I agree with your general idea. However, I disagree with part of your hypothesis.
"This happens because difficulty always corrects itself when there are too many or too few people mining. If it is really worth it, people will get in. If it is not, people will get out. It's a smooth process of self-adjustment."
I'm in California, I own my home so I pay my own electricity. I'm in an electricity worst-case scenario.
I bought a 5830 to mine and stuck it in my existing file server. The difference between mining and just serving files is 125 watts. That's 45 cents a day. I live by the beach, so I don't use air conditioning, I just open the windows. Heat generation from my 1 card is not an issue, so lets just take the direct 125 watts / 45 cents a day.
At the current difficulty, it takes me 5 1/4 days to mine 1 BTC. That's $2.33 of electricity to mine 1 BTC.
I will not stop mining unless the price of a BTC falls below $2.33, or the difficulty gets so high that it takes weeks and weeks to mine a BTC. I don't see the difficulty getting so high that the electricity cost of a bitcoin passes the USD price of a bitcoin any time soon.
Plus, I like mining. I've met some cool people mining.
My point is, after you've bought the hardware, the incentive to "get out" is low. Maybe people running several multi card rigs will cut back, but the "hobbyist" miner like myself is here to stay.
Now, the incentive for new people to get in DOES get lower as the difficulty gets higher. Why spend hundreds on hardware that will never get paid back?
"This happens because difficulty always corrects itself when there are too many or too few people mining. If it is really worth it, people will get in. If it is not, people will get out. It's a smooth process of self-adjustment."
I'm in California, I own my home so I pay my own electricity. I'm in an electricity worst-case scenario.
I bought a 5830 to mine and stuck it in my existing file server. The difference between mining and just serving files is 125 watts. That's 45 cents a day. I live by the beach, so I don't use air conditioning, I just open the windows. Heat generation from my 1 card is not an issue, so lets just take the direct 125 watts / 45 cents a day.
At the current difficulty, it takes me 5 1/4 days to mine 1 BTC. That's $2.33 of electricity to mine 1 BTC.
I will not stop mining unless the price of a BTC falls below $2.33, or the difficulty gets so high that it takes weeks and weeks to mine a BTC. I don't see the difficulty getting so high that the electricity cost of a bitcoin passes the USD price of a bitcoin any time soon.
Plus, I like mining. I've met some cool people mining.
My point is, after you've bought the hardware, the incentive to "get out" is low. Maybe people running several multi card rigs will cut back, but the "hobbyist" miner like myself is here to stay.
Now, the incentive for new people to get in DOES get lower as the difficulty gets higher. Why spend hundreds on hardware that will never get paid back?