The speech submitted by Twenty One Capital to the U.S. Securities and Exchange Commission reveals that CEO Raphael Zagury has labeled the current long-term decline in Bitcoin network hash rate as the first-ever "hash rate bear market." He argues that this shift differs from the short-term shock following China's 2021 mining crackdown, with a larger variable being mining companies increasingly allocating new electricity, land, and data center capacity to AI operations.
Hashrate has dropped more than 20% from its higher point.
At the Bitcoin Asia event in Hong Kong on August 28, Zagury stated that Bitcoin's hash rate approached 1.3 ZH per second by the end of 2025, before entering a sustained decline. Presentation materials showed that current hash rate has retraced approximately 22% to 24% from its peak.
The term "hash rate bear market" he mentioned is not an official classification of the Bitcoin network, but rather a description of a prolonged period during which hash rate fails to reclaim previous highs. Since Bitcoin does not directly publish the number of active miners, the market typically estimates hash rate based on block production speed and mining difficulty, resulting in significant daily data fluctuations.
According to CoinWarz estimates as of September 2, Bitcoin's hash rate is approximately 829 EH/s. Although individual days in late August briefly surpassed 1 ZH/s, longer-term averages still indicate a relatively slow overall recovery.
Different from the reasons for the decline in 2021
Zagury distinguished this latest pullback from the hash rate decline that followed China’s 2021 ban on mining. The 2021 drop was faster, but hash rate subsequently recovered as mining equipment relocated to regions such as North America and Central Asia.
This time, it’s more about mining companies reassessing how to allocate new resources, rather than simply relocating old equipment. For operators, new power access, cooling systems, land, and data centers are no longer solely tied to Bitcoin mining—they can also be directed toward AI data centers and high-performance computing.
He said this has created new competitive dynamics in the hashing power cycle. Mining companies no longer need to automatically invest capital into additional mining hardware; instead, they can shift toward another hashing power market with faster growth.
Mining companies are shifting resources toward AI.
Bitcoin mining farms and AI data centers both require large-scale electricity, cooling infrastructure, land, server rooms, and financial support. Although the chips and networking equipment used differ, and converting mining farms into AI facilities is not straightforward, sites that have already secured electricity and fiber optic access still possess a solid foundation for further development.
The article notes that publicly traded companies such as MARA, CleanSpark, Riot, and Bitdeer continue to operate large-scale Bitcoin mining fleets, while some have also begun investing in AI infrastructure. Companies with more prominent shifts include TeraWulf, IREN, Core Scientific, HIVE, and Cipher.
Among these, TeraWulf's AI and high-performance computing hosting revenue reached $21 million in the first quarter, surpassing its Bitcoin mining revenue for the first time and becoming the company's largest revenue source. Cipher also secured a $200 million revolving credit facility to support the expansion of long-term AI data center contracts.
Miners or beneficiaries remaining on-chain
Zagury believes that mining is not inherently a bad business; it ultimately depends on equipment efficiency, electricity costs, and capital structure. Low-cost miners may still remain profitable when competitors exit, while operators with high debt and short payback periods are more likely to come under pressure.
The current hash price remains at a historically low level, placing greater pressure on older mining equipment and mines with high electricity costs. However, when some mining power exits the network, Bitcoin adjusts its difficulty every 2,016 blocks, typically approximately every two weeks. After the difficulty is lowered, miners still operating find it easier to earn block rewards, and the competitive pressure per machine decreases.
However, this does not mean that profits will definitely increase. Miners' income still depends on Bitcoin's price, transaction fees, electricity costs, equipment efficiency, and the total network hash rate.
The company says to first look at Bitcoin itself.
The company disclosed that Zagury stated in his speech that, for investors with limited capital, directly holding Bitcoin is typically more straightforward than investing in mining companies, as mining firms face additional risks beyond Bitcoin price volatility—including construction, electricity, equipment, management, and financing costs.
He also noted that mining companies will have a better chance of outperforming Bitcoin itself only when Bitcoin’s price rises faster than the growth of the network’s total hash rate. Over the coming quarters, the market will pay closer attention to how much capital mining companies allocate to new ASIC equipment versus how much continues to be directed toward AI data center construction.
Additional information: Twenty One Capital is supported by Tether. The term "hashrate bear market" mentioned in the text is a characterization used by the company's management in public speeches and is not an official definition of the Bitcoin network.