Bitcoin (BTC): the herd is rarely correct

The unexpected rally may not be getting the media attention it deserves but, our analysis shows that people are beginning to hop on the bandwagon. Unfortunately, they only do so after bitcoin is most likely about to conclude a rally. In this article, we show how many retail investors buy only after the price surge concludes.

In trading and investing, it is always good practice to consider the contrarian stance. For instance, if the overall sentiment is bearish, perhaps it’s an excellent time to be bullish – and vice-versa. We do this all the time because the herd is rarely correct. It seems that Google Trends supports our line of thinking.

We plotted the interest for the search term “buy bitcoin” on Google Trends during the past 12 months, and correlated it with bitcoin’s price action on the weekly chart.

On the Google Trends chart, we were able to mark nine points where there was a spike or significant interest in the search term. For your reference, these are the dates when the search “buy bitcoin” bounced:

July 22 – 28, 2018

Sept. 02 – 08

Oct. 14 – 20

Nov. 25 – Dec. 01

Dec. 30, 2018 – Jan. 05, 2019

Feb. 03 – 09

Feb. 24 – Mar. 02

Mar. 31 – Apr. 06

May 05 – 11

Bitcoin posted green weekly candles in eight out of the nine dates listed above. There was only one red candle, and that was in the week of September 3rd. At that time, the market was blowing off steam after going above $8,000.

The correlation between public interest and price action is undeniable. It indicates that people are only interested in buying bitcoin after a price surge. In this sample, the “buy bitcoin” search term peaked on May 12th and May 14th. If you look at bitcoin’s daily chart, these are the dates when the market appears to be hyper bullish.