Bitcoin is experiencing what Twenty One Capital CEO Raphael Zagury has described as its first hashrate bear market. Speaking at Bitcoin Asia in Hong Kong on August 28, Zagury pointed to a prolonged decline in network computing power that has yet to reclaim its previous record, a stretch far longer than any earlier cycle.

Twenty One Capital later filed a prepared transcript of the remarks with the U.S. Securities and Exchange Commission. Zagury noted that hashrate approached 1.3 zettahashes per second late last year before entering a sustained downturn. Presentation materials showed a drawdown of roughly 22% to 24% from that peak. Recent estimates place current hashrate in the range of about 800 to 950 exahashes per second, with one reading near 829 exahashes per second.

A Gradual Shift Unlike the 2021 Disruption

Zagury contrasted the present decline with the sharp drop that followed China’s 2021 mining ban. In that episode, hashrate fell quickly as operators shut Chinese facilities, then recovered as machines relocated to North America, Central Asia and other regions. The current cycle has unfolded more slowly. Instead of simply moving the same equipment, many operators are reconsidering whether new power and data-center capacity should be devoted to Bitcoin mining at all.

The duration of the current slump has drawn particular attention. Data cited in related analysis indicated hashrate had remained in a downward trend for approximately 287 days by late July, with other estimates placing the period without a new high at around 316 days. Mining difficulty has also adjusted lower, falling nearly 20% from its November peak by late July in one assessment.

Public Miners Redirect Capacity Toward AI

Zagury attributed much of the change to competition from artificial intelligence and high-performance computing. Both Bitcoin mining and AI data centers require substantial power connections, cooling, land and capital. While converting a mining site to AI use involves different chips, networking and construction standards, sites that already secure power and fiber access can serve as a foundation for high-performance computing development.

Several publicly traded miners continue to operate large Bitcoin fleets even as they explore or expand AI infrastructure. The shift appears most advanced at companies including TeraWulf, IREN, Core Scientific, HIVE and Cipher. TeraWulf reported $21 million in AI and high-performance computing hosting revenue in the first quarter, exceeding its Bitcoin mining revenue for the first time. Cipher secured a $200 million revolving credit facility to support expansion into long-term AI data-center contracts.

Lower Bitcoin prices earlier in the period compressed hashprice, the revenue miners earn per unit of computing power. Multi-year AI and high-performance computing contracts have offered more predictable income for some operators under current conditions.

Implications for Remaining Miners and Network Dynamics

Zagury argued that Bitcoin mining profitability depends heavily on an operator’s position on the cost curve. Efficient equipment and low electricity costs can allow a miner to remain viable when higher-cost competitors shut down. Capital structure also plays a role, as heavy debt can create pressure even for operationally competitive facilities.

Declining network hashrate can increase the share of block rewards captured by operators that continue mining. Bitcoin adjusts mining difficulty every 2,016 blocks, or roughly every two weeks, to keep average block times near ten minutes. When computing power leaves the network, a downward difficulty adjustment makes it easier for remaining miners to find blocks.

That larger share does not automatically translate into higher profits. Revenue continues to depend on Bitcoin’s price, transaction fees, electricity costs, equipment efficiency and residual competing hashrate. Zagury noted that mining has the strongest chance of outperforming Bitcoin itself when the asset’s price rises faster than network hashrate growth.

Hashrate remains well above levels that would create immediate security concerns. Surviving miners, typically the more efficient ones, stand to gain a larger portion of fixed block rewards as competition thins. Block production may run slightly slower until the next difficulty adjustment restores the target interval. Longer-term AI contracts could keep some capacity committed away from mining even if profitability later improves, potentially slowing a full rebound in hashrate.

Energy Flexibility and Broader Context

Zagury also addressed the operational flexibility of mining facilities. Mining farms can be powered on or off almost instantly, a trait that can support grid management and load balancing while opening additional revenue streams. He linked energy access to broader development, drawing on experience from a project in a remote Brazilian Amazon community.

At the time of the reports, Bitcoin traded near $76,000 to $77,000. Hashrate movements have historically tended to follow price rather than lead it. The immediate price environment has also been shaped by broader market factors, including macroeconomic developments. Over the preceding month, Bitcoin had still advanced roughly 20% to 25% from the mid-$60,000 range.

Zagury recommended that an investor with limited capital consider buying Bitcoin directly before allocating to mining. For larger, diversified allocations, he suggested combining Bitcoin exposure with mining. Twenty One Capital, a Tether-backed digital-asset treasury company, measures potential investments against Bitcoin as its primary benchmark.