Bitcoin's 11.4% Difficulty Drop: A Stress Test for Miners and Price

The financial pressure on Bitcoin miners has reached a historic extreme. Mining revenue per unit of computing power has collapsed to a record low of 3 cents per terahash, a fraction of the $3.50 seen in 2017. This plunge has been matched by a severe drop in network activity, with the total hashrate falling about 12 percent since November 11. This represents the largest decline since the 2021 China ban, signaling a major operational crisis.

The stress is quantified by the Miner Profit and Loss Sustainability Index, which has slid to 21. This is the lowest level since late 2024 and indicates many miners are operating under severe financial strain. The triggers are a clear combination of weak Bitcoin prices, which have tumbled well below $70,000, and physical disruptions from severe winter storms in the United States that spiked electricity costs and forced major miners to shut down rigs.

The immediate impact is visible in the market. Shares of leading public miners like CleanSpark and MARA Holdings fell sharply on the news, with CleanSpark down 10% and MARA 11% in a single day. The setup is a classic perfect storm: eroded revenue from a weak price, amplified by a physical shock to operations, leaving the sector's financial sustainability in question.

The Adjustment: A Record 11.4% Cut

Bitcoin's mining difficulty is set to fall by about 11.4% in just hours. This adjustment, scheduled for today, represents the largest single drop since the aftermath of China's 2021 mining ban. The scale is historic, even exceeding the miner capitulation seen at the bottom of the last bear market in December 2022.

The immediate impact is a critical liquidity event for the strained sector. This massive cut directly boosts the hashprice, the revenue per unit of computing power. If Bitcoin's price holds, the adjustment would lift hashprice to roughly $35 per petahash per second. For miners still online after recent outages, this provides a vital, temporary boost to operating cash flow.

Yet the relief is narrow. The adjustment addresses the symptom of a broken economic model but does not fix the underlying problem. With hashprice still near break-even for efficient operators and physical disruptions continuing, the sector's financial sustainability remains under severe pressure.

The Aftermath: Sector-Wide Strain and Catalysts

The financial fallout is now visible in the public markets. Shares in major miners are cratering, with CleanSpark falling 10% and MARA 11% on February 5. This sharp sell-off signals investor concern over the sector's deteriorating fundamentals. The stress is so severe that even firms with strong balance sheets, like CleanSpark, are being forced to pivot. The company's executive called the downturn historic, while its president confirmed the business model is being transformed to include AI infrastructure as a long-term diversification play.

The strategic shift is accelerating. Several firms are planning a full exit from Bitcoin mining. Bitfarms announced a gradual exit last November, and Bit Digital flagged similar plans in January, intending to cease mining entirely to focus on AI strategies. This isn't just a tactical move; it's a recognition that the core mining business is no longer sustainable at current price and cost levels. The financial results underscore this: IREN reported a net loss of $155.4 million in its last quarter, a dramatic reversal from a $384.6 million profit a year earlier, driven by revaluations tied to its planned pivot.

The key catalyst for the coming weeks is the sustainability of hashrate recovery. If the network's total computing power does not rebound meaningfully, the sector's financial strain will persist. This would likely trigger further difficulty cuts in coming weeks, offering only temporary relief. More critically, a prolonged low hashrate poses a direct threat to network security, as the Bitcoin network's resilience is directly tied to its total computational power. The adjustment today provides a liquidity boost, but the real test is whether the hashrate can hold steady.