Is Attention an Underappreciated Bitcoin Analysis Metric: a Non-rigorous Exploration.
December 20, 2021
Does it seem like frivolous dinner table discussions of cryptocurrencies coincide with a tremendous rally in Bitcoin? It's no coincidence.
While not a particularly groundbreaking observation, what about the inverse? Are there any insights we can draw about the cryptocurrency market from downward trends in popularity?
To explore this, I used Google Trends data for “bitcoin price”, a search term that may loosely represent the interest in cryptocurrencies over time, and marked 52+ week lows in this search term. Although correlation doesn't imply causation (!), I decided to see price movement after these lows:
Within the last 8 years, these lows came in 4 clusters:
- Cluster 1: June 6, 2015. Although any date prior to 2017 would've been a great time to buy Bitcoin, June 6 (at $222.88) seems to be the bottom of the market.
- Cluster 2: Aug 25 — Nov 3, 2018. The middle of a sharp drop from nearly 20K to under 4K (in the 6.2-6.8K range).
- Cluster 3: Mar 3, 2019. Near the bottom of the market in 2019 at $3761.
- Cluster 4: Sep 26 — Oct 3, 2020. At around the 10.5-11.5K price range, this precedes the most recent 2020-21 Bitcoin rally to highs of 66K.
Is this a mere coincidence or a substantive long-term buying strategy? As a software engineer, I haven't been able to find a conclusive answer. What I have done, however, is automate the tracking process for myself to experiment, and have made it free and open-source.