Bitcoin Forum
December 16, 2017, 07:36:20 AM *
News: Latest stable version of Bitcoin Core: 0.15.1  [Torrent].
 
   Home   Help Search Donate Login Register  
Pages: [1]
  Print  
Author Topic: Fiat Conversion Price to Difficulty  (Read 788 times)
millsdmb
Sr. Member
****
Offline Offline

Activity: 308


View Profile
August 19, 2013, 11:13:27 PM
 #1

Is it typically expected that mining difficulty and fiat price are inversely correlated? How much weight does the difficulty have on fiat prices, in your opinions?

Hitler Finds out about the Butterfly Labs Monarch http://www.youtube.com/watch?v=4jYNMKdv36w
Get $10 worth of BTC Free when you buy $100 worth at coinbase.com/?r=51dffa8970f85a53bd000034
1513409780
Hero Member
*
Offline Offline

Posts: 1513409780

View Profile Personal Message (Offline)

Ignore
1513409780
Reply with quote  #2

1513409780
Report to moderator
1513409780
Hero Member
*
Offline Offline

Posts: 1513409780

View Profile Personal Message (Offline)

Ignore
1513409780
Reply with quote  #2

1513409780
Report to moderator
Advertised sites are not endorsed by the Bitcoin Forum. They may be unsafe, untrustworthy, or illegal in your jurisdiction. Advertise here.
1513409780
Hero Member
*
Offline Offline

Posts: 1513409780

View Profile Personal Message (Offline)

Ignore
1513409780
Reply with quote  #2

1513409780
Report to moderator
DeathAndTaxes
Donator
Legendary
*
Offline Offline

Activity: 1218


Gerald Davis


View Profile
August 19, 2013, 11:15:43 PM
 #2

Is it typically expected that mining difficulty and fiat price are inversely correlated? How much weight does the difficulty have on fiat prices, in your opinions?

None.  Higher price drives difficulty*.  At one time someone even provide some analysis showing the correlation of price driving difficulty.  There is no evidence that difficulty drives price though.  The minting rate remains (roughly) the same and today supply is only expanding by 0.3% per day due to newly minted coins.  As mining becomes unprofitable the most marginal miners quit and difficulty falls until price rises sufficiently to warrant increased hashing power.


* As the exchange rate rises the profitability of miners also rises.  This is because once hardware is bought the primary cost for continued mining is electricity which is priced in fiat. The increased profitability (ROI%) causes more hashing power to be brought online (miners chasing higher profits) and difficulty rises.  If price falls the profitability of miners go down and the least efficient miners (marginal miner) go underwater first.  Their cost to mine a coin is more than the coin is worth so some of them will idle their rigs and difficulty falls.
millsdmb
Sr. Member
****
Offline Offline

Activity: 308


View Profile
August 19, 2013, 11:26:57 PM
 #3

Is it typically expected that mining difficulty and fiat price are inversely correlated? How much weight does the difficulty have on fiat prices, in your opinions?

None.  Higher price drives difficulty (as profit margins for miners go up so miners deploy new hardware).  At one time someone even provide a mathemtical correlation of price driving difficulty.
There is no evidence than difficulty drives price though.  The minting rate remains (roughly) the same and today supply is only expanding by 0.3% per day due to newly minted coins.

Thanks!!

Hitler Finds out about the Butterfly Labs Monarch http://www.youtube.com/watch?v=4jYNMKdv36w
Get $10 worth of BTC Free when you buy $100 worth at coinbase.com/?r=51dffa8970f85a53bd000034
johnyj
Legendary
*
Offline Offline

Activity: 1834


Beyond Imagination


View Profile
August 20, 2013, 12:09:41 AM
 #4

From a "get some profit in fiat through mining" point of view, mining difficulty is affected by the price. From "get as much bitcoin as possible with the lowest possible cost" point of view, mining difficulty affect the price. It all depends on if you want fiat or your want bitcoin

Pages: [1]
  Print  
 
Jump to:  

Sponsored by , a Bitcoin-accepting VPN.
Powered by MySQL Powered by PHP Powered by SMF 1.1.19 | SMF © 2006-2009, Simple Machines Valid XHTML 1.0! Valid CSS!