BTC Prices and Transaction Volumes After Difficulty Change

[OROBTC]

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As I write there are 22 blocks until the Difficulty changes, it looks like it will be around a 28% drop, the biggest change in BTC history IIRC.  That should be roughly 1:00 AM (US Eastern Time).  I will be curious to see how the prices and BTC transaction volume change.  If either prices or volumes would NOT change after such a large drop, then perhaps difficulty changes would mean very little on their own.

BTC price has been in the $33,xxx for the past two days.

Anyone want to weigh in?

[jackg]

I am expecting a drop from here on a TA front (only a few k though) so that might be something to also consider. We're on weekend volume so you might expect some manipulation/retail magnification if news like that hits.

As long as the chain remains secure, I don't think we have much to worry about 1btc=1btc and all that...

[somac.]

We will probably get the standard weekend dump, though we recovered last weekend from the early dump for ants quick enough.

So if it does go down, I don't expect it is because of the difficulty change, just the ususal low liquidity move lower.

My interest is on the mempool which is currently sitting near 60k. Will that clear out completely again and how long will it take.

[adaseb]

I don't think there will be any effect what so ever after the difficulty change, really makes no sense. If anything it will make mining a little more profitable and maybe get more miners to turn on their rigs.

However from a price perspective,  I don't see a reason why it would change. Generally price goes up then difficulty follows however the opposite is generally not true. Price can come down but hashrate can still go up or hashrate goes down and price goes down. So it shouldn't have any affect.

Basically for most of July, we will most likely range between $30K and $40K with some fake-outs at the range highs and lows. Wait until we get a clear break and then trade that direction.

[somac.]

I don't think there will be any effect what so ever after the difficulty change, really makes no sense. If anything it will make mining a little more profitable and maybe get more miners to turn on their rigs.

However from a price perspective,  I don't see a reason why it would change. Generally price goes up then difficulty follows however the opposite is generally not true. Price can come down but hashrate can still go up or hashrate goes down and price goes down. So it shouldn't have any affect.

Basically for most of July, we will most likely range between $30K and $40K with some fake-outs at the range highs and lows. Wait until we get a clear break and then trade that direction.

Pretty much this.

[tranthidung]

I don't know and as I said months ago, difficulty adjustment has lag effects (if there are) on price movements.

• Newest update on difficulty adjustment
• Price spread is the difference between highest and lowest daily price
• Lag effects: Possibly, significant increase of difficulty (relates to hashrate) results in price topping days later. Horrific drop of difficulty causes price dumping days later
• It's neither financial advice nor prediction

[pooya87]

I will be curious to see how the prices and BTC transaction volume change.

There is no relationship between difficulty adjustment and transaction volume or price, at least none in direction you think (from adjustment to price and volume). It works the other way around meaning when price goes significantly higher or significantly lower the profit of miners change so there is either a hashrate increase or decrease respectively and that changes the difficulty too. Also when price goes up and down there is an increased number of trades which means an increased number of coins going in and out of exchanges with on-chain translations.

Other than that when difficulty changes, only newbie investors and hyped up panic buyers/sellers are going to be affected and their influence over the price is small in cases like this.

With all that said, there is one thing that  could significantly affect the price very soon. That is the end of FUD which has been keeping the price down since the drama with China and its hashrate will soon be old news.

[buwaytress]

Reminds me of 2019 posts when there was a lot of "price follows hashrate" trends and I always thought there was a somewhat logical tinge to that -- the higher the difficulty, the higher the hashrate, the more secure the network. But I believe even at this 20+% drop, the network isn't practically less secure, is it? So price probably does follow hashrate, but only up to an effective point (a point that's unknown to me).

Blockchair's current estimate is +23% on next adjustment.

[hatshepsut93]

Reminds me of 2019 posts when there was a lot of "price follows hashrate" trends and I always thought there was a somewhat logical tinge to that -- the higher the difficulty, the higher the hashrate, the more secure the network. But I believe even at this 20+% drop, the network isn't practically less secure, is it? So price probably does follow hashrate, but only up to an effective point (a point that's unknown to me).

Yes, it's not like 51% attack will become possible after this 20% drop. Think about it, it didn't happen in the past when hashrate was 50% lower. Price and hashrate are influencing each other, but it was never a mathematical formula that ties them both together exactly. We've seen a lot of times one change without the other changing much, or many examples of opposite reactions at different times.

[adaseb]

This decrease that happened recently is unlike the hashrate decreases in the past bear markets. Those difficulty decreases was usually followed months AFTER the marked topped and people mining at home with expensive power just shut off their rigs. What happened recently is different. China has taken action and banned mining and this is why the difficulty is dropping. I won't say this is like in the past where this happened months after we topped.

The issue here is. If a large mining farm needs to ship their miners to another location, there is a shipping fee. Then they need to relocate or hire personnel which might cost more than in China, there are wages. And there is also the cost of electricity which might cost more than what it cost in China. So if mining is going to be more expensive in say USA rather than China, then miners will have no choice but to sell more BTC to keep their operation running, this would actually indicate that hashrate lags price. However the market cap is so large at the moment that it really shouldn't affect the price too much.

[Fundamentals Of]

This decrease in difficulty is definitely temporary so I don't think it has a lot of influence over price or even on the perception of Bitcoin's security. This has nothing to do with Bitcoin getting weaker despite the more than 25% drop. This is only a matter of a single country cutting its ties from miners operating locally.

If this were a drop caused by a good number of countries saying no to Bitcoin mining, this drop could have meant a lot more and would definitely affect the price. But then it isn't so Bitcoin's shape as well as its price are safe and sound. See you $100,000 soon.  

[buwaytress]

Yes, it's not like 51% attack will become possible after this 20% drop. Think about it, it didn't happen in the past when hashrate was 50% lower. Price and hashrate are influencing each other, but it was never a mathematical formula that ties them both together exactly. We've seen a lot of times one change without the other changing much, or many examples of opposite reactions at different times.

Didn't happen when hashrate was 75% lower either, and I do think that the "economically unfeasible" element definitely plays a part. To 51% attack it successfully, you'd have, at best, a few blocks' worth of time to take advantage before the network reorganises. Bitcoin would need to be worth a lot more than it is now for that attack to pay for itself. But by the time it's worth that much, hashrate would be many more times higher -- so yeah, in that very simplified term, I get it. Course, it's more complicated than that, but there's a reason why the attacks have happened on other networks -- where it's economically feasible to do it:)

[pooya87]

This decrease that happened recently is unlike the hashrate decreases in the past bear markets. Those difficulty decreases was usually followed months AFTER the marked topped and people mining at home with expensive power just shut off their rigs. What happened recently is different. China has taken action and banned mining and this is why the difficulty is dropping. I won't say this is like in the past where this happened months after we topped.

That's true but also lets not forget that bitcoin price did also fall 50% and the bull run has been on pause for the past 2 months. It stands to reason that some miners who were barely making profit (high electricity costs) also shut down their miners.
There are also other countries like Iran (that I don't see anybody talking about) with increasing hashrate that shut down their mining farms because they are experiencing a lot of electricity outages during summer.

What I'm saying is that saying is that claiming "all the hashrate that went away was from China" is wrong.

[magneto]

...

As I write there are 22 blocks until the Difficulty changes, it looks like it will be around a 28% drop, the biggest change in BTC history IIRC.  That should be roughly 1:00 AM (US Eastern Time).  I will be curious to see how the prices and BTC transaction volume change.  If either prices or volumes would NOT change after such a large drop, then perhaps difficulty changes would mean very little on their own.

BTC price has been in the $33,xxx for the past two days.

Anyone want to weigh in?

I would say that it has virtually no weighting on its own.

Macro trends regarding regulation and institutional adoption still dominate this space. As jackg mentioned, as long as there is no security risks to the network there shouldn't be anything that has fundamentally changed about bitcoin.

Prices are probably going to remain in the $30k-40k corridor in the foreseeable future as we consolidate after the rallies. Don't see any big swings either way.

[davis196]

I guess that the decrease of mining difficulty will decrease the transaction fees for a while.
This can potentially boost the transaction volume so more people will move the Bitcoins,that are sitting in their wallets,instead of HODLing them forever.After all,owning Bitcoins means spending them for goods and services,not waiting for the Bitcoin price to hit 1M USD somewhere around 2038 and selling those BTC for fiat.   Satoshi would be disappointed,if all the bitcoiners are simply waiting and HODLing.
However,I don't believe that a new FOMO phase will start anytime soon.