Bitcoin News Today: Bitcoin Miners' Hashrate Drop Seen as Bullish Sign Ahead of Potential Rebound

Bitcoin Miner Capitulation and Market Shifts

Bitcoin miners may be on the verge of a turnaround, as recent signs of capitulation could signal a near-term bottom for the cryptocurrency, according to VanEck. The firm highlighted a 4% drop in Bitcoin's hashrate over the past month as a historically bullish contrarian indicator, citing data from 2014 to the present. When hashrate declines over 30 days, positive 90-day forward returns have occurred 65% of the time, compared to 54% when the hashrate rises.

The bearish trend in hashrate growth has shown even stronger results in the long term. Following 90 days of negative hashrate growth, Bitcoin has delivered positive 180-day returns 77% of the time, with an average gain of 72%. This outperforms periods of hashrate increases, where positive returns occurred 61% of the time. VanEck analysts argue that this trend reflects the natural ebb and flow of miner activity and profitability as older, less efficient machines are turned off.

Bitcoin's hashrate decline has been the sharpest since April 2024, likely driven by a 1.3 gigawatt mining shutdown in China. The shift in capacity could also be redirected to meet rising AI demand, potentially reducing the Bitcoin hashrate by 10% in the process. Meanwhile, Bitcoin's breakeven electricity price has fallen nearly 36% on S19 XP mining rigs, reflecting the challenging conditions for miners.

How Markets Reacted

Bitcoin's price has slid nearly 30% from its October 6 all-time high of $126,080, currently trading around $88,400 as of mid-December. This decline has triggered a broader industry shift, with former crypto miners increasingly pivoting toward AI infrastructure. Hut 8, one of the largest Bitcoin miners, recently secured a $7 billion Google-backed deal to build up to 2.3 gigawatts of AI capacity in the U.S. The partnership involves Anthropic and Fluidstack, with Alphabet providing a financial backstop for the project. Hut 8's shares surged more than 20% in pre-market trading following the announcement.

Other miners have followed similar paths, with Rosenblatt Securities cutting price targets for several firms due to declining profitability. The firm highlighted the growing importance of high-performance computing (HPC) contracts for Bitcoin miners, as traditional mining becomes increasingly unprofitable. While pure-play miners like Marathon Digital face significant headwinds, companies like Hut 8 and TeraWulf are benefiting from their shift to higher-margin computing power.

Risks to the Outlook

Despite the potential for a rebound in Bitcoin mining profitability, risks remain. ETF outflows have weighed on the market, with spot Bitcoin ETFs recording a $338.81 million net outflow in the week leading up to December 19. This is the largest weekly outflow since November 21. Institutional demand has weakened, and Bitcoin's price has failed to break above key resistance levels. The Fear and Greed Index hit a reading of 16, indicating deep risk-off sentiment among traders. Regulatory uncertainty also continues to impact investor sentiment. The U.S. Securities and Exchange Commission (SEC) dropped its four-year investigation into Aave, but the broader regulatory environment remains in flux. Meanwhile, the Bank of Japan's potential interest rate hike has added further downward pressure on Bitcoin, as rising rates could reduce global liquidity and risk appetite.

What This Means for Investors

For investors, the recent developments present both opportunities and challenges. VanEck analysts suggest that miner capitulation and hashrate declines could foreshadow a Bitcoin rebound, but timing remains uncertain. The firm's forward-looking data shows that hashrate compression is more likely to lead to positive returns when sustained over longer periods.

On the corporate side, Bitcoin treasury companies continue to attract attention, though their sustainability depends on navigating the mNAV rollercoaster. These firms rely on maintaining a premium to net asset value, which becomes difficult when market sentiment turns negative. For example, Strategy recently added 10,645 Bitcoin for $980 million, reinforcing its aggressive accumulation strategy amid market weakness.

Bitcoin's long-term prospects remain tied to macroeconomic trends. A softer-than-expected U.S. CPI report has increased speculation that the Federal Reserve could cut interest rates earlier than anticipated. If realized, this could boost risk-on sentiment and support a Bitcoin rebound. Meanwhile, Citi has set a $143,000 price target for Bitcoin in a year, contingent on the price holding above $70,000 and continued ETF demand.