how is difficulty determind?

[Randywag]

This may be a foolish question and it's just out of curiosity. Does the value of the coin determine the difficulty along with the block? I mean if the value hit rock bottom, would the difficulty drop as well?

[MingLee]

This may be a foolish question and it's just out of curiosity. Does the value of the coin determine the difficulty along with the block? I mean if the value hit rock bottom, would the difficulty drop as well?

It works by adjusting to the amount of hashing power essentially, trying to maintain a target time of 10 minutes per block. If the hashing power increases so that there is confirmation times under this, the network makes mining more difficult. If it loses hashing power, the network scales the difficulty so that it is easier overall.
There is no causation between the value of Bitcoin and the difficulty of the network.

[vh]

While there is no direct relation, there is a cost to mining.    If value hit "rock bottom", hashing rate will drop and difficulty will drop to maintain an average of one block every ten minutes.

[Amph]

the value have a sort of an impact on the diff of course, but the diff don't change directly because of that but only as a consequence

because if the value increase the hashrate increase and therefore the diff increase, this is the way it work

usually you see the diff retreat if the value go down because the hahsrate go also down first, there are moment where the diff increase after the hash even if the value is stale, because there is a huge margin of profit maybe like it is now...

[Lauda]

The Bitcoin difficulty started at 1 (and can never go below that). Then for every 2016 blocks that are found, the timestamps of the blocks are compared to find out how much time it took to find 2016 blocks, call it T. We want 2016 blocks to take 2 weeks, so if T is different, we multiply the difficulty by (2 weeks / T) - this way, if the hashrate continues the way it was, it will now take 2 weeks to find 2016 blocks.

For example, if it took only 10 days it means difficulty is too low and thus will be increased by 40%.

The difficulty can increase or decrease depending on whether it took less or more than 2 weeks to find 2016 blocks. Generally, the difficulty will decrease after the network hashrate drops.

If the correction factor is greater than 4 (or less than 1/4), then 4 or 1/4 are used instead, to prevent the change to be too abrupt.

There is a bug in the implementation, due to which the calculation is based on the time to find the last 2015 blocks rather than 2016. Fixing it would require a hard fork and is thus deferred for now.

It is possible to give a rough estimate for the next difficulty change, based on the time to find the recent blocks. Nobody can make longer-term predictions for the future difficulty reliably, but anyone is free to speculate based on exchange rate trends, Moore's law and other hardware advances

Source: https://bitcoin.stackexchange.com/questions/5838/how-is-difficulty-calculated
Useful to follow up on: https://en.bitcoin.it/wiki/Difficulty#How_is_difficulty_calculated.3F_What_is_the_difference_between_bdiff_and_pdiff.3F