Bitcoin Is Having Its Worst Year Ever — And the Network Has Never Been Stronger

Fifty days into 2026, Bitcoin is down 23%. That is the worst start to any year in BTC history. January dropped 10%. February has shed another 15%. For the first time ever, Bitcoin has posted back-to-back monthly losses to open a year.

The price is ugly. The sentiment is worse. The CoinDesk daybook today described the market as dominated by "extreme fear." ETF holders are underwater by an average of 20%. And yet — and this is the part most people are missing — the Bitcoin network itself is flexing harder than it has in years.

The Numbers That Matter

Let us start with the damage. Bitcoin touched $60,000 earlier this month before bouncing to around $68,000 today. U.S. spot ETFs have hemorrhaged 100,300 BTC — roughly $6.8 billion — since October all-time high near $126,500. The options market is still pricing in a "panic premium," with short-term implied volatility spiking even as longer-dated contracts stabilize. Traders are paying up for crash insurance.

Meanwhile, $179 million in positions got liquidated in the last 24 hours alone. The market is a meat grinder right now.

But here is where it gets interesting.

The Difficulty Divergence

Bitcoin mining difficulty just jumped 15% — the largest single increase since 2021, when the China mining ban scrambled the entire network. Difficulty has climbed to 144.4 trillion, and the hashrate has recovered from 826 EH/s back to 1 ZH/s (one zettahash per second).

Think about what that means. Miners are pouring computational power back into the network even as the price sits 46% below its October peak. Even as hashprice — the daily revenue per unit of hashrate — sits at multi-year lows around $23.9 per PH/s.

Why would miners do this? Because the ones still standing are the well-capitalized operators with access to cheap energy who are playing the long game. The UAE, for instance, is sitting on $344 million in unrealized mining profits. These are not speculators. They are infrastructure players betting on Bitcoin next decade, not its next quarter.

The Great Mining Pivot

There is a structural shift happening beneath the difficulty numbers that deserves attention. Several publicly listed mining companies are reallocating capacity toward AI and high-performance computing. Bitfarms recently dropped "Bitcoin" from its identity entirely, rebranding to focus on AI infrastructure. Activist investor Starboard is pushing Riot Platforms to expand into AI data centers.

This is not miners giving up on Bitcoin. It is miners diversifying revenue streams to survive exactly this kind of drawdown. The ones who cannot adapt are shutting rigs off. The ones who can are using AI revenue to subsidize continued Bitcoin mining. The net effect? The network keeps getting stronger even as weaker participants exit.

The Macro Overlay

The backdrop is not helping. U.S.-Iran tensions have resurfaced, pushing gold higher and keeping risk appetite suppressed. Bitcoin is trading more like a risk asset than a safe haven right now, which means geopolitical fear is a headwind, not a tailwind.

On the regulatory front, there is a notable bright spot: Ripple Brad Garlinghouse told reporters today that the CLARITY Act — the bill that would finally delineate which digital assets are securities versus commodities — has a "90% chance" of passing by April. The White House has also been meeting with banks on stablecoin yield rules, reportedly making progress. Regulatory clarity is coming, but it is arriving into a market that is too scared to care.

Our Take

This is a classic divergence between price and fundamentals. The market is screaming fear. The network is screaming strength. History does not repeat exactly, but it does offer patterns: the last time difficulty saw a massive spike during a price drawdown was 2021-2022, and what followed was the run to $126,000.

Bitwise says Bitcoin is "significantly undervalued" at current levels. The options market needs a break above $72,000 to confirm a trend reversal. We are not calling a bottom — trying to catch falling knives in crypto is a great way to lose fingers — but the setup for patient capital is becoming hard to ignore.

The miners know it. The question is whether you do too.