BitCoin meets Google Trends and Wikipedia: Quantifying the relationship between phenomena of the Internet era

Abstract

Digital currencies have emerged as a new fascinating phenomenon in the financial markets. Recent events on the most popular of the digital currencies – BitCoin – have risen crucial questions about behavior of its exchange rates and they offer a field to study dynamics of the market which consists practically only of speculative traders with no fundamentalists as there is no fundamental value to the currency. In the paper, we connect two phenomena of the latest years – digital currencies, namely BitCoin, and search queries on Google Trends and Wikipedia – and study their relationship. We show that not only are the search queries and the prices connected but there also exists a pronounced asymmetry between the effect of an increased interest in the currency while being above or below its trend value.

Characteristics of Bitcoin users: an analysis of Google search data

“…9 Although it is conceivable 95 that higher Bitcoin search volume need not translate into increased market participation, Kristoufek (2013) demonstrates a strong positive correlation between Bitcoin searches and exchange prices. GT can be used to extract data for precise search 100 terms and more general topics (see Fig.…”

The digital agenda of virtual currencies: Can BitCoin become a global currency?

“…Buchholz et al 2012;Kristoufek 2013;van Wijk 2013;Bouoiyour and Selmi 2015), suggest three types of drivers determining BitCoin price formation: (1) market forces of BitCoin supply and demand, (2) BitCoin attractiveness, and (3) global macroeconomic and financial developments.…”

“…This is partially linked to the fact that BitCoin has been created relatively recently and to the nature of the currency. (Barber et al 2012;Buchholz et al 2012;Kristoufek 2013;van Wijk 2013;Bouoiyour and Selmi 2015).…”

“…In order to capture BitCoin attractiveness, a t , we follow Kristoufek (2013) and use the volume of daily BitCoin views on Wikipedia (views on Wikipedia). According to Kristoufek (2013), the frequency of searches related to the virtual currency is a good measure of potential investors' interest in the currency.…”

“…Given that BitCoin is a relatively new currency, its price formation is not well understood yet, as there are only few studies on BitCoin price formation available in the literature (e.g. Buchholz et al 2012;Kristoufek 2013;van Wijk 2013;Bouoiyour and Selmi 2015).…”