Price vs Difficulty Charts - indicators for buying or mining

[Cosbycoin]

Perhaps an updated chart from the OP for current price and difficulty?


Thanks in advance!

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+1 Still waiting...

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[k]

Look at the charts at http://bitcoinx.com/charts/

[phelix]

Look at the charts at http://bitcoinx.com/charts/

thanks for pointing them - I just could not. 

[Stephen Gornick]

Since, BitcoinX is down, I thought I'ld post another variation for this:

This is Jul 16, 2010 through July 4, 2012:




This really should be logaritmic, but Google Docs charts are lame.

The data is from here:

 - https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdHVRMHpqWUJValI1RlZiaEtCT1RrQmc

[Stephen Gornick]

Since, BitcoinX is down,

It is back onlline.

This really should be logaritmic, but Google Docs charts are lame.

Ya, like this one (thanks to BitcoinX).

The chart on the top clearly shows difficulty barely moving but when it does, it follows the direction of a price move (after a long lag behind).  Because the costs to mining vary, from one mining operator to the next, what likely has been happening has been a rotation of GPU mining capacity from those whose electric rates are not competitive to those whose is competitive.  Thus overall little net new investment in mining capacity, just that the possession of the capacity has changed.



 - http://bitcoinx.com/charts/chart_large_log.png

Just like driving down the street while looking only in your rear-view mirror is a bad idea, this price vs. difficulty relationship will likely look different going forward versus how it has looked in the past.

The block reward drop to 25 BTC, likely in less than five months, will decimate GPU mining profitability.  Additionally, because FPGA mining is still nicely profitable at sane difficulty levels (due to a 5:1 to 10:1 efficiency advantage over GPUs), the electrons will be allowed to continue flowing through them.

And if the ASIC designs truly arrive around that same time, difficulty will skyrocket, regardless of any directional change in the exchange rate.

[FiatKiller]

bump, good thread for all us relative newbies

[komar]

Hi there.

I drew a few similar charts, but I used concepts of "self-cost" and "profitability" for different mining hardware.

Bitcoin mining cost (self-cost):


Mining cost is not depending on bitcoin price but only on:

• how much is revard (50 or 25... — you can see the difference at December 2012),
• how much is the energy cost ($0.12 per KWh here),
• and what's is current difficulty.

MtGox price presents there just to show you a funny dependence: bitcoin price usually doesn't come lower than mining cost.

Litecoin mining cost (self-cost):


Bitcoin mining profitability:




And another one for GPU miners: litecoins vs bitcoins mining profitability:


These charts are also available on http://divananalit.org/

[FiatKiller]

thanks for the updated charts!

[Newmine]

Why should we expect price to go up if difficulty increases?  Isn't it the other way around?

Price goes up when difficulty increases because as they become harder to get from mining, people buy.

Difficulty increases when price goes up because higher prices offset the increase in difficulty, making mining attractive again.

The question here is which is the leading indicator and which is the lagging.

I know this is old, but very well said. I had been coming to this conclusion for awhile now. I have been debating on buying into a rig but kept seeing posts from people saying its cheaper to buy and you will never recoup the cost of equipment.

If GH/s and difficulty are directly related then when difficulty surges from more mining rigs, price hikes usually follow because for those without he mining equipment it is cheaper to buy a coin than mine. After looking back to October 2013 through January 2014, difficulty increased a total of ~850% while price increased ~550%. Although at times during this period, difficulty rose ~350% and price rose ~650%.

What I have seen is that as difficulty and hash rates rise price tends to follow or even lead. Does this guarantee profits? Absolutely not. Markets are still controlled by outside factors which are irrational to the system but rational to those who control the moves.

[mmcgehee]

Fantastic data here.  Anybody aware of an update . . .  more recent data?

[smooth]

Fantastic data here.  Anybody aware of an update . . .  more recent data?

Yes. Someone did a paper using a statistical test for causality and concluded that price leads difficulty. I don't have a link though, but it is on this forum somewhere.

[peeveepee]

Fantastic data here.  Anybody aware of an update . . .  more recent data?

Yes. Someone did a paper using a statistical test for causality and concluded that price leads difficulty. I don't have a link though, but it is on this forum somewhere.

Or it can be seen as difficulty adjust to price.

Chicken or egg problem. Hard to say which come first.

[Benjig]

Since, BitcoinX is down, I thought I'ld post another variation for this:

This is Jul 16, 2010 through July 4, 2012:




This really should be logaritmic, but Google Docs charts are lame.

The data is from here:

 - https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdHVRMHpqWUJValI1RlZiaEtCT1RrQmc

so we are clearly down in the price, it should go to 1000 at least to be pair with the difficulty.

[smooth]

Fantastic data here.  Anybody aware of an update . . .  more recent data?

Yes. Someone did a paper using a statistical test for causality and concluded that price leads difficulty. I don't have a link though, but it is on this forum somewhere.

Or it can be seen as difficulty adjust to price.

Chicken or egg problem. Hard to say which come first.

There is no chicken and egg problem. It has been solved.

It has been looked at rigorously, as I said, and the evidence is that difficulty adjusts to price, not the other way.

In the short term anything can happen but the weight of the evidence suggests that difficulty adjusts to price. Difficulty also adjusts to other factors (technology changes) but in that case it does not lead to a price change, according to the evidence.

[nwfella]

Interesting analysis

[smooth]

Here's an old analysis that concludes the same -- price (along with other factors) drives difficulty.

https://bitcointalk.org/index.php?topic=123238.0

I can't find the newer one but I'm pretty sure it was 2013, probably late 2013.