Topic: Price vs Difficulty Charts - indicators for buying or mining - page 3. (Read 81503 times)

Also, I made my chart publicly available for the time being.  It updates itself automatically once per day.  I'll keep it public as long as I don't see a massive rise in my cpu usage on my server:

[edit: removed link - making it private again]

Edit: Please don't hotlink the image directly, it'll result in me taking it down.  If you want to display it somewhere, please save the image and host it elsewhere.  You are free to do whatever you want with it, I'm not big on copyrights, just don't eat my server

I'm not saying it is not profitable, merely it is not worth it for the smaller miners.  I'm running at 7 GH/s, and so I consider myself a moderate sized miner, but each of my rigs have gone from a 2 month ROI to an 8 month ROI.  The little guys, running mining software on their desktop, are making all of $2 a day, and they represent a healthy percentage of the number of miners out there.  Considering the heat, noise, electricity, and difficulty moving the money around, that $2 a day isn't really worth it, and I expect many will simply stop running their client.  At least I hope so...

At the current profit margins and an 8 month ROI, I will continue to mine - it is definitely worth it, but my expansion plans have been halted until I see some positive momentum in the market.  Next year, when the reward halves, I have no idea what will happen, but the ratio will instantly half, and a 1.0 will become a .5, at which point it will not be worthwhile to mine until the difficulty drops or the price raises.  Still have over a year to go before I need to worry about that.

I should point out, I'm not suggesting any course of action for any miners, big or small.  I am merely stating my plans based on some pretty elaborate spreadsheets showing my expected return over the next 2 years.  For me, mining is a business, I'll do it as long as there is enough profit, and I'm hoping the profit will remain.

If the price / difficulty ratio is so bad, even to say "near the lowest point it has ever been" then there must be people looking to sell their mining equipment.  Who wants to sell me some? I can't pay U much, cuz mining profitability is near an all-time low, but I'll buy 

I do not agree, the cost for 1 btc for me is 6.62$ per btc and i live in italy where electricity is expensive (0.2$ KW/h) and i can sell at 13.7$. Price can drop to 9$ and difficulty rise to 3mln and for an american citizen that pays 0.07$ KW/H it is still profitable to mine(4$ per btc and selling it at 9$) , so there is room for a drop in the price/diff ratio without affecting too much the network speed.

Include cooling costs, ... or consider that electricity at its marginal rate can be over $0.20 per kWk and over $0.30 in some areas, and you'll realize that mining truly turns into a money losing proposition at these levels for many.

Because, right now the profit is low, and there is no guarantee it won't go down.  All those miners simply running software with their video card, pulling 250 MH/s are making about $2 a day.  45% of the miners on BTCGuild are running less than 300 MH/s.  80% are running under 1 GH/s.  These are those people running video cards in their desktop, and they are dealing with the heat, noise, higher electricity bill, and the difficulty in moving money around.  I'm thinking $50-$100 isn't enough to deal with the hassle, and they'll just decide to move on.  A month ago, that $50-$100 was $150-$300, and yeah that was worth it. 

Again, I may be wrong, and I have no intention of getting out of mining any time soon.  I must admit I'm watching very closely, and I'm holding off on any more equipment until I am convinced the ratio won't be going down any further.  Also, while I believe there is a resistance point at 1, that is not necessarily the case. 

Why would difficulty go down?  Mining is still profitable at current price/difficulty.  There is no reason for anyone to stop mining unless the price drops even further.

I only multiply the price by 100,000, so that if the price is $15, it would line up with difficulty 1,500,000 creating a 1/1 ratio.  This way, when the price and difficulty intersect, I know the ratio.

By (later) using the formula: (reward/50 * price) / difficulty, it will remain valid for every halving, without modification of the formula.

I also think the actual difficulty makes more sense, because the p / d ratio represents the profit made from mining and immediate selling.  Any additional profits are on their own and belong to speculation.  When the ratio gets too low, there is no profit to be made from mining, due to the cost of electricity, equipment, and time.  So in this way, the difficulty would set a bottom to the price.  I am hoping the resistance point is at 1 (would be incredibly convenient), and when it gets below that the miners either drop off, or refuse to sell their btc at a loss, and losing that continuous stream of new btc would drive the price up.  I'm hoping I'm not wrong on this point, because I have a bit of money invested into this, and this low point on the ratio sucks.  I'm looking at an 8 month ROI on my rigs, which was only 2 months not so long ago.

Of course this is all theory.  I think the next 2 months will be interesting.  Barring some more big media on bitcoin driving the price up, the difficulty must go down soon.  There appears to be a 1 month or so lag between price movement and difficulty movement, so we are due.

Nice work!  I had been wanting to plot the three sets on the same graph..

I see you are using the actual difficulty factor (readjusted every 2016 blocks).  How are you plotting the price? 

I like being able to see the drop to $10.50 from $30 and the bounce to $25 on your chart.  That's not visible on mine because I use the weighted average price over the 504-block window for the difficulty estimate.

Another formula to use when the reward is halved from 50 to 25 would be to multiply the difficulty by 2, which should have the same effect.


How about your thoughts on the correlation?  Are we in agreement that difficulty sets a bottom for the price?

Better colors, and I added a legend.  Had to move to an older version of jpgraph to get the colors to change

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Edit: added weight to the lines

Believe me, I'd love to change the colors, for some reason JpGraph doesn't want to capitulate to my demands.

nice graph, could you pick a darker version of colors? pastels look bad on white, hard to read. otherwise, nice work keep them up.

I just realized that while the price / difficulty ratio is relevant now, it will need to be expanded next year to reward / difficulty ratio. 

The formula will be more like (reward/50 * price) / difficulty.  This way when we get half the BTC for a block generation, it will result in an appropriate decline in the ratio.

By the way, I have that graph auto updating every day.  I'd release the URL, but it is my home connection and for security purposes I find that a bad idea.  I'll update this thread periodically with the graph.

These are fascinating graphs. Thanks for sharing.

sorry, decided I like this one better, the axes are aligned, so when price and difficulty intersect, the ratio is exactly 1

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I miss this thread, and wish to see its revival.  Make it so

I've thought the same, from mtgox website "Going forward, we expect some changes to how SEPA transfers will work once we get setup with our new Bank (which we will announce on July 18th)"  i think that around monday 25 July the new funds coming from europeans investors will be available for trading, this new influx of money could help to reverse the trend.

Price bottomed at $11 on July 5, and bounced to $16.5 on July 6.  The rally hasn't come, but we've seen several patterns of bullish consolidation (sideways movement under low volume) and pushes towards trend reversal.


Thanks Enky.  I'll send you back 0.5 BTC when we bounce from $9 to $18

Great work in your blog.  The question is indeed when will the trend reverse?  We're definitely in a short term bear channel right now (or the bargain basement, as I like to call it).  By your longer-term analysis, we would expect to see a break out of the trend later this month (around the 20th of July as you predicted back on the 5th), with a bounce from $9-$10 or higher (or at the least, bullish consolidation followed by a rally).

So on the ratio chart, we stay around 1:1 and and see a double dip (first dip was the 5th to $11, second dip still to come), similar to the prior double dip after coming back from $1.10 in late February (first dip in early March and second dip in early April).


Currently, I'll note a couple of externalities which are probably having an impact and preventing things from going smoothly.  First is the SEPA problems with MtGox's French bank.  Things are fine in the US with dwolla working smoothly, but MagicalTux has stated that more funds come from Europe than the US.  And secondly, there is the constant DDoS attacks on the biggest pools, Deepbit, BTCguild, and slush, which have been interfering with difficulty growth.  Then of course there was the MtGox breach (from which they made a spectacular recovery within the week).

These technical difficulties may affect the timeline, so that we see the reversal come later than predicted, after they are sorted out.

Yes, there could be price candlesticks on this chart.  Right now the price used is the weighted average (weight = volume), so the crash from $30 plots to about $18 because the majority of the volume during the crash traded around $18.

I have a vision of a real-time javascript chart with mouseover tooltips of the ratio line showing the actual price and difficulty at each point (and candlesticks would be cool too), but I don't have the time.

This is going to be a long couple of weeks/months ahead.
<1 ratio for a while is hurting us poor miners.

Having to hold the coins hurts.