Bitcoin Miners Throw in the Towel, But Their Stocks Soar

The miners' surrender period has lasted nearly ten months.

Written by: Matt Crosby

Compiled by: Baihua Blockchain

Bitcoin's total network hash rate has been declining for several months, and miner difficulty has just recorded one of the steepest declines on record. Generally speaking, this story is not complicated: miners shut down their machines because it is no longer economically viable. However, this time is different as publicly listed mining companies' stocks are experiencing one of their strongest performances in recent years, while BTC itself has been severely impacted. In previous rounds of miner surrender, miner pressure and price pressure often occurred simultaneously; now the two are starting to diverge, and the market seems to have yet to fully price in what this divergence means for long-term hash rate.

If you're short on time, here are a few key points:

• The total network hash rate is signaling one of the longest miner surrender periods in Bitcoin's history.
• Miner difficulty has decreased by 19.9% from its peak, marking the third deepest pullback since dedicated mining hardware became mainstream.
• Despite miners selling thousands of Bitcoins, mining company stocks have significantly outperformed BTC over the past year.
• The block reward income measured in BTC has just hit the lowest single-day level on record.
• The average daily transaction fee income over the past 28 days is not even enough to cover the subsidy for one block.

Miners Are Indeed Surrendering

In Bitcoin's history, there have been very few hash rate pullbacks that have lasted longer than this round. Miner difficulty is also declining in tandem, which precisely indicates that the protocol mechanism is functioning as designed: every 2,016 blocks, or roughly every two weeks, the network resets the target difficulty to ensure that blocks are still produced on average every ten minutes. As the number of machines participating in hash calculations decreases, the target difficulty naturally lowers. Currently, miner difficulty has fallen by 19.9% from its peak; since ASICs replaced GPUs as the mainstream mining machines, only two pullbacks have been deeper than this one.

Figure 1: Miner difficulty has decreased by 19.9% from its historical peak.

The only two comparable periods also lasted nearly as long as this one. The deeper of the two occurred after China fully banned Bitcoin mining, which was almost the easiest to understand type of event: the policy directly forced miners to shut down, causing the hash rate to collapse instantly, and any observer could deduce the next step—those machines would seek cheaper electricity and reconnect to the network elsewhere.

Figure 2: Bitcoin's total network hash rate has been declining for 287 consecutive days.

Why Are Mining Stocks Rising Instead?

Over the past year, BTC has cumulatively dropped about 46%. However, the largest publicly listed mining companies have significantly risen during the same period, with the strongest performer even increasing by over 430%. This is not the typical behavior of this group of assets. Historically, mining company stocks have been viewed as “leveraged Bitcoin,” meaning they often drop harder when the market declines and rise more sharply when the market increases. Therefore, such a significant divergence as this is quite rare.

Figure 3: Performance of listed mining companies relative to BTC over the past year.

What is truly driving all of this is the AI narrative. For years, Bitcoin and the largest AI ETFs have shown correlated movements, with certain periods reaching correlations of 0.8 to 0.9. But now this relationship has reversed: AI continues to rise, while Bitcoin is weakening.

Block Subsidies Are Thinning

Miners have recently recorded the lowest single-day income from block rewards (Block Rewards) measured in BTC. Part of the reason for this is the decline in hash rate—before difficulty adjustments catch up, block production speed will be slower than ten minutes; but the main reason is simply that the protocol is operating according to established rules. Block subsidies are halved every four years and will continue to halve until no new coins can be issued.

Figure 4: Miners' block reward income measured in BTC has dropped to a new historical low.

Since the first halving, there have always been objections raised: the coin price will compensate. In other words, although fewer coins are produced per block, as long as each coin is worth more, the income in USD can still be maintained. This logic has held true so far. The Puell Multiple, which measures miner income, is currently around 0.75, meaning miners' current income is about three-quarters of the average level over the past year. In rough terms, this corresponds to a current daily income of about $30 million, while the longer-term average is close to $40 million.

Who Will Fill This Gap?

Another answer has always been transaction fees, and it has been so from the beginning. One day, block subsidies will go to zero; at that time, the network security budget must be independently supported by transaction fees, otherwise, as subsidies disappear, the security budget will shrink as well.

Figure 5: The proportion of miners' transaction fee income in total miner income.

But reality is still far from that step. Currently, miners earn about $30 million daily, of which transaction fees contribute only about $200,000. In other words, the average transaction fee income over the past 28 days is not even enough to cover the subsidy for one block, while the Bitcoin network produces about 144 blocks daily. Regardless of how the transaction fee market ultimately evolves, at least for now, the network security budget it covers is only enough to support about ten minutes.

What Does This Mean?

Today's Bitcoin is certainly far from security risks, and this article is not directly judging the price. However, the shape of this round of surrender is already distinctly different from previous rounds. Miners have simply found a more profitable hardware use than mining, and this change is occurring simultaneously with falling coin prices, shrinking block subsidies, and almost no increase in transaction fee income.

In a bear market, no one wants to hear a new pessimistic narrative, and I know this article reads somewhat like that. But conversely, the real issues that need to be addressed are often only seriously faced during bear markets. In the long run, the miner incentive mechanism will either be consciously designed and repaired, or it will have to continue to rely on higher coin prices to temporarily mask the problems.