Topic: Bitcoin Mining difficulty VS price (Read 157 times)

Correlation does not automatically mean causation. Maybe they just happen simultaneously. Bitcoin goes up in the long run because of its scarcity, hashrate goes up because new ASICS are more efficient and more miners join the network. Of course there is some connection if you look at extreme changes - if Bitcoin was worth a fraction of what it is now, hashrate would have been much lower. But it's not like you can predict the price or hashrate by looking at the other at some very short scale.

Price is one factor. Other factors are the price of electricity, and the cost and availability of the mining equipment.

I don't think that mining difficulty has a correlation with bitcoin price if so the bitcoin should be bullish this time since it is already very high and crosses the price in your chart.

Secondly, Bitcoin difficulty happens when people mine bitcoin more and more, and if you are looking the difficulty of mining is getting higher and higher, and a small correction is because the price of bitcoin is down and maybe cannot cover the electricity fee and that's it.

Historically, the hashrate has followed the price but as more and more bitcoin mining is being done with stranded, curtailed, and otherwise wasted energy, the hashrate is likely to continue to climb and miners using standard grid energy will be forced to relocate or capitulate (go out of business).

The conspiracy theorist in me thinks that the recent rise in hashrate combined with the recent FTX price collapse is a coordinated effort to attack bitcoin by driving up the costs of mining while simultaneously crashing the price to put the home miners out of business.

Hopefully, there are enough convicted bitcoin mining plebs to hold the line.   

In reality, it never happened and it would be stupid to do so!
This is not oil or coal or copper we're talking which has a global consumption that is heavily influenced by the price, here no matter what the price is the amount of daily produced coins will adjust to being the same every two weeks after each fluctuation.

On top of that, everyone seems to ignore the fact that difficulty can't increase overnight if profitability goes to the moon, we had record profitability per each TH/s two years ago simply because there weren't enough gears to be turned on and mine, they had to be produced, shipped installed, which took time to do so. Thus, even if the price was sliding and profitability was going down that gear was already ordered and in transit and got installed at lower levels, that's the reason you see it growing although the price is going down.

Second thing, the difficulty will still be able to grow even with flat prices, that is because of improvement in efficiency for newer gear, so you're going to have the same consumption, in the end, game same profits margins for miners, but overall the difficulty and hashrate of the network will be higher.

This is a nice graph:
https://bitinfocharts.com/comparison/mining_profitability-hashrate-btc-sma30.html#3y

It shows how 3 years ago prolonged levels of low profitability were keeping the hashrate growth moderate, then fast forward while despite price going down high levels of profitability were keeping the hashrate going up until again the equilibrium will be reached and the graph repeats itself.

I don't know what has changed in the bitcoin network that separated Bitcoin mining difficulty or increase hash rate being the reason for price reaction,  but the fact that Bitcoin 4 years cycle doesn't have any timed impact even though at every cycle there is a reduction in the reward for mined bitcoin and this reduction can technically affect the price but on a long term basis.

Bitcoin market price mostly reacts to the demands of the general public and if there are no clinches in the blockchain network,  even the fee and price will remain the same but if the available miners are few, this also could impact the market price.

The difficulty (actually the "target", from which the difficulty value is derived) is updated every 2016 blocks (about two weeks) based on how fast the last 2015 blocks were produced.

If the last 2015 blocks were produced more quickly than expected because total mining capacity had increased, then the new difficulty value is proportionally higher. If the last 2015 blocks were produced more slowly than expected because total mining capacity had decreased, then the new difficulty value is proportionally lower.

Bitcoin difficulty is set to be proportional to computational power available at that time. This means we have high difficulty in coming days and is set by bitcoin blockchain itself. More computational machines joining the mining process results in increase in difficulty. Correct me if I m wrong.

I've experienced several times seeing that ATH, but in the fact is not accumulated with bitcoin price. believe me, if you hope that ATH will affect with bitcoin price (ATH also) you will be disappointed. Don't you hope that happen bro, actually if more and more difficult, it will also affect in cost, of course with that cost will also affect to other needs, which make miner sell the mining results to cover their needs.

There is a link between mining difficulty and price but not the way you think. Difficulty or its adjustment doesn't affect the price, but the price affects difficulty. Meaning for example when bitcoin price goes up, it becomes more profitable to mine bitcoin so more miners join the network and hashrate goes up hence the difficulty adjusts at its fixed interval by going up.

It depends on what market you are in.

If it is in a bull market, it is a good signal that people are fomoing and joining with new mining rigs. New mining rigs can be installed from current mining farms that want to expand their farms. It can be from newbie mining farms who can over leverage or are very bad to response against market fud and corrections. They are bad factors for mining and market.

If it is in a bear market, mining difficulty and hashrate increases mean you are mostly at bottom and experienced mining farms look at future and expand their mining activities. It makes sense when in a next year, Bitcoin will have a next block reward halving.

Look at its with your long term vision is better and it is not technical indicator for your trading.

Bitcoin mining difficulty level always impacts the price of the Bitcoin market but everything has changed lately the 4years cycle is no longer the way it use to be and the total bullish market started when we least expected. I believe all this happen due to the level of the market traffic.

Quoting your image for visibility.

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To address the question if there is any correlation between the price and mining difficulty, to an extent, such a correlation exists or used to exist in the early days.

When Bitcoin was still relatively unknown, mining difficulty was very low as there were nog very may miners, but with popularity of Bitcoin increasing and subsequent increase in price, it attracted more miners and raised the competition and mining difficulty level.

Today however, I do not think there is any significant link between both factors.

Higher mining difficulty increase the cost of production for miners and since the next halving is not that far away I believe miners will prefer to keep holding their rewards, most Bitcoin miners I have met treats Bitcoin as a real GOLD and they always prefer holding than selling, particularly not in a bear market, this doesn't mean that market will fall because of high mining difficulty, wait till the next halving to start seeing some bolder price actions.

When bitcoin price increased in 2020 and 2021, bitcoin mining hash rate increased which result in increasing of bitcoin mining difficulty. In 2022, Bitcoin price falled very significantly but bitcoin mining hash rate continue to increase and got to all-time-high several times. Because of that we can not say that bitcoin price is directly correlated with mining difficulty, but if bitcoin price increase and more miners are seeing it as more reward, they will buy more miners, more miners may also join also, mining hash rate will increase and mining difficulty will also increase.

Yesterday, Bitcoin mining difficulty increased to ATH after that, I read a lot of analyzes linking them to an increase in the possibility of a correction in prices. Is there any link between them? and mining difficulty will effect on prices?