Bitcoin price vs. hash rate?

[komar]

• There is a corellation between hashrate and price.
  
• Hashrate has not any influence on bitcoin price. Hashrate always starts growing after price goes up (see the chart below).
  
• Bitcoin price has influence on hashrate. Hashrate is always growing up until mining cost hits bitcoin price.
  

Do not try to predict bitcoin price by watching its mining difficulty, it's useless.



(but if you don't care, welcome)

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[Swordsoffreedom]

With this difficulty level bitcoin price should be at $900 range. Most miners are not making money in mining.

agreed, currently it's probably a better bet to buy coin than mining gear.

there was NO SINGLE point in time, where buying hardware was better than buying coins. Bet this will not change ever

Damn! I never knew that, but yes it makes sense.

If only a quick time-trip to 2010 was possible. Buy 1000 BTC and cold wallet them on an engraved stainless steel sheet, bury it and time travel back.

Well I suppose we can pretend we are time travelling back from 2018.

Thinking about it there really was no time when hashing was worth more than price since well it started trading in 2010 and before that whoever was mining was just paying electricity lol

[sgk]

The people that keep mining when BTC rates are low are the ones who don't immediately sell their mined coins for USD right away. They HODL them because they believe in a bright future. Even if the current BTC rates are not profitable, they believe that some day in near future the prices will go significantly higher and what does not look a viable investment right now will look much more sensible at that time.

[Maharaja]

Hi all,
Given the recent flurry of posts on how bitcoin's value will keep on dropping, how does one think about the ever-increasing bitcoin hash rate?
http://blockchain.info/charts/hash-rate
http://blockchain.info/charts/hash-rate?timespan=60days&showDataPoints=true&daysAverageString=1&show_header=true&scale=0&address=

Looks like miners, the core backers and long-term investors in bitcoin, still have plenty of optimism left? And the current market is just speculators' short-term panic?

-ElOmmy

When the market is up, everybody is optimistic. When the market is down, two distinct groups of people form: pessimists (everything goes to zero) and optimists (everything will skyrocket). Neither one can predict the future, but copes with the stress of the down market by reacting the way they always react when things are bad.

Personally, I'm very optimistic and I'm in for the long haul.

[johnytelevision]

I had to idea how much hashrate is related to price. But won't it change in future ?

[TwinWinNerD]

I had to idea how much hashrate is related to price. But won't it change in future ?

Not really, efficency will continue to rise and if the price keeps his longterm upwards trend, then the money invested in hardware will not decline any time soon (if ever!)

[dandirk]

I know that people have made a profit from investing into BTC hardware with FIAT. But at no time, where a Investment into mining hardware with BTC profitable in terms of USD.

(I don't count the time when BTC was 1200 USD and then some hardware was bought)

What you wrote makes my brain hurt.

Rising BTC prices hedge risk and improve profits when investing in mining hardware.  It DOESN'T factor at all in if you are making/losing BTC directly by mining.

Your comments make NO sense.

"Investing" in mining hardware with FIAT or BTC is exactly the same thing except for any fee difference  in the transaction with one or the other.  If anyone says different they are fooling themselves.

If I have a $1000 today... I can buy BTC or I can buy a mining rig (whether that is in USD or BTC only matters in fees).  A mining rig is technically only profitable if it mines more BTC then its purchase price (in BTC) was.  Sure rising prices can mitigate the risk of mining by allowing a USD profit... but that profit would still be lower then if you just bought BTC thus just a hedge against loss.

People make BTC profit from mining all the time... if they didn't there wouldn't be pentahashes added almost daily.   Yes right now ASICs and business's are squeezing most profits out of mining but it does occur.


To the OP:  Hash probably lags price a bit since it is reactionary and takes time to order/setup mining rigs etc (and to take them down).  It also will be less and less of a factor as mined BTC become less and less a % of available coin.

[g4c]

• There is a corellation between hashrate and price.
  
• Hashrate has not any influence on bitcoin price. Hashrate always starts growing after price goes up (see the chart below).
  
• Bitcoin price has influence on hashrate. Hashrate is always growing up until mining cost hits bitcoin price.
  

Do not try to predict bitcoin price by watching its mining difficulty, it's useless.



(but if you don't care, welcome)

Hashrate follows price as you say yes.

But hashrate will have some effect on future price.

It is in the interests of miners to have higher coin prices. Miners are not just black boxes, they are also people, enough people can and will influence a market price through different means. For example spreading optimism about bitcoin, holding out for higher price on exchange etc.

Higher hashrate (provided it remains distributed) increases the network security which can only add worth.

A larger network computing power might impress new users. New user thinking "45 petahashes! wow this bitcoin must be serious stuff".

[right wing authoritarian]

I guess twin is assuming that those who buy with btc would have otherwise held btc for capital gain and when he says "profit" he means comparison between the long btc position and btc flows from mining.

I am not sure it is true that this has never happened. Anyone who buys hardware when btc is high before a fall and mines when hash rates are declining but has good enough hardware to mine more btc than it costs to pay for electricity will make a btc profit over and above a btc long position. This as happened at least once in bitcoin history (after the fall in prices from the first gox hack).

Granted it is a very specific set of circumstances.

[Bit_Happy]

i have always wondered what happens to bitcoin when everyone stops mining because its not worth it and the hash is to difficult? will bitcoin die then?

No
Difficulty falls and new miners get to enjoy producing BTC.

[BitOnyx]

Difficult goes down. That's why this system is so good and self stabilizing.

[EasySam]

Less people mining, lower difficulty.

I think it is simple and great, self regulating system.

[komar]

Hashrate follows price as you say yes.

But hashrate will have some effect on future price.

It is in the interests of miners to have higher coin prices. Miners are not just black boxes, they are also people, enough people can and will influence a market price through different means. For example spreading optimism about bitcoin,

"Miners have effect of price, because they are the great ponzi followers."

[kingscrown]

the higher the diff, the bigger the price.
its like that with all coins.

[TwinWinNerD]

the higher the diff, the bigger the price.
its like that with all coins.

are you sure its not the other way around?

[g4c]

Hashrate follows price as you say yes.

But hashrate will have some effect on future price.

It is in the interests of miners to have higher coin prices. Miners are not just black boxes, they are also people, enough people can and will influence a market price through different means. For example spreading optimism about bitcoin,

"Miners have effect of price, because they are the great ponzi followers."

Haha yes, but the paraphrase is true only if one thinks Bitcoin is a Ponzi scheme.

The bad part about ponzi schemes is that there is no utility behind them, this makes their worth only proportional to their market growth and failure is inevitable because of this.

Bitcoin does offer quite the utility, it having solved the problem of a distributed trustless transaction system. It works well, sure it's a little raw at the moment, in the end users won't be seeing key strings etc. (unless they want to).

The irony is that Bitcoins nemesis: fiat and fractional banking IS a ponzi scheme as "new" money is created at a rate of 10:1 on new debts that are taken out by users Talk about untennable and destined to fail

[TwinWinNerD]

Hashrate follows price as you say yes.

But hashrate will have some effect on future price.

It is in the interests of miners to have higher coin prices. Miners are not just black boxes, they are also people, enough people can and will influence a market price through different means. For example spreading optimism about bitcoin,

"Miners have effect of price, because they are the great ponzi followers."

Haha yes, but the paraphrase is true only if one thinks Bitcoin is a Ponzi scheme.

The bad part about ponzi schemes is that there is no utility behind them, this makes their worth only proportional to their market growth and failure is inevitable because of this.

Bitcoin does offer quite the utility, it having solved the problem of a distributed trustless transaction system. It works well, sure it's a little raw at the moment, in the end users won't be seeing key strings etc. (unless they want to).

The irony is that Bitcoins nemesis: fiat and fractional banking IS a ponzi scheme as "new" money is created at a rate of 10:1 on new debts that are taken out by users Talk about untennable and destined to fail

Well there is a good side to that. If the number of USD in circulation rises exponentially, the exchange rate of FIAT/BTC will also rise exponentially and nothing can stop it. BTC in that sence is a good hedge vs retarded central bankers.

[right wing authoritarian]

It has always been assumed that the hash rate follows the price. I would suggest that there is a real but weaker effect the other way around. When the hash rate goes up relative to the price, individuals look to exit the mining game and are no longer consumers of new mining hardware. As the mining hardware market is probably a significant slice of bitcoin trade any drop would also drop demand for and the value of bitcoin. This effect may well increase the size of the ups and downs leading to higher total volatility.

[g4c]

It has always been assumed that the hash rate follows the price. I would suggest that there is a real but weaker effect the other way around. When the hash rate goes up relative to the price, individuals look to exit the mining game and are no longer consumers of new mining hardware. As the mining hardware market is probably a significant slice of bitcoin trade any drop would also drop demand for and the value of bitcoin. This effect may well increase the size of the ups and downs leading to higher total volatility.

Yes, a feedback mechanism like this will be happening and others too.

I think mining and expectations have a big part to play in the rise and ring-down patterns that keep cropping up in the price chart.

In markets it seems all dimensions that may be found are fully cross coupled:

some couplings are strong.
some much weaker.
all couplings carry some information.
many couplings take abstract paths (psychology).

[nostradamus]

btc price falling down but hash rate raise up ... 

You should expect some carryover of continuing difficulty increase or relative stability for some time after a price collapse. Most Bitcoin hardware is pre-ordered in one way or another. Miners will be taking delivery of prepaid units for the rest of 2014 regardless of the BTC price. Even if the BTC price becomes abysmally low, miners will still continue to add their hardware to the network so long as it earns more than the cost of electricity (and maybe even if it earns less, if the miner is financially irrational).

However, we have seen some hashrate lost today, so there is some category of miner that is immediately sensitive to price.