Value of BTC is NOT connected to Difficulty!

[wetroof]

I believe the price is connected to the expense of the total hash rate. recently we had very inexpensive hash rate added to the network.

[MWNinja]

There's a logarithmic relationship between price and hash rate of the network, price drives hashrate (and NO the tail cannot wag the dog).  It's a bit unhinged right now as we go through a disruptive technology cycle that is going to 50x the pre-ASIC hashrate.  Once we complete the disruptive cycle you won't see massive growth in hashrate unless the price is going up (which means new participants are joining bitcoin, and a percentage of them mining). 

[jhansen858]

Why does everyone think/assume so?!  Do they think just because it's harder to "get" something, the value of it would be worth more?

I don't understand where people get the idea that difficulty and value is somehow affiliated with each other.  The recent decent/pattern in BTC value clearly shows that the above statement is not true.  So please, STOP thinking when the difficulty is in the 9 digit figures, you'd be rich because (pulling random number out of my ass) value will be at $1000/BTC.  It's just wishful thinking.  Please research the economy of Bitcoin and understand how difficulty and value really works.

To say that difficulty has 0 impact on value is not correct.  Price is a function of supply vs demand.  If the difficulty rises, then mining has occurred at a faster rate than the target.  Therefore more coins than expected have been released onto the marketplace faster than intended.  This increase most likely resulted from new or existing miners having already spend to get new hashing capability.  The normal reaction to spending in order to invest in additional hashing capability is to want to make a return on that investment.  Therefore, one could conclude that after a significant hash rate jump, a few things might be true.  

a) lots of new hashing has just come on line, difficulty rises.
b) that new equipment was bought and paid for in the past
c) those machines were purchased with the intent of getting a return on investment
d) miners will wish to secure this investment asap after getting the machines which will cause them to mine faster than before and dump more coins than before faster
e) this will cause a short term decrease in price just as we are seeing now.
f) after this initial "investment" has been mostly paid back, miners then switch their strategy to holding.
g) this causes a longer term upswing in the price just as we saw after the GPU influx of 2 years ago.
e) normal already existing upward price pressure now becomes the driving force pushing price up as new adopters come online.
f) speculation starts to kick in causing the next bubble.
g) bubble ensues driving more technology into the market to create better ways to do hashing.  GOTO a

This assumes that most of the btc that is traded is being priced by miners generating new coins. The fact of the matter is that is not true. New coins are currently mined at a rate of 100,000 per month and that will eventually go down when the block reward is reduced. 100,000 coins per month is nothing compared to the 11+ million btc that is already in existence, so it is ridiculous to think that miners are the ones that can move the market to go up.

In fact, the relationship of difficulty to btc value is the opposite of what you are saying. As value of bitcoin increases (because of market factors), then difficulty will go up because mining will be more lucrative. When/if value of bitcoin decreases, difficulty will decrease because mining will be less desirable/profitable.

Increasing difficulty does not mean value will increase, but increasing value will certainly mean that difficulty will increase.

I used to think this but the truth is the market is a lot more thin than 10M bitcoins in circulation.  So miners dumping coins will have a significant impact.  If 1 month worth of coins were suddenly dumped, the price would go down to ~$60 according to the depth charts.  So that 30 days of mining rewards is enough to significantly drop the market

[Gamah]

I believe the price is connected to the expense of the total hash rate. recently we had very inexpensive hash rate added to the network.

inexpensive to the end user... very expensive to develop

[byronbb]

If difficulty is very high, then acquiring a bitcoin by mining is expensive. 

[Pinwheel]

If difficulty is very high, then acquiring a bitcoin by mining is expensive. 

that is correct, with rise in difficulty everybody will get less bitcoins, as new operators who entering mining will take their share. With running cost same and let say price of btc same, miner who got less btc will not be interested to sale at this rate and will wait till rate increase. To upgrade hardware miners no need to sale btc, but asic manufacturers will sale, but those are cleaver guys and they understand well, miners will buy asics when btc is higher.

it is interconnected process and it cant be otherwise. if bitcoins price on lower side miners will not sale and that will reduce amount of btc in circulation, resulting in price rise.

According to some previous analysis of blockchain 70% of mined coins never enter into circulation. If price of btc on lower side that can be 90% or higher. for example I sale 3% of mined coins, if btc price will get up to 120 I will sale more.

Difficulty rise and rate of btc both influencing mining in many ways.  So to say that diff and btc price not correlated not correct.

[superresistant]

What about the value of Altcoins and difficulty ?

I noticed that there is a strong relation between both, especially on new Altcoins.

[polrpaul]

What about the value of Altcoins and difficulty ?

I noticed that there is a strong relation between both, especially on new Altcoins.

Is this the "altcointalk.org forum"? Do alt coins even matter? Certainly not relevant to the discussion.

Regarding the OP, the value of Bitcoin has always been based on an economy of supply and demand.

[polrpaul]

If difficulty is very high, then acquiring a bitcoin by mining is expensive. 

Mining is not the primary method of acquiring Bitcoin, don't you know?

Further, the value of the mined Bitcoin can rise (or fall) unrelated to the Difficulty.

So I guess the discussion could be split in two: 1) those arguing from a miner perspective, and 2) those who are not.