The Bitcoin-Google Connection?
Bitcoin has more than doubled over the past month, as the hype and euphoria around crypto-investing continue to outweigh fears of a burgeoning asset bubble. For one astute cryptocurrency analyst, bitcoin’s year-long rally appears to be a self-fulfilling prophecy.
Google ‘Bitcoin’ and See How Many Results Show Up
At the time of writing, a simple google search of ‘bitcoin’ yields about 152 million results. That potentially explains why Bitcoin and competitor Etherum delivered the best return of any asset in the first half of 2017.
The BTC/USD exchange rate has an unusually high correlation with Google search trends for the word ‘bitcoin,’ according former ARK Invest analyst Chris Burniske. (If you’re not familiar with Chris, he authored the widely cited whitepaper BITCOIN: A Disruptive Currency.)
In Burniske’s view, interest in bitcoin further drives the price of the BTC/USD – a phenomenon he jokingly refers to as “a virtuous Satoshi cycle”. August is already shaping up to be Bitcoin’s most popular month, based on Google search trends.
Bitcoin’s search popularity have also rubbed off on competitors like Ethereum. However, none have enjoyed anywhere near the exposure of BTC.
BTC/USD: Commanding New Highs
While the cryptocurrency market has gone from one extreme to the other this summer, the underlying trend is overwhelmingly positive. The BTC/USD has not only doubled over the past 30 days, it has gained a staggering 320% this year.
The pair reached multiple record highs this week, with Bitstamp reporting a new closing high of $4,306.23 on Monday. As of Wednesday, some exchanges priced bitcoin above $4,480.00, a move that has boosted its total market value to nearly $69 billion. The total size of the cryptocurrency market is fast approaching $140 billion.
Despite the recent price explosion, sustained momentum in the RSI and MACD suggest further upside is in store. Whether evaluating from a technical or purely fundamental perspective, gains are likely to continue over the short term.
Fiat Currencies Look to FOMC
Cryptocurrencies are often described as censorship-resistant because they are not directly influenced by governments. They are also outside the grip of the central banking system that has largely shaped the post-crisis period. The same cannot be said of fiat currencies, which are highly susceptible to central bank policies.
The world’s most powerful central bank will attract investor attention on Wednesday. At 2:00 p.m. ET, the Federal Reserve will release the minutes of the July FOMC meeting, which saw policymakers vote against raising interest rates. The meeting minutes may provide clues about the Fed’s plan to wind down its massive $4.5 trillion balance sheet – a process expected to begin this year.
The FOMC will hold its next policy meeting September 19-20, making the upcoming minutes all the more important. The U.S. dollar, which rose to nearly three-week highs on Tuesday, will be especially sensitive to the release.