How long till the difficulty starts to drop since the price is not keeping up with difficulty?
Large scale mining farms would appear to be profitable with current mining hardware and current difficulty down to about $150 per bitcoin.
This assumes the miners operating in northern areas with air cooling, can get electricity at about $0.05KWh and can make their miners for a marginal cost of about $1,000 to 2,000 per 4 terahash miner.
So don't expect any large scale miners to turn their miners off at this stage. They will still be adding capacity.
Those numbers need further examination. A large-scale miner has costs for construction, floor space and staffing. And the difficulty reduction has to be calculated in.
Play with
this calculator. That's set for the assumptions the poster gave. Bitcoin price is assumed constant at 400, and difficulty is assumed to increase at 10%/adjustment. Break-even is in November 2014. At end of life, profitability is 70%.
Now
try a price of $300. Breakeven is at the end of January 2015. But at end of life, profitability is only 6%.
At $290, end of life profitability is only 0.07%. Below that, it's never.
Not seeing any way to get profitability at $150 given realistic assumptions.
I suspect these are just two different aspects of the same issue.
One way it to look at what is the lowest economic bitcoin value for mining with the CURRENT difficult. This shows that a price one third of the current bitcoin value would make some large scale mining farms uneconomic ($150).
The other way is to look at difficult level changes to find the point where large scale mining will stop growing, based on the current prices, as Nagle has done. This shows that at current prices a three times increase in difficulty to about 100,000,000,000 to 200,000,000,000 (say 10% for 8 to 10 difficulty changes) would make mining uneconomic.
In summary large scale mining is currently quite profitable. But a three times increase in difficulty or a corresponding fall in bitcoin value price, would make large scale bitcoin mining uneconomic with current hardware and bitcoin values.
This thread asks "How long till the difficulty starts to drop since the price is not keeping up with difficulty?"
Using the above estimates of mining profitability it looks as if large scale mining will not stop rapidly growing, and difficulty will not stop rising till early/mid next year. At this point the cost of mining on a large farm and the value of the mined bitcoin will basically be in balance.
Difficulty changes are then likely to follow the value of bitcoin even if with a lag. It is the same as the amount of gold mining around the world changing as the value of gold changes. If it is profitable to mine lower grade gold you can be sure miners will appear. If it becomes unprofitable for certain gold mines they will eventually close.
As the regular 2016 block difficulty adjustment has a 2% or so statistical variance we should see in 2015 the occasional negative difficulty change, even if the total mining hash rate is still slowly rising.
But big drops in difficulty are not likely until mid 2016 when the bitcoin block reward changes from 25 to 12.5 bitcoins. The hashing difficulty should then half very quickly. (This assumes the halving does not also affect the bitcoin price.)
