Twenty One Capital CEO: Bitcoin enters its first bear market in computing power

CEO of Twenty One Capital: Bitcoin is experiencing its first "computing power bear market", and listed mining companies are turning to AI infrastructure.

Raphael Zagury, CEO of Twenty One Capital, said that Bitcoin is experiencing its first "computing power bear market". The current network computing power is still below the all-time high at the end of 2025. At the same time, many listed mining companies are turning infrastructure investment into artificial intelligence.

Summary

Raphael Zagury publicly called Bitcoin's long-term decline in computing power its first bear market for computing power. Demonstration materials show that Bitcoin's computing power has dropped by about 22% to 24% from its peak at the end of 2025. Zagury pointed out that artificial intelligence has created competitive uses for miners 'electricity and infrastructure. Today, listed mining companies are increasingly involved in AI computing, although several companies still operate large-scale bitcoin mines. After network computing power declines, Bitcoin will reduce the difficulty of mining, thereby increasing the revenue share of surviving miners. Zagury raised this argument at the "Bitcoin Asia" conference in Hong Kong on August 28, and Twenty One Capital subsequently submitted pre-prepared minutes of the meeting to the U.S. Securities and Exchange Commission.

Bitcoin computing power enters a long-term decline after approaching 1.3 Z/s

Zagury said that Bitcoin's computing power approached 1.3 Zeitar hash per second (Z/s) at the end of last year, and then entered a long-term decline. His presentation materials showed that computing power retreated by about 22% to 24% from its peak. He used the "bear market in computing power" to describe the current cycle, which is not the official classification of the Bitcoin network, but refers to the anomaly that estimated computing power has not recovered to previous historical highs for a long time.

This decline in computing power is different from the 2021 impact

Bitcoin computing power measures the estimated computing power invested by miners to ensure network security and compete block rewards. A higher value usually means more machines are running or more efficient equipment. Zagury compared the current decline with the impact of the 2021 mining ban. At that time, as the company closed its facilities, computing power fell rapidly, but as machines migrated to North America, Central Asia and other regions, computing power quickly recovered. The current cycle is developing more slowly. Instead of moving their existing machines, miners are reconsidering whether new power and data center capacity should be allocated to Bitcoin mining. "This is the longest cycle we have experienced from historical highs until recovery," Zagury said. Network estimates differ because Bitcoin does not publish the exact number of active machines. Analysts infer computing power through block yield and mining difficulty, so daily readings may fluctuate sharply. CoinWarz estimated the computing power at approximately 829 EH/s on September 2, while readings exceeded 1 Z/s in a few days in late August. Long-term moving averages provide a clearer indicator than daily estimates.

Another use for AI to provide scarce power to miners

Bitcoin miners and AI data centers compete over multiple resources: both require large amounts of power access, cooling systems, land, data center buildings, and capital. AI facilities require different chips, network equipment and building standards, so transforming a mine into an AI facility is more complex than replacing ASIC machines with graphics cards. However, sites with stable power and fiber access can still provide a starting point for high-performance computing development. Zagury said this choice changed the computing power cycle because miners can now divert money to another computing market rather than automatically expanding their Bitcoin miners. He said: "Looking at those listed mining companies, in fact, none of them insist on mining bitcoin on a large scale. Almost everyone is leaving the industry." This description reflects broad trends but should not be taken literally. Listed companies such as MARA, CleanSpark, Riot, and Bitdeer are still operating large bitcoin mines, although some companies are also exploring or building AI infrastructure. This shift is most evident in companies such as TeraWulf, IREN, Core Scientific, HIVE and Cipher. TeraWulf's AI and high-performance computing custody revenue reached US$21 million in the first quarter, exceeding its Bitcoin mining revenue for the first time, and its AI business has become its largest source of revenue. Cipher also received a $200 million revolving credit line to fund its expansion into long-term AI data center contracts.

Low-cost miners are expected to gain greater network share

Zagury refuted the idea that Bitcoin mining is essentially a bad business. He believes profitability depends on where miners are on the industry cost curve. Miners with efficient equipment and low electricity prices can still make profits despite forcing high-cost competitors to shut down. Capital structure is also important because heavy debt and short-term repayment plans can cause stress even if equipment operations are competitive. The "hash price", a measure of expected miners 'income per unit of computing power, remains at historically low levels, putting pressure on miners who use old machines or expensive electricity. However, the decline in online computing power benefits miners who are still active. Bitcoin adjusts the difficulty of mining every 2016 blocks (about every two weeks) to keep the average block output close to 10 minutes. When computing power leaves the network, the reduction in difficulty makes it easier for remaining miners to find blocks, and each surviving miner can control a larger share of the network without adding machines. Zagury said: "The beauty of Bitcoin mining being in a bear market for computing power is that those who stay will naturally gain a higher market share." But this benefit does not guarantee higher profits. Revenue still depends on the bitcoin price, transaction fees, electricity prices, equipment efficiency, and the amount of competitive computing power.

Bitcoin price must outperform computing power growth

Zagury said that when asset prices grow faster than network computing power, mining is most likely to outperform Bitcoin itself. If Bitcoin rises by 50% and computing power remains flat, miners 'income can grow without increased competition. If computing power grows faster than the price of Bitcoin, each miner's network share and stand-alone revenue will decline. Zagury recommends that for investors with small amounts of money, buy Bitcoin directly before investing in mining. For investors considering larger, decentralized deployments, bitcoin can be combined with mining exposure. He said: "If you only have $1, buy Bitcoin first. I think it's the best way to express your opinion." This stance reflects Twenty One Capital's established approach: benchmark potential investments against Bitcoin. The Tether-backed company uses cryptocurrency as its main benchmark and believes that operating the business must justify its additional risk by providing a credible path to outperform BTC. Mining companies face construction, power, equipment, management and financing risks that do not appear in holding spot Bitcoin ETFs. But when Bitcoin is rising faster than its costs and online competition, mining companies can also provide operating leverage.

Energy flexibility remains a major advantage of mining

Zagury also defended criticism that Bitcoin mining wastes electricity. He believes that energy use supports economic development, while mining provides a flexible source of demand. ASIC machines can be shut down and restarted faster than heavy industrial facilities. As a result, miners can reduce consumption when power demand rises and resume operations when idle capacity becomes available. This ability to cut operations allows miners to participate in grid stabilization plans, especially in electricity markets where renewable energy generation is volatile. Financial and environmental results depend on the underlying power supply and the specific terms of each arrangement. AI data centers typically require more stable power than Bitcoin mines because customer workloads cannot be easily interrupted. As a result, bitcoin mining may reserve a place in venues that have sufficient power but are unreliable or cannot be economically transmitted.

Zagury said mining now offers four forms of option value: flexible energy demand, increased network share when competitors exit, proximity to the Bitcoin protocol, and reusable data center infrastructure. Whether miners can obtain these benefits will become clearer in the upcoming difficulty adjustments and listed company earnings reports. The document will show how much money miners spent on new ASIC equipment, as well as money spent on AI construction. Development directions within the industry are unlikely to be consistent. Some miners will retain Bitcoin mining, others will combine mining with AI hosting, and companies that control the most attractive power sites may make a more aggressive transition to high-performance computing.