How much is difficulty related to price? Interesting Picture

[Waramp22]

Something strange happened lately which i made a picture of.

With hashing on the rise, will they ever intersect again? It could take years for the price to catch up to that curve.

I think Terracoin had a difficulty that was so high compared to the value, that it was abandoned for mining more profitable alt coins.
Bitcoin is established, so hopefully this means the price will get a good push higher after the exchanges straighten their shit out. If not, the beginning of the mining recession.

Thoughts?

[satsumi]

With two curves with different units on the Y axis, you can make them intersect anywhere. The intersection has no meaning.

Even comparing the shape of the two curves over the same time is fairly meaningless. Difficult is just the output of an equation and doesn't actually represent the change in cost of mining, since there were quite a few developments over time that increased hashrate for the same investment.

[TERA]

Correlation != Causation

[Waramp22]

With two curves with different units on the Y axis, you can make them intersect anywhere. The intersection has no meaning.

Even comparing the shape of the two curves over the same time is fairly meaningless. Difficult is just the output of an equation and doesn't actually represent the change in cost of mining, since there were quite a few developments over time that increased hashrate for the same investment.

Then why have they been mimicking eachother since the beginning of bitcoin?

[Le Happy Merchant]

This thread is so dumb it made me angry.

[jimhsu]

With two curves with different units on the Y axis, you can make them intersect anywhere. The intersection has no meaning.

Even comparing the shape of the two curves over the same time is fairly meaningless. Difficult is just the output of an equation and doesn't actually represent the change in cost of mining, since there were quite a few developments over time that increased hashrate for the same investment.

Then why have they been mimicking eachother since the beginning of bitcoin?

[vokain]

you guys are so naive it upsets me. shows how much you don't understand about mining economics

price, determined by some intersection of supply and demand

high difficulty translates into
1) less coins rewarded per miner (greater distribution)
2) necessitates a higher price for them to break even on their investment (greater accumulation)
3) fiat that would've entered the mining space is now likelier to be spent buying bitcoins instead
4) restored equilibrium

and don't tell me that miners will panic or that they get coins for extremely cheap anyways because of mining. almost by definition they are in the long game, and anyways, the mining space is now becoming only viable for manufacturers

at the very least, increasing difficulty is a positive factor upon price to some degree. it might be lagged though

[TERA]

There may be some loose relationship like 5% of the reason for the price has something to do with mining but nothing significant enough to cause a huge correlation like the chart suggests. Prices have much more to do with adoption and market sentiment.

[Waramp22]

Here is an old thread i found on this same subject.

https://bitcointalk.org/?topic=7427.0

[HairyMaclairy]

I believe there is a correlation. But the chart does not account for Moores law.

[jimhsu]

you guys are so naive it upsets me. shows how much you don't understand about mining economics

price, determined by some intersection of supply and demand

high difficulty translates into
1) less coins rewarded per miner (greater distribution)
2) necessitates a higher price for them to break even on their investment (greater accumulation)
3) fiat that would've entered the mining space is now likelier to be spent buying bitcoins instead
4) restored equilibrium

and don't tell me that miners will panic or that they get coins for extremely cheap anyways because of mining. almost by definition they are in the long game, and anyways, the mining space is now becoming only viable for manufacturers

at the very least, increasing difficulty is a positive factor upon price to some degree. it might be lagged though

The point is - difficulty follows price. It's hard to justify the converse.