Stop Googling Bitcoin – Scientists Say Google Search Volume Predicts Bitcoin Price Crashes

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NEW YORK (InsideBitcoins) — When a buddy of mine told me that a friend of his was offering to sell off a couple Bitcoins a while back, I didn’t really know what it was and the whole affair sounded like the shadiest deal imaginable, so I passed. Of course, I regret that now, as, at the time, the currency had a sizable market value compared to what the guy was selling them for (I believe he wanted $55 for one Bitcoin if memory serves), and the rates have only gone up since. I was curious though. What is a Bitcoin?

When it comes to research, I’m like every other 20/30-something. I Google. I rely on Google for too much, honestly, but it’s remained my best relationship, so, I keep going back to it. Nevertheless, those who are doing that very thing, Googling and researching Bitcoin, are the ones causing a slip in value. At least, that’s according to researchers at the Federal Institute of Technology Risk Center in Zurich, Switzerland.

Social media and search volumes

As part of an analysis of search terms and social media mentions, the scientists were able to cobble together findings that link those criteria to spikes and declines in Bitcoin value. By taking into consideration the size of the user base, as well as the current market value of the currency, number of searches and amount of information shared, the team was able to identify search strains that effectively echo positive chatter about Bitcoins, thus increasing their value and desirability.

“Our analysis suggests that the successive waves of growth of the Bitcoin economy were driven by corresponding waves of new users from public circles gradually opening to the currency” said the researchers. “Bitcoin’s growing popularity leads to higher search volumes, which in turn result in increased social media activity on the topic of Bitcoin. More interest encourages the purchase of bitcoins by individual users, driving the prices up, which eventually feeds back on the search volumes.”

The study also identified another cycle that boosts the price of bitcoin.

“The second feedback loop we identify is the user adoption cycle, which complements the social cycle: new Bitcoin users download the client and join the transaction network after acquiring information about the technology. This growth in the user base translates to a price increase, as the number of bitcoins available for trade does not depend on demand, but rather grows linearly with time. This is a direct consequence of the deflationary nature of Bitcoin as a currency.”

Massive search volume = a bitcoin price crash

One of the scarier aspects of this research indicated that while positive chatter is clearly a positive thing when dealing with the market value of a bitcoin, negative chatter and negative discourse online can have the opposite effect, as well. And it seems when it comes to Bitcoin, we may search for the negative more than the positive.

“Another important result of the [research] is the negative weight of search on price. This marks sporadic connections between large price drops and the spikes in search volume that preceded them. In other words, user search activity responds faster to negative events, such as a security breach in a Bitcoin exchange, than price. In this regard, search spikes are early indicators of price drops.”

By highlighting the influx of search terms and search keywords, the Swiss team stated that a drop in value was imminent. While not exactly gospel, it’s worth noting that the analytics really can only be read one way and the study didn’t exactly account for further-looking views on Bitcoin itself.

The most common terms when you type “Bitcoin” into Google, as of right now are “Bitcoin worth,” “Bitcoin price,” “Bitcoin exchange,” and “Bitcoin China,” by the way.

Written by Robert Ottone

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