Study Shows That Bitcoin Price is Highly Correlated with Trading Activities
According to a study conducted by Mixpanel, there is a high correlation between cryptocurrency usage and the price of the Bitcoin. Mixpanel aggregated billions of user events in different cryptocurrency products in 2017 and found that the platforms followed Bitcoin’s price to nearly 1:1.
For example, during the bull run that the market experienced in 2017, trading activity went up over 16 times the moment Bitcoin reached $20,000 dollars.
In 2018, the situation is a little bit different. The trend follows very closely and shows that traders are involved in the market far more when the price grows rather than when it decreases.
One of the main hypothesis is that investors are more likely to take a bullish position on the market because there are no short-term position investment vehicles available for most of the traders. As traders cannot participate in the market, they wait until the next bull run or reversal.
Additionally, the study shows that cryptocurrency traders are more active than other investors. For example, users on crypto platforms are more likely to perform transactions than those users that trade on non-crypto platforms. 14% of users of cryptocurrencies have performed transactions, this number goes to 9.4% on non-crypto trading platforms.
Moreover, price correlations are also starting to emerge as the cryptocurrency market becomes more mature. During the last month, a study showed that Google searches for ‘Bitcoin’ dropped over 75% since the beginning of 2018.
Bitcoin popularity was 37 back in January 2017, according to Google, but at the beginning of July, this value was just 9. When Bitcoin was traded near its all time high, the interest for Bitcoin was 100 according to Google trends.
Currently. the famous virtual currency is being traded around $6600 dollars and has a market capitalization of $112 billion dollars.