Bitcoin Hash Rate Drop Could Support Long Term BTC Gains

A falling Bitcoin network metric often raises alarms. Analysts at a major crypto asset manager see the opposite and point to data that suggests higher prices ahead.

Good to Know

• Bitcoin hash rate dropped about 4 percent over the past 30 days
• The decline marks the largest pullback since April 2024
• Historical data links hash rate declines to stronger forward returns

VanEck Analysts Say Falling Hash Rate Can Support Bitcoin Price

Analysts at VanEck say a recent dip in Bitcoin network activity may favor long-term price performance. In a new report, head of digital asset research Matthew Sigel and senior investment analyst Patrick Bush pointed to historical patterns tied to Bitcoin hash rate declines.

Hash rate reflects the processing power securing the Bitcoin network. A higher reading often signals stronger miner participation and security. The analysts noted that network hashing power, tracked on a 30 day moving average, fell about 4 percent over the past month, marking the steepest decline since April 2024.

They addressed common concerns around miner stress and price pressure. The report stated:

“Why a falling hash rate might be bullish: many Bitcoin enthusiasts worry about a sustained reduction in the hash rate because it could demonstrate that the mining industry is threatened as a going concern. Obviously, this would translate into people selling their BTC, thus worsening miner economics and therefore being reflexively bearish for Bitcoin price.”

VanEck research found data pointing in a different direction. The analysts said:

“Some empirical evidence suggests drops in hash rate can be bullish for long-term holders. Looking at 90-day forward BTC returns versus 30-day past changes in Bitcoin hashing rate since 2014, we find that forward returns are more likely to be positive when Bitcoin hash rate is shrinking than when it is growing (65% versus 54%). At the same time, we find that average 180-day forward returns are higher by around 30 basis points (+20.5% versus 20.2%) when the Bitcoin hash rate is falling than when it is increasing.”

They added that longer periods of hash rate compression tend to align with stronger gains months later:

“Additionally, when hash rate compression persists over longer periods, positive forward returns tend to occur more often and with greater magnitude. Across the 346 days since 2014, when the 90-day hash rate growth was negative, 180-day forward BTC returns were positive (77%) of the time, with an average return of (+72%).

Outside of those days, 180-day forward BTC returns were positive (~61%) of the time and averaged (+48%). Thus, buying BTC when 90-day hash rate growth is negative, rather than at any time, has historically improved 180-day forward returns by (+2,400 bps).”