Bitcoin Hashrate Slips as Macro Pressure Builds: What’s Really Behind the Drop?

With Bitcoin tagging a low of $74.5K yesterday, BTC is officially in the midst of its deepest drawdown of the current cycle. From the all time high near $126K set in October, last week’s pullback of around 12% means Bitcoin has corrected around 37% since the all time high. So far Bitcoin is respecting the critical level of $74.5K, which coincides with the April 2025 lows. That said, other key levels like the U.S. Bitcoin Spot ETFs cost basis have been broken and Bitcoin has fallen below its True Mean Market price for the first time in 2.5 years. 
It is clear that Bitcoin’s downward momentum has picked up steam over the past week, but what’s causing the decline is a confluence of factors rather than a single point of stress. Renewed macro fears, the implications of Kevin Warsh being anointed as the new Fed Chair, ongoing leverage unwinds and emerging stress signals from declining hashrate are all contributing to the current market environment.  

Leverage Being Unwound Across Crypto Markets 

January 31st saw the highest single day liquidations since the October 10th cascade event. $2.56 billion worth of positions were wiped out, making it the 10th largest liquidation event crypto has ever seen. For perspective, this was bigger than the Covid and the FTX crash.  

What’s remarkable is that this happened during a time when BTC was going through one of its largest deleveragings. Open interest is now half of what it was at the October all time high. The scale of liquidation may seem counterintuitive given Bitcoin’s aggregate open interest has fallen by nearly 50% in 4 months. However, the explanation lies less in the quantity of leverage and more in how and where this was built. 

For 75 days, Bitcoin was constricted within a tight range between $95K and $80k. This type of compression tends to encourage leverage accumulation, as traders fade range extremes, increase position sizes and tighten liquidation thresholds under the assumption that volatility will remain suppressed. What happens in this setting is that, over time, this creates a dense pocket of fragile leverage clusters. 

When price finally broke below the lower band on January 31st, the unwind was not linear. As volatility returned and liquidity thinned, even modest price moves were enough to cause cascading liquidations across similarly positioned traders. 

Macro Fears Resurfacing

Over the past week, geopolitical fears and uncertainty between the United States and Iran have led to de-risking across crypto. Markets have reacted to growing tensions between the two nations on a mix of military posturing, diplomatic friction and fears of escalation in the Middle East. 

Key developments include reports of an explosion at Iran’s Bandar Abbas port, a critical shipping hub with implications for global trade routes, which spiked market anxiety about disruptions to energy flows and geopolitical stability. Meanwhile, commentary from Iranian leadership warning that any U.S. military action could trigger broader conflict has reinforced fears of escalation in the region. 

A Hawkish Fed Tone Adding Pressure  

The nomination of Kevin Warsh as the next chair of the U.S. Federal Reserve also acted as a headwind for Bitcoin. Markets saw Warsh’s appointment as a change in policy toward a more disciplined, potentially hawkish monetary structure, given his historical skepticism on prolonged quantitative easing and expansive Fed balance sheets. 

That reputation alone quickly caused a repricing of expectations around liquidity and future interest rates decisions, two variables that have been central to crypto’s multi-year run. 

Hashrate Declines Not Always Signaling Capitulation 

Adding to the above points, the Bitcoin network itself has introduced a source of short term stress. Bitcoin’s total network hashrate has fallen by around 12% since November 11th, making it the deepest drawdown since China’s mining exodus in October 2021. The latest decline was caused by severe U.S. winter weather, which forced mining operations offline to comply with grid curtailments and protect infrastructure, sharply reducing computational power across the network. 

From a market perspective, sudden hashrate drops often translate into short-term price pressure. When miners go offline, operational costs remain while revenue and profitability take a hit. This ultimately increases the likelihood of sell side pressure from miners to cover expenses. 

It’s important to note here that a falling hashrate does not automatically mean a long term capitulation. Historically, hashrate drawdowns are seen as a network level reset wherein less efficient miners power down, costs are rationalized and profitability resets, before price stabilization and an eventual recovery begins. 

All in all, it’s clear that Bitcoin has broken through key technical and on-chain indicators. On the other hand, it would be wrong to ignore the fact that Bitcoin currently is in oversold territory with the 1-day RSI sitting at levels not seen since August 2023 when Bitcoin was at $26K. Coupled with this is that there exists a massive CME gap to the upside between $78K to $84K. The objective here is to stay balanced and see whether a follow through in sell-side pressure from ETFs and whales compounds the downside, or if the market instead sees a relief rally back above critical zones.