Let me preface this article by saying I’m by no means a statistician and welcome any additions to this analysis. I have a finance background and understand the basics, that’s about it. This post is mainly out of curiosity and fun.

Very often, Google Trends charts are quoted as examples for booms or busts in the crypto space. These graphs show a general interest in a subject over time by using Google’s search data. For example, here is a 5 year plot of the term “cryptocurrency”:

The theory is that when the World is actively searching for crypto, prices should go up, and vice versa. I decided to put this theory to the test.

Google Trends data series is weekly, so we will miss some chop in the middle but overall there are enough data points for that not to be a concern. I also noticed that trend numbers can be quite choppy so for the analysis I created a 4 week moving average to smooth the data.

Let’s take a look at BTC and ETH prices graphed against their search trends (on a scale of 1–100) over time:

BTC Price vs Google Trends

ETH Price vs Google Trends

To the naked eye, they do appear to be quite correlated. From here I decided to create some basic correlations and also try to determine who leads who. That’s one of the more important questions for anyone wanting to use this study, does price lead trends or do trends lead price?

Interestingly, these answers are bit different between ETH and BTC. For ETH, the strongest correlation comes when trends lead price by 4 weeks:

For BTC, the strongest correlation comes when there is no lag and trends and price are moving together:

I think these strong correlations show that Google Trends do in fact have a leading impact on crypto prices and can be used in buying or selling decisions as an indicator. There are deeper dives that can be done to produce even stronger models which perhaps I’ll cover in a follow up post.

Of course brings up the giant elephant in the room seen on the graphs above. ETH and BTC prices currently have the largest spread above trends we’ve ever seen. Does this mean prices will head lower and stick to the correlation or will they break the trend? Time will tell.