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If things keep going as they have been for the last half year, we're looking at 7 more two week cycles until mining becomes completely unprofitable for pretty much everyone but the most efficient people. This happens roughly around difficulty 10 million given that BTC price stays at $20 or less.
Given that we are now at difficulty .877 million, and the average rate of difficulty increase over the last 8 months has been about 55% per two weeks, we will reach difficulty 10mil+ in 13 weeks. At that point an electricity cost of just $.15 / KWH is going to be enough to make mining unprofitable on a machine that nets ~2Mhash/W (2x5870).
There are a lot of assumptions here, but given the trend of processing power increase this is something to consider before jumping into mining (unless you already have the hardware).
Of course the big risk here is that BTC price can move wildly. I think a $20/BTC is a reasonable estimate for the average price in the next few months - but far from certain of course. However, we MUST recognize that there is no basis for difficulty of mining to have any effect on the price of a coin in the short term.
Difficulty adjusts according to the processing power of the network, which keeps the rate of coin generation roughly at 2000 per 2 weeks. So regardless of the amount of processing going on out there, the supply of new BTC is fixed per time unit. Since the total supply of BTC is essentially fixed, the dollar price is only influenced by the demand for BTC. There is no way to know what the demand side is going to do, and what kind of political risk we are facing (U.S. govt could outlaw it for example).
As a result, this calculation is inexact at best. But I think I've presented at least a plausible scenario given the data. Let me know if you differ in opinion.
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