Topic: My earlier google trend correlation still holding strong, crash predictable (Read 7943 times)

If it was AHEAD of price for 3 days it would make perfect sense, time for online discovery/investment of bitcoin. Do not understand the lagging...

Well, it does over that time period anyways. I would not completely discount the possibility that it could be predictive, and would certainly pay attention to it if it diverges significantly.

I retract my previous conclusion that the Google trend is weakly predictive. It actually correlates best by lagging price data by about three days.

For those interested, the most recent google trend numbers are:

July 1st - 36
July 2nd - 38
July 3rd - 38.

Using the chodpaba method, that gives a price of $10.82. But as chodpaba pointed out, there is variance +- 100%, so don't go too crazy.

I'm sure it could be done. I once kluged a custom interface between an AS/400 and a Mac Pro in the 90's, but I'm probably not the guy.

I am actually surprised by the strength of the correlation, even though I pointed it out in the first place.

This shows that Google Trends actually correlates pretty well with $/BTC.

nt will keep this bitcoin from thriving. If in fact we did scare the new crowd away, it's only temporary.

This shows that Google Trends actually correlates pretty well with $/BTC.

Some details:
The graph you see on Google Trends is the 'relative scale' chart. But what I used for my analysis is from the 'fixed scale' trend to take out variations in Google Search traffic.

The correlation coefficient between the two series is .86, which is not bad, but by delaying the Google Trend by one week that goes up to .96 which means that in general the trend tends to lead price by about a week. The graph is a log scale to make it easier to read, and the trend was normalized (divide by 3.51) and delayed to show how well it fits. And the price levels shown are a weekly average, since this is the resolution of the Google data.

You might think that since the Google trend tends to lead price by about a week and it fits pretty well that you can use it to predict price. But, as you can see there is still quite a bit of variance. It can vary by as much as -100% to +137% with half the samples having a variance greater than 34%. (There is a zero term at the beginning of the series that does not show up on the graph because of the scaling) It is not exactly clear though that you can rely upon it as a predictive tool for projecting price, because that time shift in the later part of the sample does not actually produce a better correlation than the non-shifted series as a whole.

My conclusion is that it is certainly an interesting correlation, and it bears watching. But the high level of variance, and inconclusive causal link to price make it a weak predictive tool at best. If you want to try and use it to trade use the fixed scale data, not the relative scale, divide the last term by 3.51 to get an approximation of price, place your orders, and be prepared to wait a week to see if they hit...

But don't bet the farm.

Such a drastic and sudden dip in the trend data was obviously caused by something other than chance imo, and that something was probably the Mt. Gox crash. A lot of miners got out, a lot of investors got out, and a lot of interest was washed way in the overall process. We can all thank Mt. Gox for this imo. I will never use their exchange, so help me god.

Quick, everybody go do a bunch of Google searches!!!!

It would be ahead/behind if the google trend line only represented the first time a user looked up bitcoins. In reality, someone thinking about investing in bitcoins is probably making lots of bitcoin related searches throughout the whole process. And people who own bitcoins probably search most of all. In the end, the "first search" that helps a user find out about bitcoins for the first time is probably only a small portion of the entire search volume.

Actually, I meant the reverse effect, regarding the delay... Google Trend line should be 3-5 days AHEAD of the exchange-traded price of bitcoins.

This is very interesting.

I wonder, have you considered if the Google Trend line should in fact be 3-5 days behind the exchange traded price of bitcoins?

Once someone finds about bitcoins via Google, it does take quite a few days to get setup, funded and trading on those BTC exchanges.  So there would be a delayed effect, assuming there is a causal effect between Google Trend and the exchange price of bitcoins.

Just a thought.

SJ