Quote from: bitcoinBull on May 07, 2011, 09:11:47 AM

I'm finding the Price over Difficulty chart the easiest to interpret. I've attempted to add some trendlines this time.

http://i.imgur.com/1SUkd.png

As you can see, the lower channel represents short term periods of bear markets. I like to think of it as the bargain basement.

From the current price of ~$3.50, a steep drop to the top of the bargain basement would be a drop to a price/difficulty ratio of 1:1. With current difficulty at ~150k, that would be a drop to $1.50. A drop to the bottom of the bear trap would below $1.00, to some $0.60-$0.70. That would be below the record low price/difficulty of some 0.7:1, in early april, when the price was around $0.70 and the difficulty was at 100k.

A steep drop doesn't seem likely. Already, the difficulty estimate looks like it could approach 200k next week. So if we see a drop over the next week, and the difficulty keeps rising, at $2.00 we'd be at the top of the bargain basement.

An even slower correction. Let's say over the next 4-6 weeks difficulty keeps increasing to 300k, and price declines to $3.00. We're again entering the bargain basement, ready for another surge to the top of the upper channel, from price/difficulty of 1:1 to 2:1, from $3.00 to $6.00.

Those are the pessimistic predictions. The most pessimistic is that we get caught in the bear trap for a while and difficulty growth slows. But we would expect to surge out of the trap eventually.

The more optimistic is that price continues sideways with small corrections while difficulty continues strong growth. In that case the ratio declines, approaching the bargain basement, but rallies from somewhere in between.

The most optimistic is that price increases from ~3.50 as difficulty increases, reaching $4.00 when difficulty is at 200k, and $6.00 when difficulty is at 300k. It crosses over and remains above the yellow line to either retreat eventually, or surge higher towards 3:1, 4:1 in parabolic growth and a return to the level of a bull market back in November.

I'd love to see this chart with stats up to today (minus the scary June crash)