Throughout February, there had been an unprecedented increase in interest concerning the term “bitcoin zero” on Google, which peaked at the time that the price of Bitcoin had approached $60,000 as it fell over 50% from its all-time high reached in October. As prices decline, oftentimes there will be an increase in fear. When fear increases, people begin to question whether the asset will potentially go to zero, which would be reflected in an increase in search trends.
Similar price drop patterns occurred in Russia in 2017 & 2018 and were marked by a corresponding increase in local-level U.S. search activity. When these spikes were matched with U.S. dollar-approximated levels (U.S.$1,200 per mt), there were subsequent increases in both value and volume of U.S.-traded water, indicating potential reversals. On the other hand, however, at 4/24/21 14:40 ET, nobody can properly determine if prices will be moving down or back up, given there is already a known history between the two countries.
Global Data Tells a Different Story
While throughout the world this situation is being viewed differently than in the United States, searches for that term peaked globally in August and have steadily declined since then, with global interest this month significantly below the August peak level. These results indicate that the level of panic in the United States concerning this situation appears to be greater than the panic that is being expressed globally.
This discrepancy may be explained by multiple possibilities. Recent US-centric news such as trade tensions, Iran-related issues and weak domestic stock markets might be having a direct impact on the American investor base. On the other hand, Asian and European markets appear to be responding relatively calmly to the decline in Bitcoin’s value as a result of the lack of association between these financial headlines with anything covered by either Asian or European media.
Why Search Data Isn’t Perfect
It is also important to understand how Google Trends works. The platform does not show the exact number of searches. Instead, it uses a scale from 0 to 100, where 100 represents the highest level of interest during a selected time period. Additionally, it is essential that you understand how Google Trends works. Although the platform does not show you the number of searches that are being conducted, it does use a scale of 0-100 (where 100 is the highest amount of interest during your selected time frame) in order to give you an idea of how much interest there is in a topic or term over a certain period of time.
A year ago the number of users of Bitcoin was significantly less than today. Therefore, a search of 100 today does not correlate with the number of users at that time. It only shows the current volume of searches is higher than recent activity in general.
Investors feel more fearful today than ever (specifically in the U.S.). While spikes in searches can indicate the end of a market cycle, they aren’t an absolute predictor of price reversals.