Bitcoin Forum

I'm still wondering..

For coins that have low hashrates, because price/difficulty is becoming too low on the exchanges, what happens with the price shortly before/after a retarget?

Look at Mincoin for example: http://calc.vircurpool.com/ (http://calc.vircurpool.com/)

The price on mcxnow has been around 0.001 for quite a while now (though very slowly dropping). The hashrate has been going down for a while, and probably will go down more. Then, in one or two days, the retarget makes the difficulty absolutely PLUMMET by around 7 to 10 times. Profitability goes up massively. People will recommence mining.

What does this situation, on average, do to the price of a coin? If anything at all?

I reccon more coins will be created, so they'll be worth less per coin; but at the same time, more people will be interested in the coin, maybe driving the price up.. I'm at a loss here :)

Really, nobody?

The major issue with all the coins being produced is that they increase in circulation (inflation) regardless of demand.  If demands increases faster than the rate of coins produced then the price goes up.  If demands stays flat then the price of the coin goes down.

Difficulty retargetting only affects price in that it accelerates the short term rate at which price will drop because it is based on what the trader (not the miner) feels that future value of a coin will be.  When a miner gains some coins from mining he then determines if he should trade them or hold them.  Because he is fighting inflation rates odds are he will sell them.  So price will go down.

Thanks, that makes sense :)