The 4 Phases of the Bitcoin Mining Cycle

The 4 Phases of the Bitcoin Mining Cycle

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Understand the 4 phases of the mining cycle so you can make better ASIC & BTC purchasing or liquidation decisions.

In 2021, a new S19 Pro(110TH) miner was over $12,000USD and now, the same miner can be purchased for less than $7,000

The ASIC miner market is as volatile as the bitcoin price and has its own cycle and phases.

I wanted to know what moved the prices of ASIC miners and why so I wrote this post as I dove into the subject.

Understanding bitcoin mining cycle can help you make better decisions on when to buy and sell miners and help decide when to either sell or retain the coins you’ve earned.

One of the best research papers on Bitcoin mining I found is called The Alchemy of Hashpower by Leo Zhang and Karthik Venkatesh.

This paper dives deep into The Economic Value of Hashpower with an in-depth analysis and description of a model for the valuation of hashpower.

It’s a fascinating and very technical paper with some great analysis. I highly recommend reading it.

For this post, I wanted to pull out one of the best parts that helped me understand the bitcoin mining cycle and ultimately answer, What moves the prices of ASIC miners?”

The goal here is to help you understand the cyclical nature of mining so you can make better decisions when it comes to buying and selling ASIC miners for your operation.

Before we jump into the mining cycle phases, let’s understand hashrate and hashpower a little more.

What is Hashrate and Hashpower?

Hashrate is the estimated rate of total hashes generated by a mining machine or collection of machines. Today’s leading miners like the S19 pros, have a hashrate of around 100 to 110 terahashes per second.

Hashpower is the sum of the hashrates of all mining rigs that are in operation at any given moment. So if you have 5 miners each with a hashrate of 100 terahashes/sec, you mining operation would have roughly 500 terahashes of hashpower.

It’s also how your describe the hashpower of the entire bitcoin network.

hashrate index

The network hashrate is an estimate that gauges how much computing power(miners) are competing for Bitcoin blocks. Roughly 230 ExaHash.

The first part of the research was about understanding hashpower as an asset class, how mining machines are commodities and how their price tracks the units mining revenue.

So the reason why a new S19 Pro(110TH) miner cost over $12,000USD last year was because the price of Bitcoin was over $50,000 and the hashprice was over .40 cents USD.

An S19Pro doing 110THS was earning over $1000/month in BTC so the price for these miners was estimated a 9 to 12 months of earning which was closer to the $12,000 price tag.

For example when hashprice is below .15 cents, these miners are earning less that $500 per month so we are seeing prices in the $6000 to $8000 range.

This is simple miner valuation calculation is called static-days-to-breakeven.

“How long with this last? Will it go lower? Will it go higher?”

These questions can’t be answered with certainty but understanding the cycle of mining can help you make better decisions.

The Cycle of Mining

In the second part of the paper, the authors go into detail on The Cycle of Mining and this is what really peaked my interest.

Understanding and recognizing the phases of this cycle can help you make better miner and btc purchasing or liquidation decisions.

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The 4 phases in the mining cycle

Based on how the market’s impact on historical Bitcoin mining revenue evolves, the authors identified four stages in the mining boom-bust cycle.

The Rising Bull, The miningGold Rush, the Inventory Flush and the Shakeout.

Let’s explore each of these in more detail.

1. The Rising Bull

This is when the price of Bitcoin is increasing and outpaces the global hashrate growth rate.

Key points of this phase:

  • Mining is the most profitable when difficulty significantly lags the price rally.
  • Hashpower grows much slower than the price.
  • Increasing hashpower comes from the miners that believe the price will increase or have cheap power sources.
  • as the overall upward trend in hashpower builds, demand for hashpower increases
  • it can take around an average of 4-6 months before hashrate starts following the price rally. 

Price of miners during the rising bull phase

The price of miners is low at the beginning of the rising bull phase because the previous phase was the Shakeout.

2. Mining Gold Rush 

This is when the price growth rate is high brining optimism to miner participants and hashpower starts to grow as more mines come online.

  • New machines are sold out almost right away.
  • Well capitalized operations place large orders to get their shipments prioritized. (Read about static-days-to-breakeven in part 1)
  • The faster a machine takes to breakeven, the more expensive the it becomes.
  • Coin price rapidly rallies, demand for new machines follows, but hashrate growth hasn’t picked up the speed yet.

Price of miners during the Gold Rush phase

The price of miners starts to rise rapidly along with the price of bitcoin. Manufacturers, secondary markets and cloud mining markets earn astronomic profits during this phase. Miner prices track the price closely.

3. Inventory-flush 

This is when the price of Bitcoin drops, difficulty goes while the hashpower growth rate is still high. This is the most destructive phase of a reverting bull market.

  • manufacturers may overproduce machines and may have to flush out their inventory by lowering prices
  • Mining operators may turn off older model machines as they become unprofitable to run
  • miners may start capitulation, selling btc to cover operating expenses
  • older or unplugged miners are sold on the secondary market

Price of miners during the Inventory Flush phase

The price of miners starts to come down along with the price of bitcoin. and the static-days-to-breakeven rule comes into play in the opposite direction. The longer a machine takes to breakeven, the less expensive the it becomes.

4. The Shakeout

This is when the price of Bitcoin drops and so does hashpower. This is what some call the winter phase of a bear market.

  • In some cases mining revenue drops below a “shut-off price” where it becomes unprofitable for miners to keep them running
  • negative bias may snowball into a downturn trend
  • Network hashpower may reduce but hashpower is self-referential meaning that the more hashpower that is turned off, the more concentrated the remaining hashpower gets. This is good for those that stay.
  • only a concentrated set of industry participants remain cash-flow positive with the ultra low hashrate
  • the network composition of hardware may start to skew more towards newer and more efficient miners as miners unplug 1st gen ASIC models
  • many OG miners believe in bitcoin for the long term so many are willing to mine at-loss or even deploy more machines while the market goes through the Shakeout.

Price of miners during the Shakeout phase

The price of miners is the lowest during the shakeout phase. If you have the capital, this is the time to acquire machines when everyone else is selling.

Miners operating at a loss must choose to either further finance their operations with some debt, PE, or from cash savings on their balance sheet Or, they reach full capitulation and need to start selling all capital assets and bitcoin holdings to meet their liabilities.


I learned a lot from this paper about the bitcoin mining cycles and highly recommend reading the entire series if you are interested in understanding the details of hashpower and running a mining business or even for mining at home.

If you have questions or thoughts on the subject, leave me a comment below or come ask on Twitter @craigonbitcoin

Hope you found some value here today.

Happy Stacking!

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