Topic: Bitcoin Difficulty & Price prediction (Read 383 times)

So this usually doesn't pass me by, but only saw the news today that an "unusually large" amount of contract expirations coming up today on CME. It's always been on the news radar, but funny that the volume escaped notice from the newsboys till today (or I haven't been keeping up with the Joneses).

It has been a weird (or not) couple of post-halving weeks of ho-hum boring stability, I suppose it was these expirations coming up that helped bump yesterday and today's rates.

10k on the cards today? Before another traceback on Sunday/Monday then?

But now Bitcoin is telling who is the boss. Bitcoin still governs the market direction and structure. So even if Alts have good charts to trade, once bitcoin decides, it breaks the entire market structure for alts so fast.

I agree. Altcoins are so fucking bullish for BTC. This is something BTC purists don't understand. During strong bull markets, money flows back and forth between alts and BTC. Where people used to sell BTC for fiat, they start selling for alts instead. This reinforces bullish pressure on BTC in two ways: less supply (BTC/fiat exchange supply shifts to BTC/ALT markets and altcoin exchanges) and more demand (people are buying BTC to send to altcoin exchanges).

Despite the recent pumps in alts, I'm still skeptical until BTC officially breaks the year-long downtrend by breaking above $10.5K. Until then, altcoin investors may be jumping the gun. There could be one more bout of blood in the altcoin markets, not sure yet.

its nothing to do with the transactions. This cycle of money moving from bitcoin to altcoin is happening forever. Move and money in alts now, then move to bitcoin and repeat.

Miners who are small timers that needs to sell the coins they mine in order to pay for the costs of mining is the ones that closed shop I believe. I mean there is no data who stopped and who continues but that makes the most sense. The price went down because people are using different currencies right now to make transactions, which is why altcoins have gone up while bitcoin went down. Look at all the other times when the market crashes, usually altcoins goes down when bitcoin goes down and altcoins go up when bitcoins go up as well.

This time they were different, why? Because people are not leaving crypto at this moment, they still think crypto is cool, the only reason why they left bitcoin is the simple fact that its old and slow right now, eventually that will be fixed and price will go up again.

Yes, mining difficulty does play its role in bitcoin price but it's not reflected in real-time.
Bitcoin is a whale game, now it will range till alts complete their cycle. Thats why recent price dump did not break price structure for many of the alts. Alts are still pumping.
Once we will be out of that cycle, Bitcoin price will start moving in a trend.
Thats what i see happening

$ 8,000 can still be touched, but for $ 7,000 I'm not sure there will be accumulation there, because this time the situation of the crypto currency market is experiencing an upward trend, so it's better to accumulate at the price of $ 8000 is the right part

That is not the case, look at the chart, half or more of the signals did not trigger the way you describe them, miners don't capitulate only if the price dips, the mining business is way more complex compared to the average HODL business, miners can capitulate on the way up or the sideways market just the same as they capitulate on bear markets, there is a ton of explainings and reasons on why these facts are valid, I know it's hard to understand that miners can capitulate even when the price is going up, but it happens and it has happened before, and there are solid reasons for why that happens.



I would have been surprised if you sided the herd into taking anything else but this, looking at the charts for so long and analyzing the fundamentals of the market makes you see things the average joe can't see, the correlations between hashrate and price in both directions is one of a lot of things traders observe.

I have only met one miner in real life and they are definitely speculators. The guy just has rigs that he even hires people to manage, he has no wallet except the ones he receives his share of payments to (he uses a pool).

So it's definitely about money to him. He believes 100k BTC is coming, and soon even 500k in time to come.

If he switches off, it'll be because he can't make money. Simple.

wow, today I learned another signal to predict the price of bitcoin in the future. I have also heard about bitcoin's hashrate analysis that can predict future prices. Through many examples, I find that this is also a case that should be analyzed and included in our investment plan. I hope this time the price will drop sharply so that I can buy more at $ 8k or $ 7k.

There is definitely something to the idea that BTC miners are at their core BTC investors speculating just like us. Their exuberance and market capitulations are primarily observable through hash rate and only secondarily through price. This has to mean something in terms of investor sentiment (as you say, "blood in the streets") which in my experience is the biggest determining factor for long term market cycles.

I used to take the position that price determines hash rate, period. After hearing the (somewhat convincing) opinions of some OG miners and researching price vs. hash rate correlations over different periods, I am much more agnostic on the subject now. Impossible to say it's 100% this or 100% that.

Yeah, that is why I kept saying that bitcoin price would be unpredictable this time around because lets face it this time we had a halving that was expected by probably millions of people. I don't know the number of people who are interested in bitcoin right now, but every single one of us was looking at that date. Sure the retargeting and the difficulty could had his way as well but it wasn't like that at all this time since there was halving to go with it.

Moreover, bitcoin is doing fine, it is not crazy high, its not too low, its basically where it should be. Hell we could consider bitcoin to be a 9k stablecoin as well. No matter how high it gets or how low it drops eventually we find ourselves in 9-10k region at the end. So all in all we didn't really had any move anywhere unexpected.

Yes, this is also a way to predict the price of Bitcoin in a short span of time. But I feel this is unstable. If we are a trader, we need accuracy to the specific price and time. We can rely on the indicators to enter the command more accurately. And, of course, watching the volatility level still help us a lot in identifying short-term trends. Thank you for sharing a highly constructive article.

OP, the whalecumulators/price-setting entities would price that in the next time in my opinion. The moment we act on it, "the pattern" might be gone.

Interesting chart. I can recall pretty much all those events except the ones that occured in 2013 before I got involved with crypto. How does it work exactly? It basically seems to print a "buy" whenever there is a negative hashrate retarget and this is when the moving averages are downwards because of a pro-longed bear cycle. Hence the reason why the hashrate decreased in the first place to cause a "buy" alert.

However keep in mind that bitcoin "rarely" has periods of negative retargets. The only times were during bear markets and it could be a coincidence that during those bear markets which caused the "buy" signal we ended up reversing.

This time is interesting because we aren't really in a bear market but the halving had a factor in the negative retarget we experienced.

I personally tend to believe that difficulty follows price at least, for the most part, I, however, don't completely negate the fact that at certain times the opposite is true, in fact, some respected, well-experienced miners and old-timers believe that at many times difficulty leads price, so with all due respect to some of these gentlemen who make it sound like you were trying to predict bitcoin price by multiplying the number of eggs in your fridge by the number of red socks your neighbor has, the correlation between difficulty and price is a lot more accurate than that.

One of the most (if not the most) accurate indicator on Tradingview has always been the hash ribbons indicator, it uses NOTHING but hashrate/difficulty to predict the next move with nearly 100% accuracy.



The reason why most people think this is not possible is again simply based on the lack of understanding of many things surrounding bitcoin and market cycles in general actually work, every market consists of a capitulation phase and since miners are the backbone of bitcoin, their capitulation means a lot to the price, remember the famous saying "the time to buy is when there's blood in the streets"? well, tracking difficulty could be a great way to time that.

I, however, don't think it's possible to predict price using difficulty neither opposite for a short period of time like you have demonstrated, looking at the average price of week 1 and expecting difficulty to be at x value in week 2 is not going to work, tracking larger samples like the hash ribbon indicator does is certainly an intelligent way of using difficulty to predict price.

It was obvious from the start that he was looking at the wrong part to make a prediction, you do not look at the difficulty because difficulty only affects miners and the people who decide on the price is not mainly miners, sure they end up selling bitcoin but that is just one part of the price, there are also other sellers and there are buyers. Which means people who trade (buy/sell) decide what the price will be. Looking at part of something that is part of something is not the way to approach bitcoin at all.

Obviously it would have some affects on the price, but nowhere near that we could make predictions based on it. At the end of the day best way to make a calculation based on anything, it would always be TA, with TA at least you make prediction based on what happened previously that could happen again.

i think you are confusing a "whale" with "superman"!

the fact is that most whales don't even understand bitcoin. they think bitcoin is some numbers on some website (aka the exchange) that they can buy/sell to make money. if you tell them about mining they wouldn't know what you are even talking about.
not to mention that to mine bitcoin one has to have ASICs. your comments suggest any whale is holding some ASICs under their bed to pull out any time they want and mine bitcoin with it.

This. If there is a correlation, it's pure economics. Miners switch off when price goes down to the point they can't make more than they pay. Difficulty then adjusts (I think it will drop even more than the 3.x% estimated for the next adjustment, judging from a recent historic low in blocks found too.

Sorry hugeblack but you got this one wrong =)

I think the news is real and it's just part of the crowd. If the crowds all give up on mine bitcoin for the cost then whales will do it for them. When the difficulty decreases, the whale excavator will produce more bitcoins and then they can manipulate more easily in the future. That's the whale's strategy because they can control the market. When they have accumulated enough bitcoins, they will pump the price of bitcoin and make many miners active again. then they sell for a higher price and many people are trapped. of course this is a conspiracy theory about price manipulation but I feel it is very true. how do you think ?

The reason why you saw that a decrease in difficulty resulted in a decrease in price is most likely due to the fact that the difficulty decreased because BTC was trending downwards, and 2 weeks later the trend continued. Like everybody said here, difficulty follows price most of the time.

Prices goes up... so does difficulty
Prices stays the same... difficulty goes up anyways
Prices go down... difficulty usually stays constant or goes down.

This is in the macro scale of things. Hence its a lagging indicator and won't help you make any money since it already happened.

saying this is like me looking out my window and after seeing the streets are wet make the conclusion that it is going to rain in a couple of hours! (it is actually raining right now )

think about it this way, when you want to buy bitcoin (or as a trader place a buy/sell order) you are not looking at the difficulty to see how much it is to make a decision. instead you look at the "price charts" and place your orders. similarly a miner doesn't look at the difficulty, they look at price and decide whether to shut down, continue mining, hold their bitcoin or sell it or even buy new ASIC and mine bitcoin with it.
all working in the opposite direction of what you said here. price goes up and down and difficulty follows afterwards.

Well, first of all that $7k to $8.4k is a HUGE difference, if you are going to bet your money on falling I would understand it, you do not have to give any numbers neither, just say that price will fall and that is a good enough prediction, giving that wiiiide difference is weird. However about the drop, you have checked the previous difficulty changes when there was no halving at all, there was nothing that extra ordinary that could affect bitcoin, the march one is bigger because there was pandemic and had very little with difficulty neither.

I am not saying that difficult doesn't cause it to drop, all I am saying is there is this time is a bit different and that is why I think the results could vary this time around as well, just like the big fall because of pandemic at march compared to falls of before, this could be increase as well.

What is the relationship between complexity and price? I see only statistical, but it is meaningless.
I understand the relationship between price and, for example, the amount of electricity burned to operate a network. Here are obvious relationships. But an indicator of the complexity of the network, looking at which we cannot see the launch of new, more efficient mining equipment, cannot be an indicator that should be paid attention to.

Interesting observation. There is obviously some relationship between difficulty drops and downtrends but it's not as easy to trade as you think. For example the 3/26 difficulty drop did precede a drop in price, but it was only a small and short-lived correction in a much bigger multi-month bull trend.

It also may be significant that none of the above difficulty drops occurred after reward halvings. Those examples may not accurately characterize the hash rate dynamics we see today.

It is a tradition that old ASICs need to plug out instead of making negative profits. Here ASICs are getting old based on its profitability. So, the recent reward-drop made lots of miners old just after the day of halving. The entire mining industry needs to cope with new block-rewards and profitability, definitely it will take some time; because, out of competition some miners may even continue with negative profits with the expectation of reaching profits with future prices rather than opting to quit. Small miners are the first ones to quit or switch over to higher hash power. So, it will take time that bitcoin mining to get back to profitable after halving.

For the same reason, bitcoin prices do find a dump immediately followed by the halving but this time bitcoin markets managed to sustain at same levels to slight higher prices probably thanks to 100x more transaction fees. Usually higher transaction fees lead to bull markets. This way, when bitcoin markets remain in bullish mode, we can expect mining difficulty to increase.

reportedly 1.3 million miners have been turned off, I do not know this news is true or not,
if true, then this might make Bitcoin a dump, I know if someone new to mine in bitcoin then it is now in vain,
because the price must above $ 14,000 to make miners profitable

I think you got it backwards. Lower price may cause a drop in difficulty if the price becomes too low for some miners to continue mining. In theory higher difficulty may cause the price to drop a little bit as miners need to sell more bitcoins to pay their bills. However the total amount of new bitcoins being mined and sold by miners isn't that large compared to overall trading volumes, ~1800 per day.

Key question here is:
Is there any fundamental, economic reason for price to fallow difficulty?
Answer is:
NO

Difficulty fallows price and moor law (increase of hardware efficiency) not price fallow difficulty. This is a mistake that is repeated in many sources for unknown reasons. Just stop repeat it and let it die.

I have read some of the comments linking prices with the difficulty and did a quick research in an attempt to predict price behavior in the coming days and this was the result:

 
         Date                                   Difficulty                                 Change             Price Change


 - 2020-03-26 04:51:46   13,912,524,048,945 - 13.91 T          - 15.95 %          From 6700 to 5900 (4 Days)
 - 2020-02-25 10:28:42   15,486,913,440,292 - 15.49 T          - 0.38 %            From 9600 to 8500 (6 Days)
 - 2019-12-05 22:02:25   12,876,842,089,682 - 12.88 T          - 0.74 %            From 7200 to 6500 (13 Days)
 - 2019-11-08 01:30:36   12,720,005,267,390 - 12.72 T          - 7.10 %            From 9200 to 8047 (Next Dif)

Sources:
 
 - https://coinmarketcap.com/currencies/bitcoin/
 - https://btc.com/stats/diff

What I would like to say is that the decrease in difficulty gives us an indication that the price may fall in the next two weeks.

The current difficulty is at 16,104,807,485,529.00^[1] and it is expected to decrease in the next change by about -3.86%^[2], so I expect to notice a decrease in the price between the date of 19 May to the first of June.

I may bet on levels of $ 7000 to $ 8,400.

[1] https://www.coinwarz.com/mining/bitcoin/difficulty-chart
[2] https://diff.cryptothis.com/