Quote from: bitcoinBull on May 26, 2011, 05:40:01 AM

Quote from: smooth on May 26, 2011, 04:43:31 AM

5. It becomes more expensive to replace (i.e. difficulty goes up, electricity goes up, etc.) I don't really agree with the argument that difficulty doesn't influence price (only the reverse) and I believe I could show that formally, but I don't have time to write it down.

I don't agree with that argument either.

It seems perfectly reasonable to me that an increase in difficulty drives an increase in price. After the difficulty doubles, bitcoins are twice as hard to get by mining. The nominal price should double, for the "real" price to stay the same.

Furthermore, higher difficulty indicates greater network strength/security, and like a price increase, also represent more investment.

So is difficulty the only price driver or one of many drivers? Deconstructively, what does difficulty represent? Time to get a block, which is what? Electricity. What other price drivers are there? Demand for bitcoins. Which is based on what? Right now I think the demand is based on investment speculation/expectation. Am I missing anything?