In the horizon: difficulty crashes!

[dree12]

I don't usually write posts about difficulty, being the secular (as in, separation of mining from price) person I tend to be. However, with the upcoming buzz on the reward dropping, I figure I'll give my take.

Mining will become insanely profitable weeks before, and a while after, the reward halving.

Why? Well, I see three reasons:

• Miners shutting off or liquidating. This is already evident, as the mining, speculation, and goods subfora are buzzing with activity.
• Price appreciating. Many speculators are likely waiting for November to buy in before selling in time for the Christmas dip. For weeks before the dropping, and one or two weeks after, the price will be insanely high.
• Delayed ASIC No ASIC until 2013. Enough said.

Naturally, with lower difficulty and higher price, mining should be insanely profitable. Mine away!

[SkRRJyTC]

I am confused.  Why would difficulty crash if mining is profitable?

[Inaba]

Want to bet on it?

[dree12]

Want to bet on it?

I never bet on my speculation. If anyone wants to bet, they probably know more than me .

[meebs]

There will always be a "free market" equilibrium with mining profitability and hashrate.

If mining is very popular than more people will get in on the action. If mining becomes less popular than the GPU guys will be first to bail, than FPGAs, and the asic folk will be unlikely to drop out.. due to it being nearly free once you have the hardware.

Now if the price was to crash to say $5 again and stay there.. difficulty would probably drop a decent bit as the high electricity cost folk couldn't afford to mine anymore.

[cedivad]

Difficulty might go down but it will not compensate the 50% less coins per block.

[dree12]

There will always be a "free market" equilibrium with mining profitability and hashrate.

If mining is very popular than more people will get in on the action. If mining becomes less popular than the GPU guys will be first to bail, than FPGAs, and the asic folk will be unlikely to drop out.. due to it being nearly free once you have the hardware.

Now if the price was to crash to say $5 again and stay there.. difficulty would probably drop a decent bit as the high electricity cost folk couldn't afford to mine anymore.

The Bitcoin free market is not efficient yet. That's why speculators can earn money. There can still be slumps and riots.

[smoothie]

Want to bet on it?

This is the same guy who refuses to answer simple questions about the CEO or the person who runs the day-to-day operations for BFL.

What a joke...

[labestiol]

Want to bet on it?

Ready to bet that BFL will deliver ASICs before 2013 ? Interesting 

[Stephen Gornick]

Miners shutting off or liquidating

If they haven't by now, they probably are holding until block 210,000.  There's little risk to just seeing what happens.

Price appreciating[//quote]

That would definitely make mining more profitable.   I'm not convinced though.  It isn't a shock that it will occur -- and a lot of speculative buying has already occurred with the expectation of a rise.  If it doesn't happen, there could be a lot of dumping instead.

Delayed ASIC[/b] No ASIC until 2013.

There's still a month backlog of FPGA shipments even.   Plus, even if the ASICs aren't shipping, doesn't mean they aren't mining! 

Nobody knows for sure, but I would bet that unless the exchange rate rises, mining profitability will be decreasing from here through block 210,00.

[mb300sd]

Miners shutting off or liquidating

If they haven't by now, they probably are holding until block 210,000.  There's little risk to just seeing what happens.

Price appreciating[//quote]

That would definitely make mining more profitable.   I'm not convinced though.  It isn't a shock that it will occur -- and a lot of speculative buying has already occurred with the expectation of a rise.  If it doesn't happen, there could be a lot of dumping instead.

Delayed ASIC[/b] No ASIC until 2013.

There's still a month backlog of FPGA shipments even.   Plus, even if the ASICs aren't shipping, doesn't mean they aren't mining!  

Nobody knows for sure, but I would bet that unless the exchange rate rises, mining profitability will be decreasing from here through block 210,00.

Theres the risk that the market will be flooded with GPUs driving the price down.. better sell now.

[dree12]

Miners shutting off or liquidating

If they haven't by now, they probably are holding until block 210,000.  There's little risk to just seeing what happens.

Price appreciating[//quote]

That would definitely make mining more profitable.   I'm not convinced though.  It isn't a shock that it will occur -- and a lot of speculative buying has already occurred with the expectation of a rise.  If it doesn't happen, there could be a lot of dumping instead.

Delayed ASIC[/b] No ASIC until 2013.

There's still a month backlog of FPGA shipments even.   Plus, even if the ASICs aren't shipping, doesn't mean they aren't mining!  

Nobody knows for sure, but I would bet that unless the exchange rate rises, mining profitability will be decreasing from here through block 210,00.

Theres the risk that the market will be flooded with GPUs driving the price down.. better sell now.

Miners sell GPUs for BTC, which brings the price of BTC up relative to the GPU.