Rapha Zagury's talk explored the driving forces behind the mining reset and its impact on miners, investors, decentralization, and Bitcoin's long-term security model.Author and source: Jinse财经
From August 27 to 28, Bitcoin Asia 2026 will be held at the Hong Kong Convention and Exhibition Center, bringing together developers, mining and computing power companies, institutional investors, and policymakers from the global Bitcoin ecosystem to discuss institutional allocation, compliance frameworks, and capital connectivity between the East and West.
On the morning of the second day, Rapha Zagury, CEO of Twenty One Capital, delivered a keynote titled “The Dragon Awakens: Bitcoin’s First Hash Rate Bear Market.” Bitcoin miners are currently experiencing an unprecedented hash rate bear market and its wide-ranging consequences. In his talk, Rapha Zagury explored the driving forces behind the mining reset and its impact on miners, investors, decentralization, and Bitcoin’s long-term security model.
Rapha Zagury explained the profit logic of Bitcoin mining as a commodity business, emphasizing its competitive advantage on the left side of the cost curve. He countered the argument that mining wastes energy, highlighting its value in stabilizing power grids and supporting development in remote areas. Rapha Zagury analyzed the market opportunity presented by the current slowdown in hash rate growth, recommended diversifying portfolios to balance risk, and asserted that the industry stands at the intersection of an energy revolution and a Bitcoin revolution.
Below is the transcript of the keynote speech.
Early explorers, while circumnavigating the globe, created their first map artifacts—a copper globe. On this globe, they had marked parts of the explored Americas and Asia, but vast regions remained uncharted. In those areas, they inscribed the Latin phrase "hic sunt dracones," meaning "here be dragons." This did not necessarily imply anything terrifying was there, but rather indicated that these were unknown territories.
I believe Bitcoin is in an exciting era—we are entering an unprecedented and thought-provoking unknown territory. We have endured the longest hash rate bear market in Bitcoin’s history. Throughout Electron Energy’s long-term development (which later became one of the world’s largest mining companies), we have always focused on long-term trends when modeling and considering how hash rate grows—and these trends are immense.
Year after year, if you look at very long-term trends, the total network hash rate nearly doubles annually. If you focus on the short term, 50% is a key number in many people’s minds when it comes to miners—this is important because if you’re mining, it means the total network hash rate is increasing, which dilutes your share of the network and ultimately reduces your earnings.
But this situation has changed dramatically, especially over the past year. What we are experiencing now is entirely different from the 2021 ban in China. When mining was banned in 2021, hash rate collapsed rapidly and then gradually recovered as Chinese mining equipment was redistributed to other parts of the world. What we are seeing now is very different—hash rate approached historic highs toward the end of last year and has been steadily declining since. This is the longest cycle we’ve experienced from a historic high to recovery.
We often hear two main criticisms about Bitcoin mining: first, it’s a bad business; second, it wastes energy.
First, let’s address the first question: Is Bitcoin mining a bad business? Commodity businesses themselves aren’t inherently good or bad—it all depends on where you stand on the cost curve. If you’re mining a commodity at a very high cost, it’s a bad business for you. But if you’re on the left side of the cost curve (the low-cost end), it could be a highly profitable, even extremely healthy, business.
Bitcoin is a uniquely distinctive commodity. First, like oil, it is fungible. But I believe it is the purest form of commodity ever created. Satoshi embedded a difficulty adjustment mechanism—meaning that regardless of the total hash power on the network, a new block is still mined on average every 10 minutes. This is very different from other commodities. For example, with oil or gold, rising prices typically lead to increased development, more mining in various locations, and ultimately greater supply entering the market, causing prices to fall. But Bitcoin does not work this way—we could turn on all existing mining equipment, and the market still wouldn’t be flooded within two weeks, because a new difficulty adjustment would occur.
I believe that many people fail in mining not because of coin prices or network conditions, but due to their capital and cost structures. For example, take two miners—examine their unit economic models. Suppose both just purchased 18 S19 miners. One has very low energy costs and highly efficient machines; the other has higher energy costs and less efficient machines. This means the first may enjoy high profit margins, while the second may be forced to shut down until market conditions improve. Although the market has improved somewhat, hash price remains low compared to historical levels.
One of the most common questions we get is—by the way, at Twenty One Capital, the first thing we consider when evaluating any opportunity is: How does this opportunity compare to Bitcoin itself? Bitcoin is our standard, our benchmark. If you can directly buy Bitcoin, investors should ultimately go straight for a Bitcoin ETF, as it carries lower risk than any operational business. In the mining space, we’re asked this question every day: If I have one dollar, should I invest in mining? What should I buy?
The answer is: If you only have one dollar, I believe buying Bitcoin directly is the best way to express your view. However, if you're considering a more diversified investment strategy, mining becomes very reasonable. Simply put: Bitcoin mining outperforms holding Bitcoin itself when the price rises faster than the average hash rate. If the price increases by 50–100% annually while hash rate remains stable, your chances of outperforming are significantly higher. I believe the right decision for a company is never a binary choice between buying Bitcoin or mining—it’s a more prudent, risk-adjusted strategy to do both.
Let me address the second concern—Bitcoin mining consumes excessive energy. We often hear this claim repeated as a slogan: it harms the environment and wastes energy.
Let me tell you a story. In 2002, I was an undergraduate at Yale, and instead of heading to Wall Street for the summer, I decided to do something completely different—I returned to Brazil and joined a project deep in the Amazon rainforest. To get there, you first fly to Manaus, then transfer to a very small plane that lands on a dirt runway, followed by a boat ride upstream for five or six hours along the river. It was one of the most beautiful places I’ve ever seen—immensely rich in resources, with no hunger; you could simply pick fruit straight from the trees, go fishing, and from that perspective, it was abundant. But one thing was missing: energy. The town had no electricity, surrounded as it was by rainforest. We saw people dying from diseases that had been eradicated elsewhere for decades—because there were no medicines, and those medicines required refrigeration. We saw children learning in schools with no walls, no air conditioning; when night fell, the rainforest swallowed everything. Energy is the foundation of all development. Without energy, there is no development.
This is what we must first remember: energy consumption itself is not bad—it is directly tied to human progress. In fact, data shows a very high correlation between per capita GDP and energy consumption. Many people looking at this graph will say it doesn’t prove causation. But I return to the story of Amazon—I saw the other end of the curve: low energy consumption means poverty.
Another characteristic of mining is its extreme flexibility—it is the most flexible load ever created. If you have a steel mill, it is inherently an energy-intensive industry: you invest large amounts of energy to produce output. Shutting down a steel mill may take months to restart, depending on location. So losing power is a major issue—a huge problem. Mining is different: the machines can be turned on and off at any time.
We are now having productive discussions with energy companies on exactly this point: the energy is there and won’t disappear—most cities actually have excess accessible energy. Mining can significantly stabilize the grid at scale.
When we talk about "wasting energy," I don’t think fish swimming upstream to spawn are wasting energy—I’ve seen it with my own eyes in the Amazon. They swim upstream to create the next generation. I believe our situation today is completely different from 2021.
Mining has also unlocked a range of functions that did not exist before—most notably, opportunities in AI and HPC (high-performance computing), as well as diverse uses for energy. These option values are rarely accounted for in the pricing of mining.
These options include: the energy options I just mentioned; share options—during a hash rate bear market, miners who stay committed naturally gain a larger market share; proximity-to-Bitcoin options—our team got into mining because we were originally believers in Bitcoin; mining brings you closer to the protocol layer and deepens your understanding of it; and finally, infrastructure options—many investors from the physical assets world find mining easier to understand and accept than direct Bitcoin investment, because it involves tangible assets—they can see the mining rigs, see the data centers. This is also an advantage.
I believe we’re in an excellent position right now—bitcoin mining has, for the first time, achieved economies of scale, precisely due to the reasons mentioned. On one hand, the price of bitcoin is relatively low; on the other, the mining difficulty dynamics are also highly favorable. I can’t share specific figures, but if you look at publicly traded mining companies, very few are currently expanding at scale—almost everyone is exiting the industry.
Finally, I want to say: Bitcoin mining is at a crossroads—this is the perfect moment where the energy revolution meets the Bitcoin revolution. An exciting era lies ahead, and we will continue to build.
Thank you.