Topic: Bitcoin Trends Analysis (or How to Predict?) (Read 253 times)

Thanks everyone for your comments. I've only just seen them because I thought my thread had been deleted whereas in fact it seems to have been moved from the bitcoin forum to the economics one, which is why I thought it was no longer here.

My opening post was essentially saying that it's mostly hype that's been the driver of bitcoin's price. I used the activity (new members/ number of posts being created) on this forum as an indicator of activity and compared it then to number of searches on Google for bitcoin. I noticed a clear time lag which I went on to summise that people in general "catch on" much later than people "already in the know". My main finding, to back up my hype theory, was that as activity (hype/ media coverage/ google searches) increased, this was in proportion to the increase in price of bitcoin.

Activity is something that occurs and can be measured in retrospect. So, unlike technical analysts who use it as an indicator of future performance, I used it to demonstrate the link, in the past, of how it affected bitcoin, and the wider crypto currency market.

I also had to demonstrate, that if my presumptions were to have any validity, that the movements in bitcoin's price were not just moving along the same path as any other assets. So I set out to check this by looking at correlations of bitcoin price movements with other types of assets. This is the table that a couple of posters said they found made them "dizzy". Nothing to be too scared about though, I was just showing that a correlation did not exist, in historical data, and so we could be as certain as possible that bitcoin's price was correlated to level of activity (hype fed through media coverage, "fomo", financial/ economic news etc.) and not to any other factors affecting markets of other assets.

Thank you for the informative article. Bitcoin market was the best market for investment in the crypto industry. But somehow the price fallen down but it is recovering now and I hope that it will break the past records within a few months.

this is the reason why I am asking for a simpler operation. But it looks like the operation has gone away leaving this thread. This is a very common practice when low-ranking members thread and leave without responding to any response from other members

Thanks for your analysis. Hope BTC will gain some more popularity soon:)

The real surge in price will not be when people will buy BTC because it is popular, but when they will NEED it.

TL;DR, the more things you add up to your analysis, the more confused the reader will be on what your point is. Google Trends, alongside bitcointalk's forum activity are almost exactly the same. Why? Because on these periods you stressed, these are the things wherein the bulls are doing some massive pushes on the price. Go back a few years, 2014-2015 specifically and you'll see that google trend results would give you a flat line and bitcointalk activity is somehow not that great or close to your stats. Simply put, people only became interested in bitcoin because it has an equivalent of X dollars while being relatively unknown to the common folk. If everyone and their mothers knew about bitcoin, even with these price hikes, I guarantee you that the google trends result wouldn't spike that high. People's attention doesn't guarantee a rise in price but rather the opposite; a massive price rise will make people look into bitcoin's way. Lastly, TA doesn't guarantee near-perfect predictions on crypto. Most of the time, crypto proves that TA is flawed in some way especially when predicting crypto trends, sentiments and the overall market.

It is an interesting post. It is also confusing to many investors as they never heard of bitcoin price being affected by the times it being google-searched. Yes, when it gets enough exposure, people become more interested to know about Bitcoin and google it.

It is great that you relate the number of new members here in the forum and it truly shows the increased in interest of the currency itself. The other thing you can relate to Bitcoin's price movement is the number of new accounts created in famous Wallet providers such as Coinbase. Althought I forgot the specific number I remembered that new accounts being registered in their app increased exponentially during the price rally in the market, this also shows that a lot of people really got interested in investing in the market.

a pretty good piece of information but for new people it will be very complicated but for the old people it is very useful when the swordsman or the investment wants to predict bitcoin but whether this applies to other coins or just for bitcoin only and if you can make it easier to explain for this new person is perfect.

if we follow the chart list we can see the price of btc is decreasing based on investor but in trend analysis we can see that why its decreasing but the analysis predicts that the price of btc will increase soon and this price may affect other coins in the market.

Based on this trend analysis we can know about the result of btc price for the last few years so we can see the price of btc is decreasing but this price will increase soon based on investors are investing money here so this price may increase after few days later also we can see every coins price decreased .

I actually skipped that last table as I got somehow dizzy as well trying to study it with all those colors lol. However, it is an interesting analysis and one that is expected anyway. We know that interest globally are bound to drop when the market is not giving people what they want yet, which is the uptrend and in that case, most of those you are going to be seeing are either traders, or enthusiasts who are long term driven. As long as we start seeing uptrend in bitcoin, it is normal for us to see this change as well. It is more like a psychological thing in most markets.

these are two different statements here.
1. you can draw a conclusion based on the past with analysis and all that crap. you can say "bitcoin is undervalued and will go up a lot more because of the potential, because TA says it, because the adoption of it is growing,...."
2. saying "it was $20k so now it is undervalued" is wrong. it is basically people getting caught up in the hype and some of them who have actually bought at the peak so they want it to come back.

and as fro these charts,... you got it upside down. price doesn't go up because of more activity on forum, google trends, ... but instead when price is going up fast (or even when it is dropping down hard) there is a lot of activity (people posting on forums, idiots creating throwaways to spam FUD, news sites writing click baits,...). so you can't even use the trend for anything meaningful because it happens after the price move not before.

unfortunately, it's a very lagging indicator. it's not that informative from a trading perspective. but it does help us understand where we are in the market cycle and why (from a supply/demand perspective).

public interest plunged just as distribution set in: certainly indicative of a bear market. then again, dropping from $20k to $6k could have told us that!

Basically, OP is showing that Bitcoins price is correlated with the public's interest in bitcoin. Essentially supply vs demand.

What is more interesting, is OP shows that Bitcoin is almost completely a non-correlated asset. Now, this is Bullish long term, as it shows Bitcoin can be a potential store of value and a safe haven during economic uncertainty. Bitcoin is highly correlated with other crypto currency (Since most altcoins can only be bought with Bitcoin) but other than that, is relatively non-correlated with regular assets like the stock market.

Is that good news or bad news? Hahaha.

But seriously, can anyone give me a "ELI 5" version? All the fancy charts and deep analysis have shocked my brain, and I can do nothing but a blank stare on the OP's work with my mouth wide open.

From where did you get those stats about Bitcointalk forum activities and traffic?It`s pretty interesting.
What you are trying to explain with all those charts is just a normal price bubble.
The more people get interested in BTC and buy,the higher the price goes up.Price goes up,which leads to more newbies entering the market and buying btc.This is showball effect and it`s perfectly normal for price bubbles.

this is good, but I am quite dizzy to see the table. can this make you simpler? because sometimes some people are lazy to read and see articles that have many tables and long paragraphs

I've read online and on this forum and elsewhere comments from people who talk about the future of bitcoin whilst at the same time drawing their conclusions from the past. For example, some people have commented along the lines of "Bitcoin was $20k at the end of 2017 so it should go back there soon/ it's currently undervalued/ etc." There are others who talk about technical analysis providing signals to buy or sell (or to "go long" or "go short" in trader parlance (more on this later). And then we have the "fundamentalists" who talk about the economy, decentralisation, the value of the blockchain and so on. I wanted to see if any sense can be made from all this and whether we can identify any trends and the drivers behind them.

I started with looking at some statistics from this forum. Here are the stats from 1st January 2016 to 31st December 2017, a full two year period.



We can see an overall steady increase which then starts to increase exponentially during early 2017 and then drops off in the final month of 2017. This pattern applies fairly uniformly for new members, online, new posts and in fact all measures of activity. It will be easier to see if I plot some graphs, which I have done. Here is the first one.



We can see that aroundabout Dec 2016 new posts being created on bitcointalk started to increase month-on-month. By June/ July 2017 there were around 6,000 new posts being created compared to the 3,000 per month in Nov/ Dec 2016. The activity had doubled. And it continued to increase. This particular measure is a good indicator of activity within the existing forum community. If we compare this to new members joining the forum we see something interesting, but not altogether surprising. Here is a graph of new memberships:



We can see straight away that the rise we saw with new posts came much later with an increase in new members. It means that existing forum members were already discussing bitcoin more, rather than the rise in posts being attributed to new members. What this boils down to is that new members were joining the party after the bandwaggon was already some way down the avenue. In fact this increase in memberships only really took off around May 2017 - that's a full six months after the start of the increase in activity of existing members.

To get a better perspective I've taken the trends in bitcoin interest as measured by Google search. Here is a graph for the same two period looked at above:



Notice here that the increase in interest, measured by Google search activity, only occurred around Nov 2017 - that's a further six months down the line still. It means that interest, and by corollary, investment in bitcoin is taking place first within circles of people who are already engaged with bitcoin with the people at large catching on much later.

The question is, where do price movements kick in? Here is a graph showing bitcoin's price (in USD) for 1st Jan 2016 to 31st Dec 2017:



It bears an uncanny resemblance to the level of interest as measured by Google search. If we look at these two graphs, above, we can see a clear similarity. The more people become "interested" in bitcoin, the more the price rises and by proportionally the same relative amount. Number of searches for "bitcoin" goes up by 100% on Google then so does the price of bitcoin.

Of course, anyone might argue that all this is just pure coincidence. So we need to show whether or not it is. To do so we need to see whether there is any direct correlation between volatility of bitcoin compared to other assets. The closest comparisons would be other commodities but we should also include stocks, ideally something like the S&P 500 to get a good enough barometer of comparison. Here is a graph plotting the volatility over one year rolling periods since 2011:



It's clear to see that the three do not move in tandem. One final test, just to be sure, is to calculate actual correlations between bitcoin and a large enough sample of other assets. Here is a graph showing just this, correlation with 1,400 ETFs which cover pretty much the investment universe:



Around 99% of correlation occurs within -0.1 and +0.1 which is quite categoric in that bitcoin is uncorrelated with anything else outside of the crypto space. If you're now wondering whether bitcoin is correlated with other cryptos here is a table showing the correlation over the past three months:



It can be seen that bitcoin is indeed highly correlated to other cryptos ( the last four items in the table represent a comparison with other assets as follows: ^SPX = S&P 500 Index, ^VIX = CBOE Volatility Index, ^GLD = SPDR Gold Shares, ^TNX = CBOE 10-year treasury-note yield.)

To sum up, interest in bitcoin, which in turn affects its price, is the key driver. The increase in 2017 was extremely significant as it saw bitcoin's biggest rise since its inception in absolute terms. This was fed by a media frenzy which brought the existence of bitcoin to the awareness of people around the world who had never even heard of bitcoin. For fear of missing out many jumped in, driving the price up. This links in pretty much exactly with the Google search data above. It's worthy to note that the drop in Google searches for "bitcoin" since the third week of December 2017 have coincided with a corresponding and proportional drop in the price of bitcoin.