Bitcoin, which has had active days recently, has started to recover again after the fall. At the time of writing, bitcoin, which is at the level of 6600 USD, has been one of the fastest recovering financial assets after the decline in the financial markets with the effect of the corona virus. On Baidu, China’s Google, searches for the word bitcoin have increased by 183% in
the
last month. Can this information be a leading indicator of bitcoin growth?
In his article “Quantifying Trading Behavior in Financial Markets Using Google Trends”, Tobias Preis, Professor of Finance at the University of Warwick, tried to explain the relationship between Google trends and share prices. According to the analysis, when the search trend of finance-related words on Google increased, share prices moved in inverse proportion. Does this also apply to bitcoin?
When we compare the Google weekly search trend and the bitcoin price on a chart, we see that the bitcoin price has decreased with the increase in the search trend recently. However, in the rise of bitcoin last year, it is observed that search trends have increased again.
When we examine the correlation of the two series, we see that it is 0.23. This is not a high correlation, but we observe that price mobility has a relationship with the increase in Google trend searches 1 year ago and recently. For this reason, it seems likely that there is a relationship between weekly volatility and Google trend results. In the volatility and Google trend chart, this relationship is much more pronounced.
The correlation between the two series is 0.67, which is not a small ratio for two independent series. There is a serious correlation between volatility and Google searches, and we can’t say that this is surprising. Because bitcoin has always been the center of attention in the financial markets with its volatility. Bitcoin, which has been in the press and social media in serious rises and falls, has attracted the attention of people again with these news and this has been reflected in Google search results. This information is not enough to predict the price of bitcoin, but it can be used in the models that can be created.
In addition, the strength of the relationship shows that we need to follow Google trends from time to time when investing in bitcoin . The increase in trends may cause the ups or downs in the bitcoin price change to be more volatile. Bitcoin is a financial asset that can be frequently volatile in relation to its decentralization. For this reason, we can say that we will see more bitcoin search increases in Google trends.
