Bitcoin Forum

Mentioned it before but showing 2 charts below. First is CEX.IO GHS price, second is Bitcoin Difficulty (inc total hashing). Up to May there was an inverse relationship between the 2. However since May the relationship has disconnected. There has been 6 difficulty increase since begin of May, but GHS price has trended up in that time-frame. Reason for showing is that you can consider the relationship between GHS and Difficulty / hashing power almost as a trading Pair because GHS essentially derives its value from the concept of an outcome from difficulty / total hashing power. So, has GHS in its market found a value that is now distinct from what Difficulty / hashing does? Or like trading pairs that have a historic trading pattern will the historic situation kick back in (i.e. return of inverse relationship)?

https://dl.dropboxusercontent.com/u/54432554/GHSChart2014.png
https://dl.dropboxusercontent.com/u/54432554/Difficulty2014.png

I'm not sure, but it's quite interesting. I would say that the trend will return at some point. It seems only logical that the price of a gigahash is going to continue to fall overtime as the network grows and difficulty rises.

The price of a GH/s depends on both the current and future values of the difficulty. The price has been rising at cex.io because future difficulty is now expected to be less than previously expected. This has caused the price to rise even though the current difficulty is still rising.

Despite that, the price at cex.io is still too high. It is unlikely that anyone holding shares at the current price will make a profit.

The price depends on what people are willing to pay for it. It's those who check the difficulty that affect the market the most. Otherwise, it's not necessarily the difficulty that changes the price.

That being said, it is true that anyone that holds the hashes for a long amount of time are most likely the ones who will end up getting burned, no questions asked. It's the traders that will actually make money.

It's like the stock market, but in an opposite trend. The stock market normally rises over a long period of time (unless they are 100% useless it get thrown under the bus of crappy management) and can be sold for more than they worth, while possibly paying dividends to the holders. Bitcoin is the opposite. Price decreases because of the difficulty increase and thus prices will decrease, etc.

So Bitcoin cloud mining is the opposite of the stock market. And it's opposite from the overall economy most anyways...

The value of a GH/s depends on the amount of bitcoin it will earn over time, in the future (future cash flow), this is based off of the current difficult and the rate at which difficulty is increasing.

The price of GHs should not deviate to far from the value, however the price is ultimately set by the market.

Could be that the price of Bitcoin was constantly going down since Jan, and then sharply went upwards in May?  ;)