Bitcoin hash power halves by 20%, hash rate shows signs of a rebound again

The Bitcoin network is experiencing a "miner capitulation." Due to the impact of a winter storm in the United States combined with rising costs, miners are shutting down equipment on a large scale, causing the total network hash rate to decline by nearly 20% in the short term. This phenomenon has attracted market attention because an on-chain indicator called "Hash Ribbon" has historically appeared near significant Bitcoin lows multiple times, and it is now signaling a potential rebound again.

Why Did Hash Rate Suddenly Drop?

According to the latest data, the Bitcoin network's hash rate has fallen from approximately 1.2 EH/s to about 950 EH/s, a decline of nearly 20%. While this number may seem abstract, it essentially means that the total global mining power has significantly decreased.

There are two main reasons triggering this decline:

• Extreme Weather Impact: The US winter storm "Fern" has been sweeping across many parts of the US since January 24, causing power outages for over a million residents. As major mining farms are located in affected areas, the hash rate of US mining pools has shrunk considerably. For example, Foundry USA's hash rate has been reduced by about 60% since last Friday, dropping from nearly 400 EH/s to around 198 EH/s.
• Cost Pressures Intensify: The power shortages caused by the storm have forced miners to shut down equipment, while electricity and operational costs continue to rise, making some small-scale mining operations unprofitable.

The Logic Behind the Hash Ribbon Indicator

The so-called Hash Ribbon is an on-chain indicator constructed based on the 30-day and 60-day moving averages of the hash rate. The core logic of this indicator is simple:

When the short-term moving average crosses below the long-term moving average, it indicates that miners are under profit pressure and are starting to exit the market in large numbers—this is called the "miner capitulation" phase. Conversely, when the short-term moving average crosses back above the long-term average, it suggests that the toughest period may be over, and miners are beginning to regain confidence.

Historically, this signal has appeared multiple times at critical turning points in Bitcoin's price:

| Date | Event | Hash Ribbon Signal | Subsequent Trend | |-------|--------|---------------------|------------------| | August 2024 | Sharp drop in hash rate, yen arbitrage unwinding | Short-term MA crosses below long-term MA | Bottomed around $49,000 in August, rebounded to $100,000 early next year | | Mid-2022 | FTX turmoil, large-scale miner shutdowns | Miner capitulation signal | Bottomed near $15,000, later rebounded above $22,000 | | November 2025 | Hash rate decline and signal release | Hash Ribbon indicates rebound | Bitcoin stabilized around $80,000, now back to around $88,000 |

Implications of Hash Rate Decline for the Market

This 20% drop in hash rate will directly impact the next difficulty adjustment. According to quick data, difficulty is expected to decrease by about 17%, the largest adjustment since China's crackdown on mining in 2021.

What does a difficulty decrease mean? Simply put, mining becomes relatively easier, and miners' profit environment improves. When profitability improves, two positive signals often follow:

• Reduced Selling Pressure: Miners are less forced to sell Bitcoin to cover costs, easing market sell pressure.
• Market Sentiment Recovery: Miners are professional market participants; their recovery often signals that market bottoms may be near.

Caution Still Needed

It is important to note that although the Hash Ribbon signals a potential rebound, the market still faces multiple uncertainties. According to recent information, macro risks remain:

• US government shutdown risk (current funding expires on January 30)
• Uncertainty in trade policies (Trump may impose 100% tariffs on Canadian imports)
• Possible intervention in USD/JPY exchange rate

These factors have led to a net outflow of $1.33 billion from spot Bitcoin ETFs this week, the second-highest in history. Meanwhile, large wallets holding over 1,000 BTC are accelerating accumulation, adding over 100,000 BTC in total, reflecting that institutions and major holders are buying on dips. However, retail investors remain panicked.

Summary

Hash rate decline, Hash Ribbon signals, and difficulty adjustment—all on-chain indicators point to one direction: the miner capitulation phase may be nearing its end, and the market bottom may not be far off. Historically, such signals have appeared near significant lows and often foreshadowed subsequent rebounds. But until macro uncertainties are resolved, the market may still experience volatility. The key now is to observe whether the Hash Ribbon truly signals a bullish crossover and whether macro risks further ease. For long-term investors, miner capitulation often presents an attractive entry window.