I plotted the bitcoin price vs the difficulty to mine new bitcoins.
The rationale behind this connection is that in a market equilibrium where the price is not driven by speculation/mania/fear/uncertainty, the bitcoin price should rise with the same speed as the difficulty. As you can see, this is more or less which was the case from 07.02.2016 to 24.04.2017, where the ratio was hoovering around 2.5. After that, bitcoin entered a mania phase, with the ratio exceeding 12 on the 17.12.2017 (bitcoin price being 19.2k USD at that time).
With the price being 6460 USD as of 10/08/2018, we have a ratio of about 1.08, significantly below the ratio of the pre-bull mania in late 2017. With a historic ratio of 2.5 between price and difficulty, the value of bitcoin today should be around 15k USD.
an informative research post? on biz? nah, I'm hallucinating
Jack Taylor
so wait for 2.5 ?
Ethan Jones
Very interesting post. I think the reason for it being much lower is manipulation for whales to buy more before the ETF in September.
Carson Wood
aug10 aug16 sometimes in september ... next year maybe next year will it fucking ever happen.jpg
Carter Richardson
that chart shows a reverse logarythmic downtrend long term because price has been rising logarithmically on a log scale and hashrate been climbing near linearly lately it makes sense. what this means that you are drawing the wrong conclusion from your chart.
John Ward
Some random additional thoughts I had on this
1) Ratio is significantly higher before the plot starts (going into the 100s), but since 2013 (where my data started), was always declining. Hence had to find some sort of ratio that was stable for a longer period. The period from Feb 16 - April 17 seemed most consistent, so that ratio I took as the benchmark 2) McAffee seems to have been using a similar logic to derive his "1 million by 2020" price prediction. If the log-growth to that price target would be consistent over time, the current price should also be around 15k - see screenshot attached. 3) The ratio has never been lower than it is today. Even the 5900 USD price for bitcoin in late June had a ratio of 1.16, higher than the current ratio of 1.08.
this. if you take away "speculative fever" the trend is going down
Adam Rodriguez
>the price has been rising logarithmically on a log-scale
what do you even want to say here? if the price rises logarithmic on a log-scale, it rises linear on a linear scale. it clearly didnt. btc price has always been grow exponentially.
> hashrate been climbing near linearly lately hashrate has always been growing exponentially, see chart.
my point is that without speculation, the exponential growth rate of both difficulty and price should be identical. hence constant ratio.
>the bitcoin price should rise with the same speed as the difficulty. why? the price is simply how much people are willing to pay for it and the difficulty is simply hard you make the problems so that on average only one block is produced by miners every 10 minutes, so the difficulty is just a measure of how much mining is being done. How much mining is being done is affected by the price per bitcoin , the price of electricity , the price of computer chips and what miners think the future price of bitcoin may be ( miners may be willing to continue mining at a time when it is low profit for them to do so because they expect in 1-3 years time their bitcoins will easily be worth it)
so the bitcoin price and the difficulty should be correlated but I could easily one increasing at a faster rate than the other.
>With the price being 6460 USD as of 10/08/2018, we have a ratio of about 1.08, significantly below the ratio of the pre-bull mania in late 2017. With a historic ratio of 2.5 between price and difficulty, the value of bitcoin today should be around 15k USD. that picture of the last 4 years you posted shows a steady decrease over 2015 and 2016 so I don't know why you pulled the static 2.5 ratio figure from.
it looks like our figure in 2018 is within the range where it should be.
Elijah Adams
>the bitcoin price should rise with the same speed as the difficulty.
What? LMFAO, Bitcoin is still being minted at the same rate on average. Jesus your analysis is so bad I don't know why even bother
>15000 USD
Fucking kek
Bentley Ortiz
your reasoning why is analysis is bad is even worse. the difficulty changes in order to keep the difficulty the same. the minting rate doesn't say anything about what teh difficulty is.
Parker Barnes
Mining bitcoin is barely breaking even in countries where electricity is cheap as fuck.
This “price must follow difficulty” is a meme put about by miners to make themselves feel better.
Bitcoin can be as difficult as it wants, if no ones buying the coin the price will fall to wherever it wants
Christopher Wood
>Mining bitcoin is barely breaking even in countries where electricity is cheap as fuck. Dumbass.
>the value of bitcoin today should be around 15k USD Or the difficulty should be lower... Duuh
Gabriel Young
Oook well prove me wrong. If you’re buying antminer S9 and mining at $0.03/kWh you are making your money back in 2 years at current difficulty (which always rises) and price (always falling)
So the outlook is you never break even on the cost of an s9
Ryder Barnes
Damn I need to live where it's 0.03ckw and I don't even mine
David Lewis
Lmao. Price doesn't follow hashrate. Hashrate mainly follows price. But hashrate also depends on advances in tech and the supply of such new tech. Gmo miners are sold out after a day. How hard is that to understand? Right now hashrate is going up because of gmo and samsung. >the bitcoin price should rise with the same speed as the difficulty. Another thing that you ignored is that the block reward halves every 4 years and the fact that tx fees only make up a fraction of the mining reward. So no, the difficulty and price shouldn't go up at the same speed. If everyone used the same mining gear forever, then hashrate would go up much slower than price. The halvening alone would keep some miners from investing in new gear because the halved block reward means they'll never be able to pay off their miners. The only thing that drives hashrate when we're so close to a halvening is new, more efficient hardware.
Blake Hughes
You should think about the reasons why the ratio steadily declines. >more efficient miners >competition forces miners to accept lower profit margins and find cheaper ways to mine Morale of the story: don't invest in mining, because OPs pic shows how much revenue you'll make over time. Buying coins directly is always better.
Parker Green
It really depends on how much you pay for electricity and how much you paid for the miner itself.
People who bought S9s in December when they were $2.5k each and mine in any country where the price of electricity is over $0.04/kWh are screwed.
If you bought your miner for $800 in July, and live in Vietnam you’ll probably break even some time next year.
Joseph Thomas
nigger
Jack Flores
Your mistake is believing that because difficulty increases, then price increase. It's the opposite. If price increases, difficulty increases. It just takes a long time to adjust, so it's not a 1:1 ratio, but more like a delayed 1:1 ratio. if it's profitable to mine, more people mine, but it takes them a while to set it up etc. Then difficulty goes up.
OP is a brainlet
Leo Baker
Don't stop posting OP, keep it up. I don't agree with everything but it's making me consider new angles
