Bitcoin Network Hashrate Drops by 20% Amid Market Changes

TLDR

• Bitcoin’s hashrate dropped to around 970 EH/s, a 12% decline.
• Mining difficulty decreased by 11.16% to 125.86 trillion.
• Cango sold 4,451 Bitcoin for $305 million amid market challenges.

Bitcoin’s network hashrate recently dropped by approximately 20%, marking a significant event in the cryptocurrency mining landscape. This decrease is attributed to several factors, including unprofitable mining conditions and external environmental impacts. As a result, the Bitcoin mining difficulty saw a major adjustment, dropping by 11.16% to 125.86 trillion—an occurrence not seen since China’s mining ban in 2021.

A winter storm, named Winter Storm Fern, played a role in the reduction of hashrate by knocking out nearly 200 exahashes per second (EH/s). In addition to the storm, many miners have shifted their operations towards artificial intelligence (AI) ventures, seeking steadier revenue streams. The combination of these factors has led to an approximate decline in the network’s hashrate to around 970 EH/s, a 12% decrease from its peak in October.

Impact on Major Mining Firms

Publicly-traded mining firms, such as Core Scientific, Hut 8, IREN, and Cango, have been notably affected by these conditions. Amid challenging market situations, Cango sold 4,451 Bitcoin, valued at approximately $305 million, to improve their financial position. This sale contributed to an 8% drop in Cango’s share price.

Core Scientific and IREN are reported to have redirected some of their mining capacities toward AI-focused data centers, highlighting a strategic pivot in response to decreasing block rewards and increased competition within the cryptocurrency mining sector.

Market Reactions and Historical Context

The market’s reaction to these developments includes Bitcoin miners offloading some of their holdings, impacting the Bitcoin (BTC) asset more than any other cryptocurrency. Institutional investment has also been affected, with Bitcoin-focused exchange-traded funds (ETFs) recording $34 million in outflows as investors look to mitigate risks.

This event bears resemblance to past events like China’s 2021 mining ban, which also led to a significant drop in mining difficulty. Historical data suggests that sustained declines in Bitcoin’s hashrate have occasionally resulted in positive returns, with VanEck noting that the hashrate decreases have linked to an average 72% gain over 180 days on 77% of occasions.

Future Projections and Industry Shifts

No major statements or regulatory updates from high-profile figures or organizations have been reported regarding the current situation. However, projections indicate that the next mining difficulty adjustment could occur around February 20, 2026, potentially resulting in an increase from the current 125.86 trillion threshold.

The observed decline signifies a potential shift in the mining industry as companies adjust their strategies to cope with evolving challenges. With no new funding allocations or institutional involvements detailed, the focus remains firmly on Bitcoin and its miners as the primary affected parties under these new market conditions.