Twenty One Capital CEO Raphael Zagury said Bitcoin is experiencing its first “hashrate bear market” as network computing power remains below its late 2025 record and listed mining companies redirect infrastructure investment toward artificial intelligence.
Summary
- Raphael Zagury called Bitcoin’s prolonged computing power decline its first ever hashrate bear market publicly.
- Bitcoin hashrate fell roughly 22% to 24% from its late 2025 peak, presentation materials showed.
- Zagury said artificial intelligence creates a competing use for miners’ power capacity and infrastructure today worldwide.
- Public miners increasingly pursue AI computing, though several companies continue operating substantial Bitcoin mining fleets.
- Lower network hashrate can increase surviving miners’ revenue share after Bitcoin adjusts mining difficulty downward.
Zagury presented the argument at Bitcoin Asia in Hong Kong on Aug. 28. Twenty One Capital subsequently filed the prepared transcript with the U.S. Securities and Exchange Commission.
Bitcoin hashrate approached 1.3 zettahashes per second late last year before entering a prolonged decline, Zagury said. His presentation materials calculated a drawdown of approximately 22% to 24% from the peak.
“Hashrate bear market” is Zagury’s description of the current cycle rather than an official Bitcoin network classification. It refers to the unusually long period during which estimated computing power has failed to return to its previous record.
Bitcoin hashrate decline differs from the 2021 shock
Bitcoin’s hashrate measures the estimated computing power miners contribute to securing the network and competing for block rewards. A higher figure generally means more machines or more efficient equipment is operating.
Zagury contrasted the current decline with the disruption caused by China’s 2021 mining ban. Hashrate fell rapidly during that episode as companies shut down Chinese facilities, but recovered as machines moved to North America, Central Asia and other regions.
The present cycle has developed more gradually. Rather than relocating the same machines, operators are reconsidering whether new electricity and data center capacity should be allocated to Bitcoin mining at all.
“This has been the longest period that we’ve seen from an all-time high until recovery,” Zagury said.
Network estimates vary because Bitcoin does not publish an exact count of active machines. Analysts infer hashrate from block production rates and mining difficulty, which means daily readings can fluctuate sharply.
CoinWarz estimated hashrate at about 829 exahashes per second on Sept. 2, after readings moved above one zettahash during several days in late August. Longer moving averages provide a clearer measure than daily estimates.
Previous analysis found that Bitcoin mining difficulty had fallen 19.9% from its November peak by late July. Hashrate had remained in a downward trend for approximately 287 days, according to Bitcoin Magazine Pro data cited in that report.
AI gives miners another use for scarce power
Bitcoin miners and AI data centers compete for several of the same resources. Both require large power connections, cooling systems, land, data center buildings and access to capital.
AI facilities require different chips, networking equipment and construction standards from Bitcoin mines. Converting a mining site is therefore more complicated than replacing ASIC machines with graphics processors. Sites with secured power and fiber access can nevertheless provide a starting point for high performance computing development.
Zagury said this option changes the hashrate cycle because miners can now direct capital toward another computing market instead of automatically expanding their Bitcoin fleets.
“If you look at the public mining companies out there, there really isn’t anybody staying the course to mine Bitcoin at scale,” he said. “Pretty much everybody is leaving the industry right now.”
The statement describes a broad trend but should not be read literally. MARA, CleanSpark, Riot, Bitdeer and other publicly traded companies continue operating large Bitcoin mining fleets, even as some explore or build AI infrastructure.
The shift is most advanced at companies such as TeraWulf, IREN, Core Scientific, HIVE and Cipher. TeraWulf reported $21 million in AI and high performance computing hosting revenue during the first quarter, exceeding its Bitcoin mining revenue for the first time as its AI business became its largest revenue source.
Cipher has also obtained a $200 million revolving credit facility to finance its expansion into long-term AI data center contracts.
Low cost miners could gain network share
Zagury rejected the idea that Bitcoin mining is inherently a poor business. He argued that profitability depends on where an operator sits on the industry’s cost curve.
A miner with efficient equipment and low electricity costs can remain profitable under conditions that force a higher-cost competitor to shut down. Capital structure also matters because heavy debt and short repayment schedules can create pressure even when a facility remains operationally competitive.
Hash price, which measures expected miner revenue for a unit of computing power, remains low compared with historical levels. That puts pressure on operators using older machines or expensive electricity.
However, declining network hashrate can benefit miners that remain active. Bitcoin adjusts mining difficulty every 2,016 blocks, or approximately every two weeks, to keep average block production close to ten minutes.
When computing power leaves the network, a downward difficulty adjustment can make it easier for remaining miners to find blocks. Each surviving operator can then control a larger share of the network without adding machines.
“The beautiful thing about Bitcoin mining being in a bear market of hashrate is that, for those that stay around, they naturally get a higher share of the market,” Zagury said.
That benefit does not guarantee higher profits. Revenue still depends on Bitcoin’s price, transaction fees, electricity costs, equipment efficiency and the amount of competing hashrate.
Bitcoin price must outpace hashrate growth
Zagury said mining has the best chance of outperforming Bitcoin when the asset’s price increases faster than network hashrate.
If Bitcoin rises by 50% while hashrate remains flat, a miner’s revenue can increase without an equivalent rise in competition. If computing power grows faster than Bitcoin’s price, each operator’s network share and revenue per machine can decline.
Zagury recommended buying Bitcoin directly before investing in mining for someone allocating only a small amount of capital. He said investors considering larger, diversified allocations could combine Bitcoin with mining exposure.
“If you only have $1, buy Bitcoin first,” Zagury said. “I think that’s the best way to express your view.”
His position reflects Twenty One Capital’s stated approach of measuring potential investments against Bitcoin. The Tether-backed company treats the cryptocurrency as its main benchmark and argues that an operating business must justify its additional risks by offering a credible path to outperforming BTC.
Mining companies face construction, electricity, equipment, management and financing risks that do not arise from holding a spot Bitcoin exchange-traded fund. They can also offer operating leverage when Bitcoin rises faster than their costs and network competition.
Energy flexibility remains mining’s main advantage
Zagury also defended Bitcoin mining against criticism that it wastes electricity. He argued that energy use supports economic development and that mining offers a flexible source of demand.
ASIC machines can shut down and restart faster than heavy industrial facilities. Miners can therefore reduce consumption when electricity demand rises and resume operations when unused capacity becomes available.
The ability to curtail operations has led miners to participate in grid stabilization programs, particularly in energy markets with variable renewable generation. Financial and environmental results depend on the underlying power source and the terms of each arrangement.
AI data centers generally require steadier power than Bitcoin mines because customer workloads cannot be interrupted as easily. Bitcoin mining may therefore retain a role at sites where electricity is abundant but unreliable or cannot be transmitted economically.
Zagury said mining now provides four forms of optionality: flexible energy demand, increased network share when competitors leave, proximity to Bitcoin’s protocol and reusable data center infrastructure.
Whether miners capture those benefits will become clearer through upcoming difficulty adjustments and public company results. Filings will show how much capital miners direct toward new ASIC equipment compared with AI construction.
The sector’s direction is unlikely to be uniform. Some operators will retain Bitcoin mining, others will combine mining with AI hosting, and companies controlling the most attractive power sites may shift more aggressively toward high performance computing.
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