user78: There have been claims that Bitcoin price and difficulty correspond. Is there empirical data to support or refute this?

user153: Here you go!

https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdHVRMHpqWUJValI1RlZiaEtCT1RrQmc

Click the tab at the bottom Difficulty Versus Price for a chart view.
As-of Jul 4, 2012 here's those charts:



user153: This relationship can be seen visually, though it is a rough correlation.
In the all time chart (scroll down) you can see the orange being the price at Mt. Gox, and the grey line that steps up and down being the difficulty.
Summary: AFTER the price moves, the difficulty follow the same direction, ... lagging two to five weeks roughly:
 - http://tvori.info/bitcoin/charts
The green line shows profitability, which is not part of your question but is the most important line in that chart so I wanted to point that out.
Incidentally, following the traders on the #bitcoin-otc marketplace gives the anecdotal evidence that 

When profitability is high miners are hoarding (they are saving their bitcoins and if adding capacity will do so using their cash to purchase)
When profitability is low miners are generally selling off.  They have electricity bills to pay, credit card bills for the hardware they purchased, etc, and with less profits they liquidate their holdings. This of course, increases price volatility -- especially without any decent Bitcoin derivative instruments (e.g., an options market).


user27: If you look at the network hash rate, you'll notice that it fell off after the Bitcoin exchange rate dropped.
This leads to the conclusion that price drives difficulty. A drop in price caused a drop in difficulty. I have noticed this same correlation on another occasion; about two months ago.
Also, the reverse is probably true. When the price soared to $30+; the network hash rate accelerated greatly. The higher prices clearly attracted miners.

78: <p>There have been claims that Bitcoin price and difficulty correspond. Is there empirical data to support or refute this?</p>
 153: <p>Here you go!</p>

<ul>
<li><a href="https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdHVRMHpqWUJValI1RlZiaEtCT1RrQmc" rel="nofollow noreferrer">https://docs.google.com/spreadsheet/ccc?key=0AmcTCtjBoRWUdHVRMHpqWUJValI1RlZiaEtCT1RrQmc</a></li>
</ul>

<p>Click the tab at the bottom Difficulty Versus Price for a chart view.</p>

<p>As-of Jul 4, 2012 here's those charts:</p>

<p><img src="https://i.stack.imgur.com/OkNoI.png" alt="enter image description here">
<img src="https://i.stack.imgur.com/NmKeP.png" alt="enter image description here"></p>
 153: <p>This relationship can be seen visually, though it is a rough correlation.
In the all time chart (scroll down) you can see the orange being the price at Mt. Gox, and the grey line that steps up and down being the difficulty.</p>

<p>Summary: <em>AFTER</em> the price moves, the difficulty follow the same direction, ... lagging two to five weeks roughly:
 - <a href="http://tvori.info/bitcoin/charts" rel="nofollow">http://tvori.info/bitcoin/charts</a></p>

<p>The green line shows profitability, which is not part of your question but is the most important line in that chart so I wanted to point that out.</p>

<p>Incidentally, following the traders on the #bitcoin-otc marketplace gives the anecdotal evidence that </p>

<ul>
<li><p>When profitability is high miners are hoarding (they are saving their bitcoins and if adding capacity will do so using their cash to purchase)</p></li>
<li><p>When profitability is low miners are generally selling off.  They have electricity bills to pay, credit card bills for the hardware they purchased, etc, and with less profits they liquidate their holdings. This of course, increases price volatility -- especially without any decent Bitcoin derivative instruments (e.g., an options market).</p></li>
</ul>
 27: <p>If you look at the <a href="http://bitcoin.sipa.be/">network hash rate</a>, you'll notice that it fell off after the <a href="http://bitcoinity.org/markets?theme=light">Bitcoin exchange rate</a> dropped.</p>

<p>This leads to the conclusion that price drives difficulty. A drop in price caused a drop in difficulty. I have noticed this same correlation on another occasion; about two months ago.</p>

<p>Also, the reverse is probably true. When the price soared to $30+; the network hash rate accelerated greatly. The higher prices clearly attracted miners.</p>
