Introduction: The Current State of Bitcoin Mining
The exuberance witnessed during the record highs of October has dissipated, leaving the foundational infrastructure of the Bitcoin network confronting a harsh and sobering reality. As indicated by data from CryptoSlate, Bitcoin is currently trading in proximity to $78,000—a staggering decline exceeding 38% from its zenith of over $126,000 just four months prior. While superficial analysis may categorize this as a routine market correction, the internal perspective from mining operations reveals a much graver scenario.
The precipitous fall in the value of Bitcoin has intersected with persistently elevated network difficulty and surging energy costs, engendering a multifaceted crisis for mining operators. Recent analytics from CryptoQuant characterize miners as “extremely underpaid,” attributing this condition to the confluence of diminished prices and heightened difficulty levels, with its profit-and-loss sustainability index plummeting to 21—marking the lowest point since late 2024.
This financial strain is manifesting in tangible outcomes, as mining machines are being taken offline, resulting in a reduction of Bitcoin’s total hashrate by approximately 12% since November—representing the steepest decline since the Chinese mining ban of 2021. Consequently, this has precipitated a condition where the network operates at its weakest level since September 2025.
In an ecosystem that touts itself as the most secure computational framework globally, this predicament transcends mere market downturn narratives; it serves as a rigorous stress test for Bitcoin’s security model during a period when miners have access to more lucrative alternatives than ever before.
Bitcoin Miners’ Capitulation: An Analytical Perspective
The security framework of Bitcoin is predicated upon a straightforward incentive structure whereby the network compensates miners with a fixed block subsidy and transaction fees for successfully solving blocks. During periods when Bitcoin traded above $126,000 in October, the so-called “security budget” was ample enough to absorb inefficiencies within operations. However, this margin for error has evaporated as prices have plummeted below $80,000.
Recent metrics from the mining pool f2pool elucidate the severity of revenue compression currently afflicting miners. As per its February 2 hardware electricity cost dashboard:
- Bitcoin Price: Approximately $76,176
- Network Hashrate: Approximately 890 exahashes per second (EH/s)
- Daily Revenue: Approximately $0.034 per terahash for miners incurring costs of $0.06 per kilowatt-hour
This scenario presents a stark contrast to earlier observations; for instance, Luxor Technology’s Hashrate Index had recorded spot hashprice near $39 per petahash per second (PH/s) merely months ago—a figure which was already considered thin by historical standards prior to its decline towards an all-time low of approximately $35 at present. The current f2pool figure of $0.034 per terahash translates into an equivalent rate of $34 per PH/s—confirming that miners are operating at historical lows.
The Economic Viability of Mining Operations
When these economic conditions are extrapolated to individual mining machines, it becomes evident why we are witnessing a contraction in hashrate. At a benchmark Bitcoin price of $75,000 coupled with the aforementioned six-cent power cost:
- Electricity Costs for Newest Models: For Bitmain’s Antminer S21 XP Hydro units, electricity constitutes approximately 52% of revenue with a combined hashpower of around 473 TH/s and an energy draw of 5,676 watts.
- Mid-Generation Rigs: Units such as Antminer S19 XP or Avalon A1466i experience electricity cost rates approximating 92% to 100% at this price point.
- Older Models: Less efficient models like Avalon A1366 or Whatsminer M50S show electricity cost rates ranging from about 109% to 162%.
This analysis reveals that at a Bitcoin price of $75,000 under standard power tariffs, vast segments of mining hardware are operating at cash losses prior to accounting for debt servicing, hosting fees, or other operational expenditures.
The Shift Toward AI and Its Implications
The current revenue collapse distinguishes itself from previous crypto bear markets due to the emerging interest from AI infrastructure providers in distressed assets associated with mining operations—specifically power contracts and grid connections. The infrastructural requirements for Bitcoin mining align closely with those necessary for hyperscale AI compute operations. Unlike the beleaguered Bitcoin network, AI infrastructure suppliers exhibit readiness to invest substantially.
A case in point is CoreWeave—a former mining entity that has transitioned into providing specialized “neocloud” services for AI workloads. Recently bolstered by a $2 billion equity investment from Nvidia aimed at accelerating its data center expansion, CoreWeave exemplifies this paradigm shift. In addition, in 2025, it pursued acquisition discussions with miner Core Scientific in a multibillion-dollar deal that explicitly framed mining sites and power contracts as prime assets suitable for GPU deployment rather than ASIC applications.
This strategic pivot has resonated throughout the sector; numerous public Bitcoin miners are adapting their business models toward AI initiatives. For instance, Canadian operator Hut 8 recently formalized a long-term lease agreement for a 15-year commitment covering 245 megawatts dedicated to AI data center operations at its River Bend campus—valued at approximately $7 billion. Such arrangements effectively secure long-term economic stability distinctly divergent from the volatility endemic to traditional mining rewards.
The Implications for Network Security
While these transitions offer shareholders an exit strategy from financial distress precipitated by recent price declines—enabling them to exchange cyclical revenues from Bitcoin mining for more stable AI cash flows valued at a premium—they raise critical concerns regarding the long-term integrity and security architecture of the Bitcoin network itself. Specifically: what transpires when integral components of its security infrastructure discover alternative avenues that yield superior compensation?
The Future Landscape: Security Budget Under Threat
Jeff Feng, co-founder of Sei Labs, described the current epoch as “the most significant bitcoin miner capitulation since 2021,” asserting that large-scale miners diverting resources toward AI computation exacerbate existing challenges within the ecosystem. Unlike previous cycles where hashpower might temporarily diminish until market recovery occurs, contemporary reallocations appear increasingly permanent.
Once dedicated sites such as those generating 245 MW are retrofitted for AI under long-term leases, their power capacity effectively becomes unavailable for future expansions within the Bitcoin network’s hashrate. It is crucial to clarify that while Bitcoin remains exceptionally secure in absolute terms—the financial barriers required to amass sufficient hashpower capable of mounting an attack on the network remain extraordinarily high—the concern lies in directional shifts and compositional changes rather than immediate collapse scenarios.
A sustained reduction in hashrate incrementally lowers the marginal cost associated with potential attacks on the network’s integrity. With fewer honest miners contributing hashpower online, fewer resources are necessary to obtain disruptive control over compute capacity—be it through rental agreements or direct construction efforts.
This trend further narrows stakeholder participation incentivized to defend the chain; should older high-cost operators exit while only ultra-efficient miners maintain profitability, control over block production risks becoming increasingly centralized—a development that engenders fragility masked by overarching hashrate statistics.
CryptoQuant’s characterization of miners as “extremely underpaid” serves as an implicit cautionary note regarding how resiliently robust the network’s security budget remains relative to competing capital and energy utilization demands.
Navigating Forward: Potential Paths for Miners
The ongoing pressure on miners may influence Bitcoin’s evolution through several potential trajectories:
- Quiet Consolidation: In this scenario, enhanced difficulty adjustments facilitate more efficient operators capturing larger shares of block production while overall hashrate experiences slower growth than in preceding cycles—an outcome likely unnoticed by external stakeholders.
- Fee-Driven Security Acceleration: If subsidy rewards remain inadequate compared to AI returns, there may be an increased reliance on transaction fees as means to sustain miner engagement—potentially resulting in greater emphasis on high-value settlements at base layers and increased activity on second-layer solutions.
- External Backstops Becoming Explicit: This speculative pathway envisions institutional players who normalized spot Bitcoin ETFs beginning to view security budgets akin to bank capital ratios necessitating deliberate intervention—this could manifest as increased fees across transaction classes or industry-funded incentives designed to bolster miner viability.
Notably, none of these trajectories necessitate any fundamental deviation from Bitcoin’s core design principles; rather they represent industry-wide deliberations concerning how much stakeholders are willing to invest in maintaining hash presence within the network vis-à-vis competing demands from GPU clusters.
The current snapshot provided by f2pool underscores these negotiations: with about 890 EH/s engaged at an approximate price point of $76,000, security costs hover around 3.5 cents per terahash daily. The outcome regarding whether future energy investments will acquiesce to such rates or demand parity with AI economic models will ultimately dictate the strategic pivots within the mining market landscape.
