Texas University Researchers: Predicting Bitcoin’s Price with Google Trends, Twitter Crypto Data
Both Google Trends and Twitter could eventually be used to predict price movements in Bitcoin (BTC) and Ethereum (ETH). According to a recent study released by the Southern Methodist University, Twitter and Google search activity could predict the price movement of the two largest digital currencies in the market.
— CoinTrendz.com (@CoinTrendz) May 7, 2019
Google and Twitter Could Help Crypto Traders
According to this report, the researchers identified correlations between Bitcoin and Ethereum prices with Google Trends data. At the same time, they were able to recognize a correlation between Twitter and Bitcoin prices according to the number of tweets related to the digital asset.
The experts have also explained that the sentiment of tweets was determined not to be a reliable indicator when the prices of virtual currencies were falling. Thus, sentiment analysis is less effective for crypto price changes when the market is falling.
The report reads as follows:
“Both Google Trends and tweet volume were highly correlated with price. In addition, the correlation held during period of increasing and decreasing prices suggest that the relationship is robust to periods of high variance and non-linearity. The findings of our analyses show that sentiment analysis is less effective for cryptocurrency price changes in an environment in which prices are falling.”
The report explains that this happens in this way due to the fact that tweets about cryptocurrencies tend to be objective in nature or positive regardless of price changes. At the same time, traders use different tools in order to identify crypto market sentiment. CoinTrendz, for example, identifies the top 10 virtual currencies according to their Twitter activity per hour.
This is very important in order to understand how markets are going to be evolving after an increase in the activity on Twitter and Google Trends.