Following a recent historic high in early November, the computing power allocated to the Bitcoin blockchain has seen a significant drop at the end of the year. Could this be a favorable scenario for a bullish return of BTC?
Decline in Bitcoin miners’ computing power
The evolution of the Bitcoin blockchain depends on certain essential prerequisites, such as a steady and sustained rise in BTC in order to make up for the shortfall in miners’ earnings each time a new halving occurs, causing their income to be halved.
This is all the more important given that mining difficulty is constantly increasing at the same time, to the point of regularly reaching new highs. The goal is to align the complexity of obtaining a block with the number of miners present and the available computing power (hashrate).
At the same time, this computing power dedicated to the Bitcoin blockchain has seen a significant decline of 4% over the last 30 days. According to VanEck analysts, this situation is described as “the sharpest decline since April 2024.”
This is due to the sharp drop in the price of BTC, which has led to the shutdown of some machines, but also to new Chinese pressure on this industry at the local level and an attraction to the potentially more profitable AI sector, which could “lead to the disappearance of a share equivalent to 10% of the Bitcoin network’s hashing power.”
It is estimated that nearly 400,000 mining machines have been shut down. Even though miners’ profitability has been poor recently, many players continue to mine despite periods of economic downturn because they believe in the future of Bitcoin.
VanEck
A bullish scenario for long-term BTC holders?
According to VanEck specialists, this decline in computing power allocated to the Bitcoin blockchain could appear to be a sign of the mining industry’s difficulty in continuing to exist in an increasingly competitive environment. But the reality may well turn out to be completely different…
Comparing future 90-day BTC returns to past 30-day hash rate changes since 2014, we find that future returns are more likely to be positive when the hash rate declines than when it increases (65% vs. 54%). Furthermore, we find that average future returns over 180 days are approximately 30 basis points higher (+20.5% vs. 20.2%) when the hash rate declines rather than when it increases. VanEck
An upcoming rise in BTC that could be supported by the resumption of the Digital Asset Treasuries (DAT) accumulation process. This is particularly true when considering that the longer the hash rate compression persists over time, the greater the likelihood of positive returns occurring on a larger scale.
Buying BTC when the 90-day hash rate growth is negative, rather than at any other time, has historically improved future returns at 180 days.
VanEck
