Could it be possible that a rise in the trend of Bitcoin related search terms, could be helping change the price of Bitcoin? Bear with me because this isn’t suggesting Google searches have a direct manipulative impact on the value of the markets, but new research does show that Google Search trends could be used to help investors predict what might happen next.
A study called ‘Risks and Returns of Cryptocurrency’ by Yale University Economists Yukun Lin and Aleh Tsyvinski has found a correlation between Google trends and the value of various cryptocurrencies. They believe that the findings indicate market changes within the markets could be down to increased or decreased attention through investors online. In essence, the more people that search for Bitcoin, the higher the price goes and vice versa.
According to Cryptoglobe, the paper states:
“High investor attention predicts high future returns over a 1–2 week horizon for Bitcoin, a one-week horizon for Ripple (XRP), and 1–6 week horizon for Ethereum. Using the model, researchers found a one-standard-deviation increase in Google’s search volume for ‘Bitcoin’ led to a 2.3% increase in the cryptocurrency’s price within two weeks.”
“Similarly, a one-standard-deviation increase in Twitter posts about BTC saw its price increase 2.5% within a week. On the other hand, the study further found that negative investor attention sees crypto markets fall. When Google searches for ‘Bitcoin hack’ increased, the cryptocurrency’s price dropped by 2.75% within a week.”
See more for yourself, here.
What does this suggest?
It looks like this could mean increased attention online is pushing the price of Bitcoin up. Now, this might not actually be the case and there’s a huge chance that increased searches are happening as a result of localised speculation, that goes viral, which in turn pushes the price of the markets up. The interesting finding is one that suggests when searches fall, so does the price of Bitcoin. News and speculation that could drive Bitcoin down will encourage more Google searches, so, how might this work?
One explanation could be that when the price starts to fall, people recognise and simply stop looking for news and prices, they ignore it. Or, maybe this is because when values fall, it’s easier to find crypto news in mainstream news outlets, without having to take to Google?
Either way, this research provides some interesting points and gives us something to think about at the very least.