Are miners leaving the market, and will the difficulty drop?

I recently wrote a bearish article about Ethereum as I see the price declining in the short term. I can't say when it will level out, but I don't expect to see that in the next few weeks. By year's end I suspect the price may have started to level off. However, this has an interesting consequence for Ethereum mining.

Difficulty will drop

As the price drops miners will be shaken out of the market. The price has cut in half since its peak while the difficulty of mining is still high. Consequently, mining is far less profitable than it used to be. Given the steep drop in profitability many miners have stopped mining. This line of thinking seems to be confirmed by a recent article I came across:

Small-Time Ethereum Miners are Exiting Under Rapid Price Fall

Inevitably, that suggests that the difficulty will drop too.

What next?

I suspect price will keep dropping, miners will leave, and difficulty will drop.

At worst Ethereum mining profitability may drop to a temporary price-point such that the Ether earned is less than the cost of the electricity spent (i.e. unprofitable such that you will never pay off your mining rig). For this to happen it will require the price to continue dropping far faster than difficulty does. I haven't done the calculations to figure out that price point, but I don't think we are too close to it.

Going forward we need to balance two concerns: Ethereum mining will stop once the Casper code is released (moving from PoW to PoS), so you only have a finite amount of time to mine ETH. That said, I do see the price of Ethereum eventually going higher than it is now. I honestly suspect that won't be until another year or so into the future. This is an assumption I'm making on the belief that the price of ETH will repeat what Bitcoin did.

Manias in crypto come and go. If you mine a bunch of coins now they may not pay-off until sometime far into the future. I don't think the steep price drop now is not necessarily a bad thing for mining or investors. It will shake out the weak hands (investors and miners alike) and give another chance for the stronger willed participants to pick up some bargains.

Disclaimer: this is not investment advice, nor is it the opinion of my employer.