Predictive Strength
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Predictive Strength
Net Realized Profit/Loss Index measures the profit and loss of all market participants.
NRPL quantifies aggregate profit/loss realization, acting as a psychological barometer. Extreme positive values (profit-taking frenzies) often precede local tops, while extreme negatives (capitulation) signal bottoms. This mirrors Warren Buffett's "be fearful when others are greedy" principle, as NRPL objectively measures greed/capitulation thresholds.
Net Realized Profit/Loss is sourced by analyzing on-chain transactions to calculate the difference between realized profits (coins sold above acquisition cost) and realized losses (coins sold below acquisition cost). We track coins' movement history to determine cost basis and current value, aggregating these values across all transactions. The raw data is then normalized against historical averages to create a relative index.
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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