Predictive Strength
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Predictive Strength
Hashrate Index measures the total computational power dedicated to mining Bitcoin. The index provides insights into the market's perception of mining profitability and network health. The index is normalized using a wide range of lookback windows in order to be easily modelable and interpretable.
Hashrate reflects miners' capital expenditure decisions, which are forward-looking bets on Bitcoin's profitability. Sustained hashrate growth (e.g., 104% YoY in 2023) signals miners expect rising BTC prices to offset operational costs.
Bitcoin's 2-week difficulty retargeting creates lagged supply responses. When hashrate grows faster than price (current Price/Hashrate Delta Ratio: 0.82), it signals miners anticipate future price appreciation to justify overinvestment in ASICs. This pattern preceded 2017 and 2021 bull markets.
Hashrate data is sourced through Bitcoin mining pools (for hashrate metrics), aggregated to represent network-wide computational power. This raw data is normalized against historical averages to create a standardized index, enabling comparisons of mining profitability and network health over time.
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To understand a predictive factors predictive power, we create a simple long/short strategy and simulate its past performance (with daily rebalancing):
The strategy is rebalanced daily, on a continuous basis. There are 0.5% transaction costs applied on each position adjustment.
Get started by validating the historical performance of the strategy with our transparent code snippets.
Copy and paste the code snippets below into your Python environment or download the files below.
Predictive Strength
Predictive Strength