Submitted by Nicholas Colas of DataTrek Research

The recent news that Google will not allow advertising of cryptocurrencies is a good reason to revisit the fundamental drivers that predict bitcoin price trends. Google searches and bitcoin wallet growth continue to slow in 2018, which is all you need to know about the near term direction of the asset. But while Google’s move may slow future adoption rates, plenty of other banned items (drugs, hacking software, counterfeit goods, etc.) still manage to flourish. An imperfect set of comps, to be sure, but still relevant to the discussion.

There are only 4 things Google doesn’t allow you to advertise on its search engine platform:

Counterfeit goods.

Dangerous products or services, like recreational drugs, weapons, ammunition, explosives and fireworks, and tobacco products.

Anything that enables dishonest behavior, such as hacking software, services to artificially inflate web or ad traffic, fake documents or academic cheating.

Inappropriate content, like hate speech or ads that use profane language

Source: https://support.google.com/adwordspolicy/answer/6008942?hl=en

As of June of this year, you can add one more: anything about cryptocurrencies like bitcoin. The prohibition is actually quite broad: “Cryptocurrencies and related content (including but not limited to initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice).” Frankly it is hard to blame Google, or Facebook (which put a similar ban into place recently), for the move given the level of fraud and deception in the space. The phrase “Goat rodeo” comes to mind except goats are, at least, cute.

Bitcoin’s price has been hit on the news, and for good reason: its value correlates well with the growth in the number of wallets that store the crypto online. Less advertising for bitcoin-related services may slow new wallet growth, which has already declined from its peak last year. A few numbers:

Bitcoin wallet growth in Q4 (the peak quarter for its price): an average of 7.7%/month

January 2018 wallet growth: 3.5%

February 2018 wallet growth: 2.9%

March 2018 run rate: 2.5%

Source: https://blockchain.info/charts/my-wallet-n-users

Google search trends for “bitcoin” – our preferred leading indicator for wallet growth – shows a similar decline in 2018. Our logic here is that those interested in buying bitcoin start with a Google search, and then open a wallet and eventually purchase. The latest data from Google Trends:

Worldwide searches for “bitcoin” are down 67% from the start of January to today.

From the all-time peaks of online search interest last December, Google searches for “bitcoin” are down 90%.

Changes in search interest for bitcoin in just the United States mirrors global volumes.

Global search interest is now similar to early October 2017, when bitcoin’s price was around $4,400. Bitcoin’s current price is $8,100, or roughly double the prior levels.

You can see the Google Trend data for yourself here: https://trends.google.com/trends/explore?date=today%203-m&q=bitcoin

The bottom line is that bitcoin is no different from any other emerging technology: it requires incremental adoption from new users in order to grow in value. That’s why we focus so much on wallet growth. Those are the new users, and right now growth here is less than half what it was when bitcoin was rising at a furious pace.

To close out on a (strangely) positive note, consider again the list of things Google doesn’t allow to advertise. None are particularly appealing – drugs, tobacco, hacking software, counterfeit goods, etc. – but they are all multi billion dollar industries. Google’s ban has done little to dent their ongoing success.

No doubt the ad ban will slow adoption, and the data we present here shows why that is important. But just because Google forbids advertising doesn’t condemn an industry to failure. People always find a way.

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Meanwhile, in a separate take, Forbes' contributor Panos Mourdoukoutas believes that the Google (and now Twitter) ad ban is actually bullish for crypto.