Bitcoin mining is experiencing something unprecedented: a prolonged decline in network computing power that experts are calling the first-ever hashrate bear market. The network's hashrate, which measures the total computational power securing Bitcoin, peaked near 1.3 zettahashes per second in late 2025 before entering a steady decline estimated at 22 to 24 percent from that peak. What makes this downturn historically significant is not just its size, but its duration. According to Twenty One Capital CEO Rapha Zagury, this represents the longest stretch the network has ever recorded between an all-time hashrate high and a full recovery.

What Is Driving Bitcoin Mining's Historic Decline?

Unlike previous hashrate crashes, this decline isn't driven by a sudden shock like a regulatory ban or market panic. Instead, it reflects a fundamental shift in how miners are allocating their capital and infrastructure. The culprit is artificial intelligence. As AI and high-performance computing (HPC) demand has surged, miners face a critical choice: should new electricity connections, cooling systems, land, and capital go toward Bitcoin mining or toward more lucrative AI data center operations ? For many publicly listed mining companies, the answer has become clear.

"If you look at the public mining companies out there, there really isn't anybody staying the course to mine Bitcoin at scale. Pretty much everybody is leaving the industry right now," said Rapha Zagury, CEO of Twenty One Capital.

Rapha Zagury, CEO, Twenty One Capital

This statement captures a broad industry trend, though it's not universal. Companies including MARA (Marathon Digital), CleanSpark, Riot Platforms, and Bitdeer continue to operate substantial Bitcoin mining fleets. However, the pivot to AI is furthest along at firms like TeraWulf, IREN, Core Scientific, HIVE, and Cipher. TeraWulf reported $21 million in AI and HPC hosting revenue in the first quarter of 2026, which for the first time exceeded its Bitcoin mining revenue and became its largest single revenue source. Cipher, meanwhile, secured a $200 million revolving credit facility specifically to fund expansion into long-term AI data center contracts.

How Are Mining Companies Adapting to the AI Shift?

Converting a mining facility into an AI data center is not a simple process. It requires different specialized chips, advanced networking equipment, and different construction standards than Bitcoin mining demands. However, sites that already have secured power connections and fiber optic access offer a significant head start for this kind of infrastructure build-out. This creates an interesting dynamic for investors: companies that control the best power sites may be positioned to benefit from both Bitcoin mining and AI infrastructure demand simultaneously, a positioning that Zagury suggested current market valuations may not fully reflect.

• TeraWulf's AI Revenue: Exceeded Bitcoin mining revenue for the first time in Q1 2026, generating $21 million and becoming the company's largest revenue source
• Cipher's Expansion: Secured a $200 million revolving credit facility to fund long-term AI data center contracts and infrastructure development
• Infrastructure Requirements: Converting mining sites requires different chips, networking gear, and construction standards than Bitcoin mining, but existing power and fiber access provides a competitive advantage

Why Does Mining Profitability Matter More Than Bitcoin's Price?

Zagury used his keynote presentation at Bitcoin Asia 2026 in Hong Kong to challenge two long-standing criticisms of Bitcoin mining: that it's fundamentally a weak business and that it wastes electricity. He argued that neither criticism holds up once cost structure and energy flexibility are properly understood. Bitcoin mining, in Zagury's framing, is a commodity business where success depends on where an operator sits on the cost curve, not on the price of Bitcoin itself.

This distinction matters because of how Bitcoin's difficulty adjustment works. Roughly every 2,016 blocks, or about every two weeks, the network recalibrates its difficulty to keep block production near ten minutes. This mechanism makes Bitcoin unusually resistant to oversupply, unlike traditional commodity markets such as oil where higher prices typically draw in more competing supply. Comparing two hypothetical miners with different electricity costs and equipment, Zagury demonstrated that capital structure and cost management, not Bitcoin's price swings, ultimately determine who survives in the long term. He pointed to past mining failures as evidence that weak cost positioning, rather than unfavorable market conditions, was usually the real culprit.

There's an upside built into the current downturn as well. As hashrate leaves the network and difficulty adjusts downward, miners who remain naturally gain a higher share of the market. However, Zagury cautioned that this doesn't automatically translate into higher profits, since revenue still depends on Bitcoin's price, transaction fees, electricity costs, and remaining competition.

How Does Mining Support Grid Stability Rather Than Drain It?

On the energy question, Zagury argued that Bitcoin mining machines can be switched on or off almost instantly, making them one of the most flexible industrial loads available. This flexibility allows miners to participate in grid stabilization efforts, particularly in markets with variable renewable energy generation. Mining could support grid stability rather than simply drain it, he suggested. He contrasted this with AI data centers, which typically require steadier power since customer workloads cannot be interrupted as easily, suggesting Bitcoin mining could retain a valuable role at sites where electricity is abundant but unreliable or difficult to transmit economically.

To illustrate energy's broader value, Zagury referenced a project in Manicoré, a town in the Brazilian Amazon, where the lack of reliable electricity had limited access to medicine and refrigeration. He emphasized that energy infrastructure enables development itself, not just mining operations.

The current hashrate bear market, while historically unusual, may ultimately reveal which miners have built sustainable, cost-efficient operations and which have not. For investors evaluating Bitcoin mining stocks, the shift toward AI infrastructure adds a new dimension to valuation: companies with the best power sites and capital structures may offer exposure to both mining and the broader AI infrastructure boom simultaneously.