One problem I have with this is the assumption that big miners are in it for BTC and not fiat. I don't know everyone's motives but I am sure that for some it is an opportunistic business model (ie buy ASIC's, mine, sell, profit). As such what gives is price and it's a race to the bottom in terms of who has the cheapest electricity. Hardware is a sunk cost now, so it makes sense to continue to mine as long as your electicity costs less than than you can sell the BTC for, even if that means just minimising losses (on sunk costs), for all those miners whose goal is not to accumulate BTC.
We hear many times that miners will just hoard or switch off and buy instead. IMO only those that are true believers and not in it for fiat will do so. The rest will get what they can out of their equipment while they can. Many a bad investment decision has been made in the past and will be in the future in many industries. Why this mythical illusion that BTC is so different?
It looks very much like mining bubble to me
EDIT : In conclusion is it not a perfectly reasonable proposition that difficulty could nosedive to match current price as inefficient miners who are in it for fiat simply switch off their hardware at some point and exit the game or wait for their equipment to become profitable again, if ever? The assumption that they will simply buy BTC instead seems deeply flawed. Meanwhile the BTC inflation rate (supply) will remain constant. In the absence of new demand where does price go ?
I agree that the idea that miners 'start buying' is deeply flawed but when mining becomes unprofitable they will stop mining, supply will be reduced and the price will stabilise. Is this not part of the big "Satoshi Plan" of checks and balances for the functioning of BTC anyway; at the moment we have a confluence of negative factors: too much supply and negative sentiment due to Gox, Neo et al.
When the miners stop the flow of coins the price will find equilibrium and sentiment will return with a stable price.
Simples.
No ... until the next halving, supply is a constant no matter how many miners mine or what the hash rate is. The unprofitable miners will stop mining, maybe, but that has no effect on the BTC inflation/emission rate, which remains a constant until the next halving regardless of how many miners there are. Whatever the hash rate, the same number of BTC will be mined in the same time (excluding small variance between difficulty adjustments). This is a fundamental part of the BTC protocol - the emission rate is a constant until the 'halvings'
Supply is fixed in this equation, re how many BTC are mined. The variables are difficulty and hash rate, but these have no effect on supply, just on profitability of miners.
If every other miner shut down and you and I could mine the (approx) 3600 BTC per day on laptops once the difficulty rapidly adjusted downwards.
Sure, the network would be massively open to a 51% attack, but I am taking it to en extreme to demonstrate what I believe is a poorly understood function of the BTC supply/demand equilibrium
We'd better get the entire 21M of the buggers mined then and get things simplified then.