According to a Twitter user with the username @100trillionUSD, an ‘unorthodox prediction’ of mining difficulty will place the price of Bitcoin (BTC) price at $17,000 by 2020. This is due to the power law relationship between both parties. The Twitter user is back with an intriguing chart indicating the relationship between the Bitcoin (BTC) price (at $4222 as of press time) and expected mining difficulty in coming years.
Bitcoin (BTC) Price Today – BTC / USD
| Name | Price | 24H % |
|---|---|---|
 | $0.00 | -0.15% |
Understanding the Difficulty Power Law and the Bitcoin (BTC) Price Relationship
A previous graph plotted by the same user highlighted the relationship between mining reward halving and the impact it will have on the price of the digital asset as time passes. This he focused on mining difficulty and Bitcoin price because many crypto analysts regard both parameters as inextricably linked to the network hash rate.
Mining is profitable if the hash rate is on the rise. It also means that miners are growing confident in Bitcoin’s future if they are beginning to add hardware to facilitate their operations. But on the other hand, a high hash rate can cause Bitcoin (BTC) mining difficulty to increase which in turn makes mining more resource-intensive because more hash power is required to achieve similar results as is the case in lower difficulty levels.
When the harsh rate is too high compared to the price that miners can sell their Bitcoin (as observed this year), the chances of the most unprofitable miners dropping out becomes high. They might sell their equipment or turn off their rigs to wait for prices to recover or when mining becomes easier.
Difficulty Will Increase From 10-100 Times Within the Next Two Years
About 85% of respondents believe that the difficulty will increase from 10-100 times by 2020. Meanwhile, 10% believe this is the end of the road for Bitcoin mining (the ‘death spiral’). The larger share of respondents 59% expect the difficulty to move up 10x from this day to the end of 2020. However, 27% believe this increase could go as high as 100X, which automatically would mean Bitcoin hitting a price above the $28,000 by 2020.
Although the size of the poll was small with 250 votes, mining difficulty is a paramount factor to consider when it comes to predicting the price of Bitcoin (BTC) and giving an evaluation of the state of the network.
Difficulty Drops, But ‘Death Spiral Absent
We can recall that Bitcoinist reported that the mining difficulty with the Bitcoin Blockchain had another downward adjustment which is the biggest in more than seven years, amid a continued bear market that has seen 85% of the value of the digital asset drop. Contrary to what many ‘experts’ believe equating a break or cut in the bearish trend to the beginning of a ‘death spiral,’ the mining difficulty adjustment is a crucial counterbalance for Bitcoin. Hence, the adjusting difficulty relative to the hash rate is one feature that allows the network to find equilibrium when it comes to mining profitability.
What’s more, this is something similar to what the central banks are doing by increasing and reducing interest rates according to changing market conditions. In the case of Bitcoin (BTC), the adjustment is baked into the code and is 100% predictable.
Princess Ogono is a writer, lawyer and fitness enthusiast. She believes cryptocurrencies are the future. When she's not writing, she spends time with her adorable cat, Ginger and works out often.
