Declining hashrate makes Bitcoin mining up to 15% harder, pushing miners’ profits back into the $30 stress zone
Bitcoin mining economics have tightened again, but that trend could pave the way for a price recovery for the top cryptocurrency.
Over the past few weeks, network difficulty has skyrocketed, while hashrate has shown signs of softening. At the same time, BTC miner margins are under increasing pressure as BTC miner profits retreat towards stress levels.
This combination has played out repeatedly near major inflection points in previous market cycles.
Market analysts caution that this is not a magical buy signal for investors, but the structural settings are very important because they can shift miners’ behavior from a situation where they desperately need to sell to survive to a scenario where they sell less of their accumulated holdings.
This subtle change in behavior can transform what is normally a stable and predictable source of market supply into an effect that significantly reduces headwinds to Bitcoin price.
Delayed difficulty jump landed after rebounding
Bitcoin difficulty adjusts every 2,016 blocks, approximately every two weeks. This means that metrics are always reacting to events that have already occurred on the network.
The timing explains the apparent contradiction in the move.
The network difficulty decreased by about 11.16% to about 125.86T on February 7th after the storm and restricted period took machines offline.
Once miners came back online and block production normalized, the next correction went in the opposite direction. On February 19th, the difficulty increased by approximately 14.73% to approximately 144.40T.
The key point is simple. The network became harder to mine not because the economics for miners improved in real time, but because the hashrate recovered earlier.
This distinction is important in interpreting miner behavior. Increasing difficulty indicates the strength of the network, so it can appear bullish on the surface.
However, margins could also be squeezed if that increase occurs when fees slump after a temporary recovery and the price of BTC is not strong enough to offset the rise in mining costs.
Short-term recovery in hashrate masks broader decline
Short-term measurements of the BTC network hashrate certainly showed a noticeable improvement towards mid-February.
Data compiled from Luxor’s hashrate index demonstrated that the 7-day SMA increases from ~1,003 EH/s to ~1,054 EH/s during the immediate recovery phase of the storm.
However, when you zoom out a little to see the overall trend, things get significantly worse for the industry.
VanEck’s latest ChainCheck report explains that the hashrate has dropped by ~14% over the past 90 days. This metric is noteworthy because sustained drawdowns of this magnitude are rare in the mature stages of the Bitcoin network.
Additionally, daily estimates consistently exhibit meaningful volatility, a factor that complicates single-point claims by market observers.
With this in mind, broader trends indicate continued pressure on hashrate over the past few months. That pressure, coupled with a sharp increase in mining difficulty, could increase margin stress at points where the industry is particularly vulnerable.
Hash price is the real pressure point and tightened again
Difficulty and hashrate represent the network. Hush Price describes the business.
Miners pay costs in fiat currency and fund those costs through the production of BTC and, in some cases, the sale of flagship digital assets. That is why hash prices, which are usually quoted in dollars per petahash per day, are a more realistic measure of stress.
After the difficulty increase on February 19th, the BTC hash price has returned to below around $30/PH per day. This level is widely seen as a stress zone, depending on machine efficiency, debt and power costs.
This is because while some operators can tolerate it, some marginal operators often cannot.
Fees are not reduced much. Hashrate index data over the same period showed that transaction fees accounted for only about 0.48% of block rewards, indicating that miners relied almost entirely on subsidies and the spot price of Bitcoin.
The result is the familiar compression. Difficulty increased, fee support remained thin, and hash prices fell.
This combination tends to shut down older rigs first and push high-cost miners closer to forced sales.
In reality, this is how networks that appear technically strong can cause economic stress in the mining sector. The protocol is doing what it’s supposed to do. The problem is timing.
Why Minor Stress is a Bullish Setting in 90 Days
Bullish arguments surrounding this phenomenon focus on structural changes within the mining industry and their impact on supply dynamics.
This mechanism is structural, rooted in how sustained miner pressure reshapes issuance, balance sheets, and market liquidity.
Difficulties act as a squeeze that slows down the market. If the network aggressively increases difficulty after a short period of operational recovery, it could easily overshoot the level that miners can realistically sustain at current price and fee levels.
The hashrate then adjusts in real time as operators react to new economic realities. Marginal rigs are forced to power down almost immediately when their daily profitability falls below the break-even point.
If that persistent weakness carries over to the next epoch, a safety valve built into the protocol kicks in, essentially reducing the difficulty.
Difficulty reduction mechanically improves the underlying economy for surviving miners.
If the difficulty decreases from 10% to 12% and the price of Bitcoin remains completely flat, miner revenue per hash increases by roughly the same mathematical magnitude.
While this adjustment does not guarantee a massive market rally, it can overall significantly reduce the likelihood of aggressive and forced sales by financially strapped miners.
This mechanism forms the absolute core of the surrender-and-recover theory popularized by various miner cycle frameworks (such as traditional hash ribbon-style analysis).
VanEck adds a compelling quantitative hook to this theory. In a published table tracking 12 notable periods of hashrate contraction, the financial firm notes that long periods of hashrate decline are often followed by very strong 90-day forward returns for Bitcoin.
Excluding the network’s very early history without defined prices and currently unresolved episodes, the periods listed by VanEck are highly positively skewed, with median forward returns near the high 40% and averages highly skewed.
The ultimate takeaway for traders is to focus on broader signals rather than specific percentage profits.
Minor stress peaks often indicate late-stage supply pressure, which can quickly subside once the underlying protocol resets difficulty or asset prices stabilize.
The next trigger will be the next difficult print, but ETFs and macros will still set the tone
The most direct variables are already listed in the calendar. The prediction tool points out that if current block timing holds, the difficulty will drop another two orders of magnitude to about 11% in early March.
If the estimate is directionally correct, the effect is straightforward. The hash price improves even without BTC needing to rise first, potentially easing the operational pressure on funds from short selling on weaker miners.
Therefore, the current snapshot, increased difficulty and decreased hashrate may be interpreted as a peak tightening rather than a new warning. In previous periods, this was just before network conditions eased.
Still, minor signals don’t work in isolation, and the post-ETF market has made that even clearer.
In early February, the US Spot BTC ETF recorded large fluctuations in daily fund flows, including net inflows of approximately $562 million on February 3rd and net outflows of approximately $545 million on February 5th.
Later in the month, daily activity remained volatile, with outflows of about $166 million on some days and inflows of $88 million on other days.
When ETF buyers are active, miner selling pressure is less important. If ETF demand weakens or turns negative, miner stress could add to the downward momentum.
Meanwhile, macro positioning also remains a key filter in the market.
Reuters reported that during the same period, put interest was concentrated around the $50,000 to $60,000 exercise level, which it said was a sign of demand hedging and caution against risky assets.
If risk sentiment deteriorates or liquidity tightens, Bitcoin could still trade like a high-beta macro asset, even if mining conditions improve.
Three paths for Bitcoin in the next 90 days
The most constructive scenario is a mining reset with stable demand. Along the way, hashrate remains soft enough to support meaningful difficulty reductions, hash prices improve, and ETF flows no longer swing sharply negative.
Under these circumstances, BTC has room to rise between 10% and 35% over 90 days as miner-related supply pressure eases.
The middle path is what can be called a mild outcome of surrender. The hash price remains near the break-even point, the hash rate continues to drop gradually, and the difficulty adjusts progressively lower, but the spot price remains volatile.
In this kind of setup, BTC could remain in the -5% to 20% range over a 90-day period, and miner stress could undermine short-term sentiment before the protocol reset begins to take effect.
The bearish path is a signal failure, dominated by demand and macro. In that case, ETF outflows will continue, risk-off positioning will deepen, and low difficulty will not be enough to compensate for weak demand.
Now, the digital asset could see returns of up to -30% over the next 90 days as BTC revisits a major downside zone and miners are forced to sell into the falling market.
(Tag translation) Bitcoin
