Understanding the Relationship between Digital Currencies and Search Engines: An Empirical Analysis

One of the hot debates from the last few years that has been discussed not only in academia but also in non-academic circles is digital currencies (Bitcoin, Litecoin, Ethereum). Bitcoin is the most popular of the digital currencies, which is used and distributed electronically, and is an innovative internet protocol created by the Japanese pseudonymous “Satoshi Nakamoto” in October 2008. It is a new form of decentralized electronic currency system and stands for an IT innovation based on advancement in peer-to-peer networks and cryptographic protocols; it has low processing fees and is quite trustworthy. The digital currency is based on the IT innovation having association and dependence on internet access. So against this backdrop, this chapter is an attempt to understand the relationship between Bitcoin prices and search queries on Google Trends as a measure of the interest in the currency throughout the world. The relationship will be examined by using weekly data for 2013–2018. The chapter makes use of time series models to develop and understand the relationship in a scientific way. Our preliminary results conclude that there exists a strong and significant relationship between Bitcoin price movements and the queries in Google Trends by investment professionals. The chapter concludes with some suggestive remarks. Digital currency is a digital representation of value that can be digitally traded and functions as a medium of exchange, a unit of account composed of unique strings of numbers and letters, and/or a store of value but which does not have legal tender status in any jurisdiction. Bitcoins are created as reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger. In recent years, some studies have evaluated the ability of keyword analysis to forecast technological factors. The data succinctly depict the total size of the Bitcoin blockchain and the distributed database that contains a continuously growing and tamper-evident list of Bitcoin transactions and records, from the third quarter of 2010 to the latest quarter. Bitcoin has not received nearly as much attention from the media in 2018 as it did in 2012, but Bitcoin-based startups continue to be of great interest to venture capitalists.