It ignores supply and demand: when rewards fall, unprofitable miners shut off their ASICs, which lowers difficulty and shifts all block subsidies and fees to the remaining miners, making them more profitable.
More profit means less selling pressure on mined Bitcoin, so less supply hits the market and price rises.
When Core Scientific went bankrupt in 2022, the next block was mined without issue. New miners replace those who leave because mining remains profitable.
That’s the advantage of a purely capitalist system — nobody is too big to fail, and exits benefit remaining participants.