X

15216 Views

Google Searches Can Forecast Bitcoin Price Movements

Spread the love
  • 7
    Shares

The National Bureau of Economic Research (NBER) recently published a study that hinted that cryptocurrency markets are influenced by the type of attention they receive, not like traditional financial markets.  

Unlike other traditional financial assets, cryptocurrencies are not responsive to the market parameters as traditional financial tools but instead, having “cryptocurrency specific factors,” as stated in the non-profit’s report which was released this week. These factors are investor interest and market motion, defined in the report as “time-series cryptocurrency momentum at the daily and weekly frequencies.”

Yale University economists Yukun Liu and Aleh Tsyvinski, the two authors which wrote the paper, indicate that, as opposed to popular belief, “the markets do not view cryptocurrencies similarly to standard asset classes.” The paper named the price trackers from CoinDesk on Bitcoin, Ethereum and XRP price as the source that provided the market data.

By looking at price data series from time frames over several years, the paper compared the actual returns with the estimated returns by employing a standard finance pricing model called CAPM. Liu and Tsyvinski went on to draw comparisons between cryptocurrency returns and traditional assets, as well as macroeconomic factors like consumption increase.

All of these results may seem statistically insignificant, but they point towards an entire new matter in other instances, which Liu and Tsyvinski classified as the measure of returns a day or week before. Basically, the price increase over one up to a week could be forecasted by a single daily return, while a weekly return could forecast how the market will act on a one, two, three or four-week period.

What’s even more remarkable, is that the study included data from consumer activity on search engines such as Google and social media sites like Twitter. According to these findings, a standard deviation surge in searches for keywords like “bitcoin” predicted a small increase in the token’s value in the next weeks.

According to the report, just on standard deviation surge in the keyword search on Google determined a 2.75% price increase on average. In a similar manner, a standard deviation increase in Twitter post counts led to a 2.5 percent increase in crypto prices. Then again, a standard deviation increase in searches with terms such as bitcoin hack led a small drop in bitcoin’s price.

7 Shares

You may be interested

Why Strong Web Security Is So Important for Cryptocurrencies
Learn
2419 views
Learn
2419 views

Why Strong Web Security Is So Important for Cryptocurrencies

Adriana Midrigan - August 20, 2018

One of the reasons why so many people have turned to cryptocurrencies lately is for the greater feeling of security…

Shanghai Stock Exchange to Integrate Blockchain Technology
News
2492 views
News
2492 views

Shanghai Stock Exchange to Integrate Blockchain Technology

Adriana Midrigan - August 20, 2018

The Shanghai Stock Exchange (SSE) is working with the Insurance Asset Management Association (IAMAC) to streamline the insurance and pension…

Bitcoin Millionaire Lost His BTC to Forged Bank Notes
News
3194 views
News
3194 views

Bitcoin Millionaire Lost His BTC to Forged Bank Notes

Anca Faget - August 20, 2018

A South Korean businessman was duped into swapping his bitcoin holdings for fake banknotes, losing millions worth of BTC for…