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You've got it backwards. It's the difficulty which is pegged to the price. If the price went back to $5 now, miners would turn off their equipment and the diffi

by kolinko 13y ago

You've got it backwards. It's the difficulty which is pegged to the price. If the price went back to $5 now, miners would turn off their equipment and the difficulty would plummet. On the other hand, if difficulty would shoot 10 times now, it wouldn't affect the price much, because most of the cost of mining would already be sunk in. Miners would sell their bitcoins even with a loss. Besides that, look at the chart: https://bitcointalk.org/index.php?topic=7427.0 https://bitcointalk.org/index.php?topic=7427.0 If anything, it seems that difficulty follows the price (Dec 2010, Feb-March 2011) on the above chart. And here: http://bitcoin.sipa.be/ http://bitcoin.sipa.be/ You'll see that difficulty was raising constantly during the past year, while the price stood still for quite a long time, and fluctuated wildly at other times. Especially this graph: http://bitcoin.sipa.be/speed.png http://bitcoin.sipa.be/speed.png Can you show me, from this graph alone, when price increases were due?

saalweachter 13y ago
First, to narrow my claims: I am not claiming that BTC has always been supply-constrained on miners. I think this is a recent phenomenon, tied to the rise of ASIC miners. Nor am I claiming that miners will always be able to demand any price from the market (nor do I know the point at which the market will reject the higher prices). The question you raise about the direction for the arrow of causation in the correlation between price and mining difficulty is interesting. While it seems intuitively obvious to me that difficulty is leading price, "intuitively obvious" is not evidence. One test might be the upcoming increase in mining difficulty, which is currently only projected to be +11% (compared to the previous difficulty increases of 30-50%): http://bitcoindifficulty.com/ http://bitcoindifficulty.com/ . I would predict that the price of BTC should increase ~11% after that increase (the price following the difficulty).

by kolinko 13y ago

saalweachter 13y ago

First, to narrow my claims: I am not claiming that BTC has always been supply-constrained on miners. I think this is a recent phenomenon, tied to the rise of ASIC miners. Nor am I claiming that miners will always be able to demand any price from the market (nor do I know the point at which the market will reject the higher prices). The question you raise about the direction for the arrow of causation in the correlation between price and mining difficulty is interesting. While it seems intuitively obvious to me that difficulty is leading price, "intuitively obvious" is not evidence. One test might be the upcoming increase in mining difficulty, which is currently only projected to be +11% (compared to the previous difficulty increases of 30-50%): http://bitcoindifficulty.com/ http://bitcoindifficulty.com/ . I would predict that the price of BTC should increase ~11% after that increase (the price following the difficulty).