Crypto Search Trends Aren’t up, But Big Players are Entering

The Search Interest Doesn’t Back Up the Current Price Action but The “Why” is Potentially Bullish

Crypto search trends are down considerably from the run of 2017 – 2018, and while there is a slight uptick in new retail adopters, most of the new blood seems to be institutional investors.

Meanwhile, most of the buying seems to be from those already in the game alongside the aforementioned new investors.

This is logically what seems to me to be the case given the data I have. I’m not GDAX; I don’t have a database that tells me exactly what is going on. I can only see price action and order books, analyze search trends, read headlines, and read reports that have been made public like reports on Over the Counter buying.

NOTE: I’ve illustrated data that I think backs up my point in the header image where I’ve presented a chart that shows search interest in Bitcoin vs. price action over time. You can see that the two correlate up until about February and then it stops. The price picked back up after that, but search interest never did. Before you think this is explained by Bitcoin losing dominance, or other cryptos gaining dominance, check out the Google Trends on cryptocurrency (it is the same deal).

Given my research, here is how I would describe what is and is not happening:

• What is what is not happening: A wave of new adoption from retail investors pushes price from $6k to nearly $10k.
• Here is what is happening: Another pump and dump (half joking). Here is what I think is happening: There are about twice as many new adopters today as there were in April at the bottom, but that isn’t likely having a significant impact on prices. Mostly what is happening is the same people who have been in the space for months/years are putting more money in or buying back what they sold earlier. Meanwhile, institutions and institutional investors are entering the space or ramping up involvement in the space. The algorithms that dominate the market have tended to be in bull mode since the $6ks, perhaps chasing fib levels, perhaps chasing liquidity (it is hard to fully understand their plan, I just try to ride their coattails). Those who are currently in the market seem to be content with rising prices for now. This is unlike the fall from $11.6k where the bear bots dominated and the bull bots capitulated. If we are starting another bubble, then (in the image below) it is likely we are in the stealth or awareness phase. I would say we are toward the end of the awareness phase nearing the first “bear trap;” but that is perhaps a little overly optimistic given the history of crypto.

An illustration of the phases of a classic economic bubble (left) and the 2017 – 2018 Bitcoin Bubble popping (right). Just assume that bubble pattern will repeat over and over again until crypto goes away. That means after despair, and the return to the mean, smart money and then institutional investors come back in before the public. #patternsandfractals (NOTE: we could be on an extended dead cat bounce in a capitulation phase. Still, it was like that in 2014).

Why do I feel so sure this is institutional investors and the same players and not new adoption?

To expand on some points made above, I say it because I look at volume trends, the search traffic on our site (we cater to new users), and Google search trends, and it seems pretty clear to me that while prices are going up, adoption by retail investors isn’t.

If it were new adopters driving the price action, I feel as though we would 1. be seeing crypto ads being bid up higher 2. be seeing more sign ups 3. be seeing more search traffic on pages geared toward beginners 4. be seeing an uptick in Google trends, 5. Etc. After all, I saw all this back in November and early January and nothing has fundamentally changed about our site or the internet.

Instead of being like that last mania phase, this is more like what I saw during the previous stealth and awareness phases of the last bubble.

I can only theorize on what exactly is happening, I don’t have the data that those closer to the inside have (like crypto exchanges or traditional institutions), however, I can read reports and see the data I do have.

I can see that institutions are opening crypto trading desks and offering derivatives. I can see that big Over the Counter purchases are being reported. I can see the algos pushing the price up on average. I can see the prices going up in waves. I can see search trends failing to correlate with price action. I can see a lack of volume on the exchanges compared to the last time we got to $10k.

Thus, I’m fairly sure that of what is happening in practice, and think I have a solid theory on what it could mean.

So, what does this mean? In my opinion, it means you should be skeptical of the narrative that says what is happening now is an advent of new adoption by retail investors.

That is either good or bad news. It is not great in that we are in a market full of people who sold once and will sell again and are trading based on algorithms and technicals (algos programmed to both buy and sell and technicals which include sell signals).

It is however interesting when you consider that we potentially have a wave of new adoption coming and that those in the market now are potentially accumulating for that wave!

Last time we got to $10k, there was a giant wave of new adoption. Now here we are, nearing that $10k goal post again without a wave of retail investors with credit cards.

If and when we see an actual wave of actual new adoption, we could see prices go through the moonroof again. That would require something like a 500% increase in new users in my assessment. In fact, we might logically breach all-time highs if we can hold anything close to the current price levels until then, but pair these prices with warm bodies fresh meat greater fools new users stoked about the power of the blockchain.

If I were building a position in crypto (which I am), logically I’d want to do it in a stealth or awareness phase, not in the greed and delusion phases. That is where you buy carefully and otherwise scale out to lock in some profits.

That said, the first sell-off (AKA bear trap) and the time leading up to it looks a lot like a miniature greed and delusion phase, and if we are there now (or worse, if we were just there this weekend), then…. hmmm. Sorry for your bags, hope you have some cash to buy lower and/or strong hands (half joking).

Anyway, all humor aside, my positive and focused point here is this: 1. you are better off gradually building a position alongside the big players and their algos now than you are when new adoption occurs again (assuming it occurs). 2. everything that has happened to the price of crypto since April seems to be driven by the same retail investors alongside potentially [but not certainly] a few new big players.

That means if you are still in the market, you are up against big players and potential sellers, but you also potentially have space to build a nice position before bubble mania kicks in again. That is mostly bullish from my perspective, but you need the risk tolerance and strategy to stick with it for as long as it takes for the next wave to form. Please be aware that there is no rule that says we have to go up; I personally believe that $500 BTC is still in the cards and I have planned for it.

TIP: Crypto is volatile heck. We might be only months away from all-time highs, but you can see up to 50%+ losses in the meantime. There is no limit on how high or low crypto can go. Anything can happen. Make sure you are taking a position that you can sustain. If you would sell after losing 90% of your wealth on paper, then consider scaling back into cash a bit and placing some low ball limit buys. There is nothing that says we aren’t currently at the highest prices we will ever see. However, if I am right, then we are at the stage before the next bubble starts to inflate. Thus, we want to figure out how to sneak onto that ship, which probably wants to throw us overboard and force us to buy higher and provide liquidity, and HODL on for dear life.