By CCN Markets: On June 7, Coin Street News (@CoinStreetNews) shared a chart on Twitter that could have serious implications on bitcoin’s price action. The account specializes in technical analysis of cryptocurrencies and other assets. They posted a Google Trends chart and revealed that “there are more people searching ‘bitcoin’ now than during the 2013 bubble.” The tweet also noted that the year-over-year data for the search term “bitcoin” has gone up for the first time in the past year.
Coin Street News noted the significant rise in the search term “bitcoin”:
Followers of Coin Street News did not find the post newsworthy. User Hawthorne (@hawthornebtc) replied, “…we chartin Google trends chart now?” Another follower with the Twitter handle @fathead noted that we’re so far away from the 2017 bubble search results.
What these followers, along with many others, seem to miss is the potential importance of this spike. Based on the Google Trends chart posted by Coin Street News, the search term “bitcoin” not only took out a key resistance but it also retested it as support. More importantly, if you look at the chart closely, you will see that the breach of the resistance triggered the breakout from an Adam and Eve double-bottom pattern.
In technical analysis, the breakout marks the trend reversal for the search term. This suggests that it’s quite possible that from this point forward, there could be an uptrend in the interest of the search term “bitcoin” over time. This is potentially ultra bullish for the price of the cryptocurrency. This bias is supported by a study published in the second half of 2018.
CRYPTOCURRENCY INVESTOR ATTENTION AS PREDICTOR OF BITCOIN PRICE ACTION
In August 2018, Yukun Liu and Aleh Tsyvinski examined the risks and returns of cryptocurrency.
In their study, they noted that cryptocurrencies are distinct from other investment assets such as stocks, fiat currencies, and precious metals. Most risk factors that are often linked to the stock market do not impact crypto tokens. Macroeconomic factors, such as housing data and personal consumption data, do not affect cryptocurrencies either. In addition, fiat currency’s (euro, Australian dollar, Canadian dollar, Singaporean dollar, UK pound) and precious metal (gold, silver, platinum) returns do not affect digital coins.
On the other hand, Liu and Tsyvinski emphasized that cryptocurrency investor attention through Google Trends data strongly projects cryptocurrency returns. According to the study, Google Trends data statistically significantly forecasts one-week and two-week ahead returns. One standard deviation jump in this week’s searches equates to growth in weekly returns of 1.84 percent. That figure rises to “2.30 percent at the 1-week and 2-week ahead returns.”
BOTTOM LINE: GOOGLE TRENDS DATA COULD PREDICT BULLISH PRICE ACTION AHEAD
The trend reversal of the search term “bitcoin” on Google Trends could have serious bullish implications. With the Adam and Eve breakout, there might be more people searching for “bitcoin” in the coming months as the search term is now in an uptrend. According to Liu and Tsyvinski, the increased investor attention is mega bullish as it strongly forecasts bitcoin returns.
We may be far away from the 2017 bubble search results but we could get there, as pointed out by some Twitter followers of Coin Street News. Should that happen, it’s possible that bitcoin’s price will closely follow suit.