shutting down or selling bitcoin, contributing to spot pressure on the sell side.
In reality, hashrate drops tend to lag price drops. According to VanEck, timing has historically placed the market closer to cyclical lows than highs. As higher cost miners disappear, lower difficulty adjustments occur, making bitcoin mining easier and ensuring blocks are produced at a consistent rate. The resulting improvement in the profitability of miners then facilitates forced sales.
The current price correction appears selective, VanEck noted, with closures concentrated on more expensive or geopolitically exposed operations.
VanEck found that when 90-day hashrate growth was negative, bitcoin generated positive 180-day forward returns 77% of the time, meaning that price performance over the following six months is above average compared to periods of rising hashrate.
The firm estimated that buying Bitcoin during sustained hashrate corrections improved 180-day forward returns by approximately 2,400 basis points, reinforcing miner capitulation as one of Bitcoin’s most enduring contrarian signals.
