Bitcoin mining has often been described as a cyclical industry, deeply intertwined with Bitcoin’s price movements. A popular theory divides the mining cycle into four distinct phases: Mining Gold Rush, Inventory Flush, Shakeout, and Rebalancing. While this framework provides a useful historical lens, market behaviour over the last few years suggests it may no longer fully explain the dynamics of Bitcoin mining. Let’s explore this traditional theory, why it has fallen short, the accelerating growth of the network hashrate and what lies ahead for the next phase.
The Traditional Mining Cycle
The Rising Bull or Rebalancing Phase
Mining Gold Rush
Inventory Flush
Shakeout
The Traditional Mining Cycle Has Broken
Disruption by the China Mining Ban
Delay in 2022 Shake-Out
Less Rebalancing, Longer Gold Rush
Accelerating Hashrate Growth
Premium Members Only:
3 Reasons Why the Traditional Mining Cycle Has Broken
Institutionalization and Globalization
Refinancing Running Operations
Dynamic Mining Strategies
What Lies Ahead for the Next Phase of Hashrate Growth?
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The Traditional Mining Cycle
Mining analysts have identified a cyclical boom-bust pattern to Bitcoin mining ever since miners entered the ASIC era started around 2013. Around the 2020 halving, a cycle model was codified by the Coinmetrics and Alkimiya teams and consists of 4 phases:
The Rising Bull or Rebalancing Phase – Blue
This is the phase after the down trend in BTC price is over. During this period no new lows are made and the market stabilizes. Bitcoin’s price begins to recover, and with improved margins, miners slowly start to re-enter or scale operations, leading to a gradual recovery in hashrate.
Mining Gold Rush – Green
In this phase Bitcoin’s price rises rapidly, attracting new miners as margins have gone up. Network hashrate also increases, as miners deploy more machines to capitalize on higher rewards.
Inventory Flush – Orange
The price begins to decline and Bitcoin enters into the bear market. However, network hashrate continues to grow due to hardware investments made in the previous months. Additionally, mining facilities build-outs that were initiated during the gold rush are being energized. Miners operate under tight margins, hoping for a market rebound.
Shakeout – Red
Bitcoin’s price drops further, forcing high-cost or inefficient miners to shut down operations. This leads to a decline in hashrate as weaker players exit the market.
The Traditional Mining Cycle Has Broken
When comparing the period from 2021 to 2024 with previous mining cycles, some notable differences emerge. In traditional mining cycles, the phases followed a clear sequence: rising bull → gold rush → inventory flush → shakeout. Over the last five years, however, the order of these phases has been less consistent.
Disruption by the China Mining Ban
The 2021 China mining ban disrupted this pattern, triggering a shakeout phase in the midst of a gold rush. Unlike previous shakeout periods, where hashrate declines were driven by low profit margins, this event forced hashrate offline due to regulatory action. During this time, Bitcoin’s price reacted to the hashrate downturn—a reversal of the usual dynamic seen in shakeout phases, where price declines typically drive hashrate reductions.
Delay in 2022 Shake-Out
The 2022 bear market ending also deviated from historical trends. The shakeout phase occurred only after Bitcoin’s price had bottomed out and moved sideways for two months. Instead of price and hashrate declining in tandem, it was only once Bitcoin’s price bottomed at around $16,000 that hashrate came offline.
Less Rebalancing, Longer Gold Rush
In the past five years, a rising bull or rebalancing phase (blue) has only been observed around the 2024 halving. Beyond that, we saw the shake-out phase go straight into the gold rush, while the gold rush phases appear to be lengthening. This suggests an acceleration in hashrate growth over time.
Accelerating Hashrate Growth
The accelerating growth in the Bitcoin network’s hashrate is striking when analyzed through the lens of the 60-day moving average. This metric smooths out short-term fluctuations, providing a clearer view of long-term trends. Over the past decade, the growth curve has shown a consistent steepening trajectory, underscoring the rapid adoption of more efficient mining technologies and the increasing competition among miners. While short-term corrections and occasional plateaus are inevitable due to market dynamics, the overall trend reflects the continuous inflow of capital and innovation into the mining industry.
The following content is exclusively for our Premium Members:
3 Reasons Why the Traditional Mining Cycle Has Broken
Institutionalization and Globalization
Refinancing Running Operations
Dynamic Mining Strategies
What Lies Ahead for the Next Phase of Hashrate Growth?
