Despite Month-Long Rally, Cryptocurrencies are Not Brimming With New Buyers

If Google search trends are a proxy for consumer demand, bitcoin and other cryptocurrencies have yet to recapture the attention of new adopters. In fact, interest in cryptocurrency declined last week to the lowest level since October, a strong sign that the latest buying spree was driven almost entirely by existing market players.

What Google Search Trends Reveal

Cryptocurrencies have generated nearly $200 billion in additional market cap over the last four weeks, but new adopters appear to be absent from the rally. Data from Google reveal that searches for keywords like “bitcoin” and “cryptocurrency” have steadily declined since mid-February, with the downtrend continuing even as digital assets rebounded.

As of  May 5, search word “bitcoin” had a trending score of 12 on a scale of 1-100 where higher readings are associated with higher interest. To get a sense of just how far “bitcoin” has fallen, consider that the keyword had a perfect score of 100 in the week leading up to Christmas.

Interest for bitcoin is depicted in the following chart, which was taken from Google Trends:

The “cryptocurrency” search term has followed a similar downtrend since peaking at 100 in late December. As of Saturday, the term had a score of 17, which was also the lowest since October.

Assessing Demand

Much of the attention paid to cryptocurrency over the last week has centered on growing institutional adoption. Hacked reported May 3 that Goldman Sachs was in the formative stages of launching its own cryptocurrency market through bitcoin futures contracts. The bank will serve Wall Street in a market-making capacity where institutional investors can gain exposure to the digital asset using traditional derivatives products.

While institutional demand has been regarded as the next major step for cryptocurrencies in their path to mainstream adoption, some analysts have underestimated the role of new buyers in propping up the market. Google search trends reveal an undeniable correlation between consumer interest – perhaps even curiosity – and the underlying performance of the cryptocurrency market. In other words, when consumer interest was highest, so was the market.

Of course, the correlation isn’t perfect. The month-long recovery in crypto prices has not been met with a commensurate rise in search traffic. Then again, this is what leads us to believe that the veterans are largely responsible for the rally.

But new adopters are absolutely needed to keep crypto prices trekking higher and their absence can generate lethargic price action for the foreseeable future. That’s the general outlook of Nick Colas, a prominent Wall Street analyst who has been covering cryptocurrencies for quite some time.

In a recent interview with CNBC, Colas cited Google search and cryptocurrency wallet growth in concluding that fewer people are buying bitcoin for the first time. In his view, real world adoption of crypto assets goes far beyond what the institutions are doing. Although bitcoin futures and ETFs matter, what the average Joe is doing matters even more.

“Like any new technology, you need new adopters to come in to make it more valuable.” Colas said in the interview. “Then, we have a solid trek higher. Then, interest will reengage.”

Colas concluded that bitcoin and the overall market could trend sideways until we see the return of newcomers to the market. In his view, this could take up to five years to materialize.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi