And increating the hash rate doesn't increase the demand?
Increasing the Hashrate will increase the supply which normally lowers prices, but as bitcions are accepted at more places everyday, demand increases which has an upward effect on the price.
No, I'm pretty sure the difficulty adjustment is to secure the supply at a fixed rate, it's built that way.
I still stand by my hypothesis that more hash rate means more demand because there are more hashes (depend) being put into each block found... thus making each bitcoin effectively more scarce... While the rate of generation is constant, the effort put into them is far greater.
Where block/hour remains fairly constant, hash per block goes up.
Difficulty 10,000,000.
~90Thash (pulling numbers out my ass) = the preferred 10 mins/block
where at difficulty 50,000,000
450 Thash = 10mins/block
When you break it down, each has nets you less of a bitcoin... irregardless of power usage/efficiencies. That alone I do believe (especially considering the numerous users who don't even mine, but just trade BTC) will drive the overall price of BTC up.