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Author Topic: My earlier google trend correlation still holding strong, crash predictable  (Read 7623 times)
DamienBlack
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July 04, 2011, 10:58:27 PM
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Earlier I started a tread (http://forum.bitcoin.org/index.php?topic=17318.0) about how price and bitcoin's google trend numbers are highly correlated. The only big price drop in the past was paired with a drop in the trend. I decided to see how well the current "crash" matches up with bitcoin's google trend numbers. It turns out, that the correlation still exists very strongly.

Image Below:



The blue line is the google trend line for bitcoin, roughly scaled to match price. You can see that if we assume bitcoins popularity is the main factor driving price, that the current price is justified, and in fact, (I have to say it) lower prices might be seen.

I know that correlation is not causation, but clearly there is a correlation here. It seems intuitive to me, since bitcoin is a lot like a commodity, that the number one factor driving prices is demand. Demand seems like it can be roughly estimated by getting an indication of interest, which is what google trends gives us. I think that assuming at least some causation is prudent.

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foggyb
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July 04, 2011, 11:02:20 PM
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Sure looks flat to me.

Just like the trading price.
muyoso
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July 04, 2011, 11:04:45 PM
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Sure looks flat to me.

Just like the trading price.

You are looking at the last 30 days while the OP is looking at the last 12 months.  Google does relative data scaling pertaining to the selected time frame.  In the last 30 days they take the average of the data and set the average to 1.  In the last 12 months they take the average over 12 months and set it to 1.  Since nobody gave a shit about bitcoins until recently, the first 9 months of the 12 month graph bring the average way down.

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July 04, 2011, 11:07:32 PM
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Looks like the peak was mid June (the 11th, 12th, 20th) and trending down since then.  
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July 04, 2011, 11:11:10 PM
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OP your graph doesnt appear to actually predict anything (ie show something before it happens) it changes when the price changes. correlation but not prediction.


and the reason it is below near the end is that there is no price line to mach it against due to trading freeze, and then your graph ends.

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DamienBlack
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July 04, 2011, 11:14:32 PM
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OP your graph doesnt appear to actually predict anything (ie show something before it happens) it changes when the price changes. correlation but not prediction.


and the reason it is below near the end is that there is no price line to mach it against due to trading freeze, and then your graph ends.

That is because google trends 12 month chart has a delay. Perhaps I should have used the term, justified, or expected, instead of predictable.

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DamienBlack
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July 04, 2011, 11:16:48 PM
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Is there tabular data for that index?

I would like to take a closer look at it and quantify that correlation a little more precisely.

http://www.google.com/trends/viz?q=bitcoin&date=ytd&geo=all&graph=all_csv&sort=0&sa=N

I'd love you to take a look at it, your statistical analysis is always very good.

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Bitcoin Swami
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July 04, 2011, 11:17:08 PM
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OP your graph doesnt appear to actually predict anything (ie show something before it happens) it changes when the price changes. correlation but not prediction.


and the reason it is below near the end is that there is no price line to mach it against due to trading freeze, and then your graph ends.

I agree I dont think that crash at 32 had anything to do with lack of interest..
DamienBlack
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July 04, 2011, 11:18:50 PM
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OP your graph doesnt appear to actually predict anything (ie show something before it happens) it changes when the price changes. correlation but not prediction.


and the reason it is below near the end is that there is no price line to mach it against due to trading freeze, and then your graph ends.

I agree I dont think that crash at 32 had anything to do with lack of interest..

When it was at 32, interest was at its peak. You can decide which way it relates. There is a case both ways. I think the price got to 32 because there was so much interest, but interest died down, and so did the price.

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Man From The Future
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July 04, 2011, 11:19:38 PM
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I think it's more of a feedback loop than just search volume -> price.


Up price = news = speculators = up price = news, repeat, until speculators bail.
DamienBlack
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July 04, 2011, 11:21:25 PM
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I think it's more of a feedback loop than just search volume -> price.


Up price = news = speculators = up price = news, repeat, until speculators bail.

Why wouldn't the correlation break at that point? A huge drop in prices should generate news, which should lead to a higher trend then price. Or are you arguing that speculators haven't bailed yet?

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July 04, 2011, 11:24:35 PM
 #12

OP your graph doesnt appear to actually predict anything (ie show something before it happens) it changes when the price changes. correlation but not prediction.


and the reason it is below near the end is that there is no price line to mach it against due to trading freeze, and then your graph ends.

I agree I dont think that crash at 32 had anything to do with lack of interest..

When it was at 32, interest was at its peak. You can decide which way it relates. There is a case both ways. I think the price got to 32 because there was so much interest, but interest died down, and so did the price.

Yeah who knows.. its a paradox marty. 
Man From The Future
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July 04, 2011, 11:27:36 PM
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I think it's more of a feedback loop than just search volume -> price.


Up price = news = speculators = up price = news, repeat, until speculators bail.

Why wouldn't the correlation break at that point? A huge drop in prices should generate news, which should lead to a higher trend then price. Or are you arguing that speculators haven't bailed yet?
I guess more detail: It generates news, but investors don't want have as much incentive to invset from this news, which is bad news. It's liek teh difference from a micropone being newar enouhg to a speaker for a feedback loop, or near enough fro an echo.

(Above theory is probably wrong Smiley)
Man From The Future
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July 04, 2011, 11:28:04 PM
 #14

Is there tabular data for that index?

I would like to take a closer look at it and quantify that correlation a little more precisely.

http://www.google.com/trends/viz?q=bitcoin&graph=all_csv&sa=N

I'd love you to take a look at it, your statistical analysis is always very good.


All I got from that is a bunch of weird characters

Code:
⁙⁵†⁵⁳⁴†⁢⁥†⁳⁩⁧⁥⁤†⁩†⁴†⁥⁸⁰⁲⁴†⁤⁡⁴⁡†⁦⁲†⁇⁧⁥†⁔⁲⁥⁤⁳

How do you make Google give you the list?
Your browser's a screwing up the compression.
imperi
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July 04, 2011, 11:31:41 PM
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It works if you import it into Excel.
KeyserSoze
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July 05, 2011, 01:34:52 AM
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How do you make Google give you the list?

You kidnap their children for ransom. Works every time. Just be sure to use a voice scrambler when you call or they will track you down.

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July 05, 2011, 03:22:25 AM
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I think it's more of a feedback loop than just search volume -> price.


Up price = news = speculators = up price = news, repeat, until speculators bail.

Why wouldn't the correlation break at that point? A huge drop in prices should generate news, which should lead to a higher trend then price. Or are you arguing that speculators haven't bailed yet?
I guess more detail: It generates news, but investors don't want have as much incentive to invset from this news, which is bad news. It's liek teh difference from a micropone being newar enouhg to a speaker for a feedback loop, or near enough fro an echo.

(Above theory is probably wrong Smiley)
Above theory is impossible to read.  Wink
StewartJ
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July 05, 2011, 03:41:50 AM
 #18

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
StewartJ
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July 05, 2011, 04:05:59 AM
 #19

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


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.
DamienBlack
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July 05, 2011, 04:10:46 AM
 #20

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


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.

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.

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