Nice analysis that I can't pick any factual holes in, good to have such an educated piece.
The key is of course this statement:
Now the historic difficulty shows us that the difficulty rarely went below 10%, so let's include at least that one. Let's also include the ubiquitously cited 20%.Now, if you take the bitcoinwisdom figures (which is a great site) and plot all the difficulty changes they have, you get this
![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fwww.megamine.com%2Fassets%2Fmegamine%2Fimg%2Fdifficulty.png&t=663&c=KzeSns7gnq1VSw)
The difficulty (sorry, no pun intended) is what you mean by
historic, especially if you are looking at a 12 month, but more so a 24 or 36 month contract.
I've given three possible views, there can be many more
![](https://ip.bitcointalk.org/?u=http%3A%2F%2Fwww.megamine.com%2Fassets%2Fmegamine%2Fimg%2Fdifficulty2.png&t=663&c=uOTdHgbD7O8QAA)
The red line seemed to be what was happening in the 'early phase' of bitcoin.
The green is essentially the last year and a half averaged.
The orange is the last year.
So which do you use to predict the next 10 months. The average. The last year. Since time began. A weighted version against bitcoin price? Something else?
The uptick right at the end that argues against the orange line is, of course, last weekends 25%+ change, but there is pretty good speculation about what caused that, and it's certainly not carrying on because estimated difficulty has been steadily falling since the last change, and is now down to 15%. The latest graph from bitcoinwisdom shows that clearly.
![](https://ip.bitcointalk.org/?u=https%3A%2F%2Fbitcoinwisdom.com%2Fassets%2Fdifficulty%2Fbitcoin-difficulty.png%3F1404247204&t=663&c=d8KtWXqWeJCIZA)
So, is the 'arms race' over, or is this the lull before the storm? That is the question, or the fun of predicting the two way problem about BTC price and hash rate progression.
The main issue is of course small impacts on what you 'flatline' difficulty in your calculations have large impacts on early life contracts such as the one I demonstrated, and I would argue that your analysis where you 'flatline' a difficulty change every 2 weeks is half the issue in your predictive answers as clearly difficulty is not going to flatline.
Finally, as you note, just like buying shares when you are 20, ignoring them, and seeing what they are worth at 50 probably isn't the best investment strategy, we wouldn't really recommend anyone not doing a more balanced view of how to invest in mining buy regularly buying contracts to smooth out ups and downs.
One final minor thing, we have a mid price of 455 not 435 for 4th May, but that only changes your 'buy bitcoins' analysis by 5%.