Topic: Difficulty rising but not price? (Read 1787 times)

EDIT:I somehow went off on a tangent. Reason is simple, Difficulty does not drive price. Price drives difficulty.  The below will now have better context.

Original Post:
It's simple...How long has BFL delayed shipment?.. almost a year. So that's almost a year of uninformed(ignorant) buying. Between BFL, Avalon, and now all these other start ups, the network is going to become over saturated. I'm going to laugh when a lot of these start ups fold. (Hoping the fold to as they are doing nothing but hurting Bitcoin by centralizing mining operations)

It hasn't been like the GPU days when you can capitalize on a BTC price increase buy placing a order for equipment and have miners setup within a week.  In the case of GPU days, the network hash rate and therefore the profitability could be seen and easily calculated within a week or two. What has happened now is, people bought, has rate went no where, so more people bought thinking, "wow the profitability is so great still" and more people bought, (still no increase in hash rate, returns still look great), and so on and so forth for a year....and counting. We are finally starting to see some of the back log orders of the 1st Gen ASIC ice burg.(2nd Gen and even claims of 3rd Gen are suppose to come in the next 6 months)

I've been saying(and thinking, running numbers) for months now, a tsunami is coming. Not many people believed it. Seems lately people are starting to though finally. But, I will say, it's even worse than I was predicting...by far.

I believe the meatworld economy is really the thing to watch in terms of BTC price. The rapid rise and fall seen in April was driven largely by a bank failure and subsequent "bail-in" by Cypriot banks, a fancy term that basically means the bank robbed itself to save its own skin by extracting funds from their own customer accounts. BTC's price shot up as Cyprus depositors fled to Bitcoin, the one place banks cannot touch. The sudden surge then got speculators and investors involved as well to ride the wave up, gaining Bitcoin a heap of exposure to the general public in the process.

I am waiting for the next one to fail, and we shall see what Bitcoin has in store for us next. Bitcoin isn't done yet, and as the fiat economy continues to bleed out I believe we shall see a big rally again pretty soon.

We've seen two bubbles already, and I would be SHOCKED if we don't see a third in the next 2 years. Following the pattern of the last 2, I'd say somewhere around $900 at the beginning of 2015.
Literally pulling numbers out of my ass. Don't hate me.

However, whether or not the price increases in 3 months remains to be seen. I'm quite curious to see if it will.

Yes, those who said difficulty doesn't directly control price are basically correct. If there is a direct causal relationship it is indeed the inverse.

We are a few months out of a bubble, so it may be an organic slow-growth period, so to speak, just like 2012: price flat, slowly rising or even bearish at times. It hasn't been anywhere near as severe or negative as 2011, where the June bubble peaked about 20-fold above the imaginary "logarithmic trend line", then crashed and trended heavily downward for four or five months before bottoming out at $2 ($1,994) on Mt Gox.

No one knows if/when a "third bubble" is coming, but it may be worth bearing in mind that there is no reward halving due any time soon. If a third bubble rises and pops in the near future (I'm not making any speculation on that right now!) it may trend a bit more like 2011 - nobody really knows. It's always so much easier if you can go back in time and look to the right of the graph!

Some people have theorized that price lags about 6 months from the rise in difficulty. Since the exponential growth started in June'13, one can wait until Dec'13 to see the price start to skyrocket?

Two things:

1) It has already been determined that the difficulty does not affect the price. Actually, it's the other way around. The price affects the difficulty. Now obviously ASICs are majorly responsible for this increase, so I like to think of it like this: Price affects interest. If the price is high, people want to mine, and will buy hardware and turn on their rigs. If the price crashes or is low, people don't want to mine, so they won't.

2) I would say that the majority of the Bitcoin network right now is NOT video cards. Most of it is the new ASICs being developed/shipped. Anyone who's still running GPUs for BTC will either A) have free electricity, B) be mining at a loss, or C) both, once you consider the resale price and the average lifespan of a mining GPU.

I think this calculation is based on GPUs which are not more profitable now.

So the difficulty is rising about 20% each 2~ weeks, but the price are not changing so much.

Why you think this is happening?

Price



Difficulty



The price are not attached to the difficulty but the majority of miners are operating at loss

you can see it here

http://blockchain.info/charts/miners-operating-profit-margin

This is an estimated but I think its very accurate.


Why the miners don't try to sell a little higher?

Its like mining Gold, but at loss, you get less gold but you continue operating at a loss and doesn't try to sell higher to make mining for a profit.


What do you think? The price will go up slower like the last few days, or the difficulty will make an impact on the price?