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Author Topic: Difficulty are going down - No question about it - New price target 3-4 dollars  (Read 4702 times)
fastandfurious
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August 12, 2011, 08:05:28 AM
 #1

Look at this link as proof: http://bitcoin.sipa.be/

Difficulty is plummeting. This is as I see it the strongest indicator of the price of bitcoin, the cost of creating bitcoins.

If the average Joe leaves then what is left is all the investors with heavy investments in 6990 GPUs etc. , they WILL want to have their money back asap, and they have invested massive amounts of money in May and June off this year. And they WILL sell at the market at nearly any price or a bit above electricity cost.

If the difficulty continues to go down (could be even just a modest drop), I have a new price target of 3-4 dollars. My last price target took 9 days (I said it will reach 5-6 dollars within 1-2 months when it was at 12 dollars), lets see how many days it takes for this one.
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piramida
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August 12, 2011, 08:45:48 AM
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the price still didn't reach 5-6 dollars unless you have your own little exchange that you monitor. only 6-7, but that's not quite the same especially if you use orders when trading.

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August 12, 2011, 08:58:10 AM
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Investors won't sell at 5 when there is a chance to sell at 10. Market volatility is very high so they will wait correction.

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August 12, 2011, 09:48:35 AM
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Look at this link as proof: http://bitcoin.sipa.be/

Difficulty is plummeting. This is as I see it the strongest indicator of the price of bitcoin, the cost of creating bitcoins.

The "proof" you provided is no proof at all.

Sipa calculates the hashing power of the network by aproximation. It computes the difficulty and the blocks found during a certain period. If the miners happen to be very unlucky for some period, it can seem that the hashing power is going down. And the same is true in the opposite direction, if the miners happen to be very lucky for a while, it can seem that the hashing power is going up.

Big short term variations are usually due to the luck of the miners. We have seen movements in the "hashing rate" like this before, both up and down.

You need to wait for a more long term average to confirm whether this was due to luck or not.
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August 12, 2011, 11:20:26 AM
 #5

Difficulty doesn't set the price of anything. Don't know where you came with those "price targets" from, it's a supply and demand market, not a "pay for the miners luck" and bitcoins will not be generated faster by a small decrease in difficulty, as that also means a decrease in allocated computer power.
fastandfurious
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August 12, 2011, 11:21:57 AM
 #6

The price actually reached under 6 dollars (mt.gox), look up your figures.
hugolp
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August 12, 2011, 02:41:49 PM
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Have you seen how the "hashing power" is already back up near 15000? Its not the total hashing power changing, its the luck of the miners influencing the stimations.
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August 12, 2011, 05:27:23 PM
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Difficulty doesn't set the price of anything. Don't know where you came with those "price targets" from, it's a supply and demand market, not a "pay for the miners luck" and bitcoins will not be generated faster by a small decrease in difficulty, as that also means a decrease in allocated computer power.

Basically this.

Difficulty is going to be a lagging follower of price in the long run, not the other way around.

The only way the opposite would occur is if a medium/large company decided to build a large mining array and then started running it before it announced that it would be doing something big with BTC that would raise the price significantly.
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August 12, 2011, 05:48:32 PM
 #9

The "proof" you provided is no proof at all.

Sipa calculates the hashing power of the network by aproximation. It computes the difficulty and the blocks found during a certain period. If the miners happen to be very unlucky for some period, it can seem that the hashing power is going down. And the same is true in the opposite direction, if the miners happen to be very lucky for a while, it can seem that the hashing power is going up.

Big short term variations are usually due to the luck of the miners. We have seen movements in the "hashing rate" like this before, both up and down.
It's pretty much definite that difficulty will going down if nothing changes, actually. Estimates over multiple non-overlapping periods of time have consistently indicated that the hash rate has dropped, and it looks like we should be in for at least a 3% drop in difficulty.

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August 12, 2011, 07:01:55 PM
 #10

It's pretty much definite that difficulty will going down if nothing changes, actually. Estimates over multiple non-overlapping periods of time have consistently indicated that the hash rate has dropped, and it looks like we should be in for at least a 3% drop in difficulty.

Yes, I agree, but he was refering to the big "drop" that the 8 hour stimate had this morning.
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August 12, 2011, 07:10:49 PM
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I already dropped off of bitcoin mining awhile ago. Needs to be above $13 for me to get back in. (about 2.7ghash/s sitting idle) Got a months worth of bitcoin mining from mining ixcoins for 1 day anyway.

So i'll wait and see, but for now I'm not mining.
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August 13, 2011, 04:56:38 AM
 #12

Actually, difficulty DOES have an effect on price.  Think about it this way.  You are new to bitcoins and you want to be long some, with your choices being mine or to buy.  If you do the math on power costs and at current difficulty your cost to mine is $7/btc with a bitcoin appearing once every 3 days while cost to buy is $5.80/btc, where do you think BTC prices will go short term?

Conversely, if the BTC is selling for $32 but it costs you about $2.50 to mine it at currently difficulty with a coin appearing every day where do you think BTC prices will go for the next few months?

There are other secondary effects.  If I look at difficulty and it looks like I'll have an easier time coughing up coins in the coming 2 weeks than today then it makes little sense to hoard.  If it looks like difficulty is going to drop a *LOT* then yeah, fire sale time.

That said my barometer of difficulty is deepbit.  Deepbit was going up about 100 Ghash/day, then that slowed down to 50 Ghash/day, and is now holding about even at around 5400 gigahash.  I'll panic if I see that drop to 4000 (which could happen if we trade at below $7/btc for more than a few weeks).  Until then it still looks like smooth sailing.


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August 13, 2011, 08:29:52 PM
 #13

If you live in the American Midwest and are finding it unprofitable to mine, you can move your rig into my place and I will charge you only 40% of your current electric bill.

I get free electricity.

geek-trader
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August 13, 2011, 09:27:18 PM
 #14

I disagree completely that difficulty causes price changes.

It's the other way around.

If the price goes up, more people mine, and then the difficulty goes up.

If the price goes down, less people mine, and the difficulty does down.

Price affects difficulty.  Difficulty does not affect price.

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Enky1974
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August 13, 2011, 10:33:30 PM
 #15

I disagree completely that difficulty causes price changes.
It's the other way around.
If the price goes up, more people mine, and then the difficulty goes up.
If the price goes down, less people mine, and the difficulty does down.
Price affects difficulty.  Difficulty does not affect price.
Yes, i found a lag of 15 days on average beetween price and diff., if price goes up then miners need 15 days to buy new hardware, setup the rig and start mining with the final effect of rising the difficulty.

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Oldminer
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August 14, 2011, 03:16:29 AM
 #16

Blocks per hour now down to 4.88

Next difficulty 1,841,634

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fastandfurious
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August 14, 2011, 07:14:52 AM
 #17

Blocks per hour now down to 4.88

Next difficulty 1,841,634
Difficulty down -> More bitcoins for the miners that are left mining (and are profitable) -> more bitcoins to sell to the direct buyers -> more pressure on the exchanges
geek-trader
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August 14, 2011, 07:37:28 AM
 #18

Blocks per hour now down to 4.88

Next difficulty 1,841,634
Difficulty down -> More bitcoins for the miners that are left mining (and are profitable) -> more bitcoins to sell to the direct buyers -> more pressure on the exchanges

Same bitcoins per day to miners
Same bitcoins to sell to buyers
Same pressure on the exchanges

that's kinda what the difficulty does.

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fastandfurious
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August 14, 2011, 07:46:14 AM
 #19

Blocks per hour now down to 4.88

Next difficulty 1,841,634
Difficulty down -> More bitcoins for the miners that are left mining (and are profitable) -> more bitcoins to sell to the direct buyers -> more pressure on the exchanges

Same bitcoins per day to miners
Same bitcoins to sell to buyers
Same pressure on the exchanges

that's kinda what the difficulty does.

You don't get it? Why is it that so many here don't get easy math or easy economics. It should not be that hard. If difficulty goes down then I can mine more bitcoins with my "1,4 GHash/s rig" / day, when i do so, I will be able to sell MORE bitcoins / day, and because of that I don't need it to be at 5-6 dollars, I'm happy to get 3-4 dollars and I STILL make a good profit at the last line, that is in dollars / day. Get it now? If not please stop commenting.
fastandfurious
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August 14, 2011, 07:53:04 AM
 #20

If the 10 dollar price should be sustainable, we should start to see an increase in the difficulty soon. It is like the market of Bitcoins prices in a difficulty increase, at the same time miners are leaving (not in a hurry but you can see that it is going down) and are showing the market that they have for different reasons stopped mining. My bet is on that it will continue going down for a while. And once again the direct buyer is feeding the beast, that is the miners, without having done their due diligence.
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