Weekly network forecast 29th April 2013

Important: 
These posts are a test of the methods used to create the forecasts, and definitely do not forecast non-MTGOX US$ / BTC price related changes - for example the current massive decrease in the cost of a hash. Please do not use the forecasts here for financial forecasts - these posts might be useful in that respect.


Errata: Nil.


0.Introduction
About a 7 Thps increase this week - still far less than the models would suggest. Here's what I think is happening: a volatile exchange rate coupled with an inability to purchase new hashes and the current method of pricing those hashes in BTC rather than fiat.

The forecast models are a simple relationship between the previous MTGOX prices and previous network hashrates. When the exchange rate has been extremely volatile in the past, miners have not reacted to it until the exchange rate stabilised. This is part of the current error in the model results - miners did not respond to the increased exchange rate because they were unsure of their BTC investment.

Most miners wanting a new mining tool are only considering ASIC devices. There have been significant delays in delivery, so someone wanting one now will have more than one week to wait (except ASICMiner Blades, which so far will only add 0.6 Thps to the total hashrate). So between the decision to purchase and the deployment of the new mining tool will be a lag greater than the lag the models have used - so they predict a much higher hashrate.

Finally, pricing devices in BTC changes the relationship between the exchange rate and the network hashrate. Most miners want their new tool to pay for itself in BTC rather than US$, so the exchange rate has less effect on the hashrate than difficulty does - so the autocorrelation increases as the cross correlation decreases.

The models should return to accuracy once pricing returns to fiat prices (as they must once difficulty increases to a point that the BTC price  - based on the time to return the investment - is less than the cost to manufacture the tool). However this may take a long time. I've guessed the models would be inaccurate for long periods before, after the block reward halving for example. But I'm pretty sure this time that the models will remain inaccurate for at least a month, maybe longer.

1. Models and datasets:

The model datasets have been collected into one paste to save time. Model estimates have been likewise aggregated.

Forecast and canary model analysis

All datasets

All estimates

Canary model: An estimate of the current hashrate estimate based only on current price and previous network hashrates. Used to detect changes to the network caused by agents other than the direct action the MTGOX US$ / BTC price as determined by the model.

Models f1, f2, f3 and f4: These are the one, two, three and four week forecasts of the network hashrate, based on the modelled relationship between the MTGOX US$ / BTC and the network hashrate.

2. Results

• Canary model, Models f1, f2, f3 and f4: Network hashrate is within the confidence interval the three and four week estimates. All models significantly overpredicted the weekly average hashrate, as discussed above.

• Difficulty modelling: Method one calculates a difficulty estimation using the network hashrate estimation and is recalculated each week. Method 2 calculates difficulty estimation based only on previous difficulties and the MTGOX price, and is only recalculated after each difficulty retarget.

3. Charts

Chart 1: 

A graphical history of the one, two, three and four week forecasts of the weekly average network hashrate compared to the actual network weekly average hashrate.

Chart 2: 

A graphical history of the Canary model estimates of the weekly average network hashrate compared to the actual network weekly average hashrate.

Chart 3: 

A graphical history of the last twenty six weeks of retarget date and difficulty estimates, actual retarget dates and actual difficulties. It should be noted that each retarget will often be forecast by two consecutive weekly forecasts, hence the multiple points per retarget on the new chart.

Chart 4: 

A graphical history of the one, two, and three retarget forecasts of the Difficulty, modelled directly as a function of previous Difficulties and MTGOX US$ / BTC prices.

Thanks to the following for use of their data:

blockexplorer.com:  1Cvvr8AsCfbbVQ2xoWiFD1Gb2VRbGsEf28

blockchain.info

bitcoincharts.com: 1kqHKEYYC8CQPxyV53nCju4Lk2ufpQqA2

molecular: 1MoLECHau3nb9zV78uKraNdcZsJ2REwxuL

organofcorti.blogspot.com is a reader supported blog: 12QxPHEuxDrs7mCyGSx1iVSozTwtquDB3r