By now we know that Google is synonymous with the internet. Though technically and officially not a monopoly in 2017, they dominate the globe with their seemingly infinite reach of all things internet; spanning dozens of different business verticals, hundreds of companies, and thousands of products and services – all neatly packaged under one parent company known as Alphabet Inc. (NASDAQ: GOOG). For Google, above all their most cherished commodities is their ability to harvest exabyte amounts of data and information from the end user (if it’s free, you’re the product, not the customer).
I hear what you’re probably saying though… “I already know this, and there’s nothing new here”.
From my personal experience, most people I encounter only seem to know Google merely for their search engine and gmail, however as previously mentioned, Google has many products in their arsenal that can actually be quite beneficial for you as the knowledge-seeking trend-spotter we both know you strive to be. By using Google’s own data capabilities and computational prowess, you can utilize products like Google Trends and Google Correlate to make better sense of not only the world around you, but to also catch trends as they occur in real-time – resulting in better and more informed decisions that otherwise may have not come to pass have you not read this article.
Using Google Trends, Correlate, Sheets and Data Studio, we’re going to do a step-by-step breakdown of a few historical time-series and geographical charts in order to compare search query popularity of the cryptocurrency industry to overall market performance, and to moreover see if we can identify any significant positive or negative correlations that may aid us in helping forecast the wildly volatile market going forward.
Google Trends and Correlate will provide us with their normalized data sets of search query popularity. To oversimplify their super complex algorithms for a moment and give you a barebone explanation of the source of this data – Google aggregates all the end-user search data they receive from you and others, apply some of their machine learning sauce to present us with clean, normalized and most importantly, “anonymous” data sets. We will also incorporate the use of Google Sheets to help achieve proper visualization.
There exist a plethora of drill-down menu features and categories to help you easily navigate and find the trend you so desire. We’re starting with a broad and simple worldwide search for “Bitcoin”, filtered by past 5 years to see what we find.
Okay, so this graph looks eerily familiar. Let’s see to what extent Bitcoin’s search popularity correlates to its relative price action by calculating Pearson’s correlation coefficient. Google Trends allows us export their data sets and we pulled Bitcoin’s historic price data from CoinDesk. To match Google’s normalized scale of 1-100, we took the historic Bitcoin price data and matched the scale, also from 1-100 – lowest to highest price, respectively. We then proceeded to import the data into Data Studio for the visualization below.
Pearson’s linear correlation coefficient is r = 0.82, which indicates a strong positive correlation between the price of Bitcoin in US dollars and its respective search popularity online. Had we used a more granular data set, say weeks or days, there is no doubt that we would have seen an even stronger positive correlation.
Okay, so we didn’t really need such an analysis on something so obvious – good news hypes the market and bad news creates fud (fear uncertainty doubt), we get that.
Let’s see if we can find something less obvious, more obscure and interesting.
Let’s compare search popularity between Bitcoin and Ethereum over the past year to see how they stack up against each other.
It’s no surprise that Bitcoin is still the buzzword all-star in the cryptocurrency space, but what is surprising is the fact that Bitcoin is a more popular search term in Nigeria than it is in the United States… But is it really THAT surprising?
According to Google Trends data, searches for Bitcoin are twice as popular in Ghana as they are in the United States. What gives? Well, there are two possible reasons I can think of, but be sure to leave your opinion in the comments below.
For starters we know that Bitcoin empowers the “un-banked” due to its fundamental, “decentralized” ways. When we talk about the “un-banked”, we’re talking about those who either don’t have access to traditional forms of banking due to lack of local infrastructure, or those who willfully seek to avoid banks altogether due to reasons of their own. Also remember that a few Satoshis today can go a long way in impoverished countries like Nigeria and Ghana. Additionally, mobile phones are relatively inexpensive and abundant, even in West Africa, meaning that with a simple mobile connection, anyone can have access to their funds and do business locally with cryptocurrency. Needless to say, Nigeria knows how to HODL! It’s easier to handle the relative stress brought on by mass volatility in cryptocurrency when your native currency itself is driven by mass corruption and volatility to match.
Then there’s also the infamous 419 scams… Back in the wild-west days of the internet, many new internet users would receive emails from rich princes. Many of these princes were located in Nigeria and they would promise you fortunes in exchange for remote access to your computer. Similar scams are being perpetrated to this very day, and since cryptocurrency is in a similar “wild-west” state, it’s comes as no surprise that Nigeria and countries like it would have high levels of search popularity.
So this sort of begs the question – does a correlation between Bitcoin and Ethereum search popularity and average GDP per capita by country exist?
The difference between Bitcoin and Ethereum’s search popularity is interesting to visualize, but what is more interesting is that Bitcoin’s search popularity and a country’s average GDP per capita holds neither a positive nor a negative correlation; r = 0.03 to be precise. Bitcoin’s popularity and ultimate proliferation is so well distributed across nations that a country’s standard of relative monetary success bares 0 influence on its attractiveness.
On the other hand, Ethereum holds a stronger yet still weak, positive correlation to average GDP per capita, wherein r = 0.37. Search popularity for Ethereum does seem to favor a greater average GDP per capita than Bitcoin, and the cause for that I’ll let you speculate on.
With the impending Bitcoin Gold hard fork in a few days, it’s curious to see what kind of price action we are seeing relative to the amount of searches being done for Bitcoin Gold.
So no surprise there. As we approach the activation of the hard fork, we see that search popularity for Bitcoin Gold spikes through the roof. We also noticed that many alt-coins (cryptocurrencies that are not Bitcoin) began to drop in value over the past few weeks. Let’s see if we can identify some kind of relationship there.
We pulled price data for the the top 50 coins by market capitalization, excluding Bitcoin (BTC) and took their daily weighted average value and paired it against search popularity for Bitcoin Gold. It is evident that there is a strong negative correlation of r = -0.78.
Because the Bitcoin Cash hard fork went well, HODLers are seeking to buy into Bitcoin prior to this upcoming hard fork in order to receive their Bitcoin Gold post fork. In order to do so, investors are selling off their stake in the least dominant coins.
Google Trends is actually a spin-off, or better yet, an extension of Google Correlate. Google Correlate has been around for much longer than Google Trends and is much like Trends, but in reverse. With Google Trends, you type in a query and get back a series of its frequency (over time, or in each US state). With Google Correlate, you enter a data series (the target search term) and get back queries whose frequency (search popularity) follows a similar pattern. Here’s an example:
Did you know that search popularity for Bitcoin positively correlates to searches for Skullcandy Crusher headphones and Jeep Cherokee Trailhawks? Not kidding, search it for yourself, it’s actually quite amusing.
So remember, next time you see someone driving a Jeep Cherokee Trailhawk wearing Skullcandy Crusher headphones, be sure to wave a hearty hello to a potential fellow HODLer.
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