The link between Bitcoin and Google Trends attention

TL;DR

This study investigates the relationship between Bitcoin prices and Google Trends attention, revealing a bidirectional link with returns and a dominant influence of volatility on attention, specific to cryptocurrency-related searches.

Contribution

It demonstrates that Bitcoin's attention is specifically linked to cryptocurrency search trends and uncovers the directional influence between attention, returns, and volatility.

Findings

Bidirectional relationship between Google Trends attention and Bitcoin returns.

Information flow from Bitcoin volatility to Google Trends attention is stronger.

Relations are consistent across different periods and index compositions.

Abstract

This paper shows that Bitcoin is not correlated to a general uncertainty index as measured by the Google Trends data of Castelnuovo and Tran (2017). Instead, Bitcoin is linked to a Google Trends attention measure specific for the cryptocurrency market. First, we find a bidirectional relationship between Google Trends attention and Bitcoin returns up to six days. Second, information flows from Bitcoin volatility to Google Trends attention seem to be larger than information flows in the other direction. These relations hold across different sub-periods and different compositions of the proposed Google Trends Cryptocurrency index.