is there a consistent relationship between mining difficulty and coin price?

[ggbtctalk000]

I have contemplating about this and even consider capturing data however havent had a chance yet.
I presume if the coin price plummets then people will lose interest and move to other profitable coin and as a result, falling coin's difficulty would decrease but so far I havent quite noticed that with zcash. Sometimes it seems opposite is happening.
But I'd really need to capture long term data over long enough time range to see any relationship and/or pattern being observed.

[drunkenone]

I have contemplating about this and even consider capturing data however havent had a chance yet.
I presume if the coin price plummets then people will lose interest and move to other profitable coin and as a result, falling coin's difficulty would decrease but so far I havent quite noticed that with zcash. Sometimes it seems opposite is happening.
But I'd really need to capture long term data over long enough time range to see any relationship and/or pattern being observed.

You can easily see this just looking a few times a day at whattomine. For example, Musicoin is up ~50% on bittrex, and the difficulty is up ~42%, as people switch from mining other coins to make those big profits. However the estimated rewards have plummeted due to that large increase in difficulty.

[leonix007]

I have contemplating about this and even consider capturing data however havent had a chance yet.
I presume if the coin price plummets then people will lose interest and move to other profitable coin and as a result, falling coin's difficulty would decrease but so far I havent quite noticed that with zcash. Sometimes it seems opposite is happening.
But I'd really need to capture long term data over long enough time range to see any relationship and/or pattern being observed.

For the basics, people will mine the most profitable coin they could see at any online calculators. then difficulty of that coin will rise, however, it is more profitable to mine a decent coin like zcash as even though the price has plummeted it still can increase long terms. it is a mine and Hold strategy. another thing is that zcash can be mined on old GPU's like AMD280's.

[Undefined31415]

I have contemplating about this and even consider capturing data however havent had a chance yet.
I presume if the coin price plummets then people will lose interest and move to other profitable coin and as a result, falling coin's difficulty would decrease but so far I havent quite noticed that with zcash. Sometimes it seems opposite is happening.
But I'd really need to capture long term data over long enough time range to see any relationship and/or pattern being observed.

There is no simple consistent relationship between the two.

Mining difficulty alone isn't sufficient for making accurate predictions of coin price, nor the other way around. Perhaps you could make general statements, such as "If all other factors are constant, and coin value decreases, then we would expect the mining difficulty to decrease as other options are explored."


If there is a time where a coin is primarily being used by miners looking to make a quick profit with a different preferred coin, they would simply dump in favor of that preferred store of value. If such were the case, then we would expect the price to drop as miners continue to sell their coins to a smaller pool of spectators.

That behavior is not typical of successful cryptocurrencies. Miners are never the only users of a such coins. A large number of people are always in it to speculate, whether that's simply because they believe the value will increase, or because they value the coin itself based on the merit of the system and its ability to be used as a medium of exchange.


Mining alone does not account for enough of the variation in coin price to make good estimates. The behavior of speculators will always influence the value and is inherently difficult to predict.

[MagicSmoker]

I've only been mining for a few weeks and I've already learned to avoid mining whatever is the most profitable coin on whattomine; it doesn't take long for the difficulty to catch up with the profitability.

[sjbi]

Not a consistent one but they have a relation.
1. When the price is low, fewer people would be mining it hence the difficulty would be low.
2. With increase in price, more people would jump into and hence increasing the difficulty.

So, its use and price that makes miner jump into a coin than the price being set due to difficulty.

[danialzo]

I've only been mining for a few weeks and I've already learned to avoid mining whatever is the most profitable coin on whattomine; it doesn't take long for the difficulty to catch up with the profitability.

I agree. I am also adopting a long run strategy. Mine and hodl the coin I believe in with good future potential. Profit switching is just not working as most miners are expecting. It's profitable for 12 hrs, once you switch and mine to accumulate decent amount to take to exchange, baaam it goes down.

[QuintLeo]

I have contemplating about this and even consider capturing data however havent had a chance yet.
I presume if the coin price plummets then people will lose interest and move to other profitable coin and as a result, falling coin's difficulty would decrease but so far I havent quite noticed that with zcash. Sometimes it seems opposite is happening.
But I'd really need to capture long term data over long enough time range to see any relationship and/or pattern being observed.

No, there is no direct relationship between the two.

There IS a direct relationship between both of those and PROFITABILITY though.

Price rises DO tend to fuel higher difficulty over time indirectly, as PROFITABILITY increases and folks build more rigs to take advantage of the profitability increase.


Many folks "chase the profitability" into coins that briefly spike on profitability - it tends to even out most coins over time fairly closely but often takes a day or two and sometimes might take a week.
Folks that don't "chase the profits" STILL benefit some as hashrate leaves the coin they're on to "chase the profitability" - and they don't lose any mining income while they are switching their rigs over to another coin.


When I look at whattomine, I NEVER look at "current profit" - I normally look at 24 hour average as a minimum, and more commonly at 1 week average, before I decide if it's worthwhile moving my farm to something else.
Other folks are more "gotta max out to the limit"....


To be explicit, as it's been asked before - difficulty does NOT cause price rises, it's the other way around but not directly, and there is a lag factor involved (a really BIG one the past year and some on Bitcoin and Litecoin due to limits of ASIC manufacturing, a lesser but significant one for some months this spring when most GPU coins shot WAY up and rig-building couldn't keep pace).