A common saying in the investment world is “The trend is your friend,” a phrase that hints at the idea that most of the time, sticking with the prevailing market trend will produce positive results.
Some of the common metrics used to identify market trends include: technical analysis, which involves studying price charts to spot opportunities; fundamental analysis, which involves looking at the underlying economic and technological factors of a project; and social media metrics, which help an investor hear the pulse of what the general public is focusing on.
One of the most popular metrics that crypto merchants use to identify emerging patterns is Google Trends, a product that analyzes the popularity of search queries made through the Google search engine. With Google Trends, users can view data in simple line charts that also provide a breakdown by geographic region.
The Google Trends graph for “Bitcoin” shows several sharp spikes in searches over the past year, most notably in early January, late February, mid-April, and again in mid-May.
Bitcoin interest over time. Source: Google Trends
A look at the BTC price chart shows that each of the spikes in Google searches coincided with increases in the price of Bitcoin (BTC) and indicates that the search queries offer insight into how to identify trends that could affect prices. .
BTC / USDT 1-day chart. Source: TradingView
The same approach can also be applied to altcoins and decentralized finance (DeFi) tokens. Let’s take a look at how social analytics preceded the rise of popular NFT-related tokens and DeFi blue chips like Polygon’s MATIC.
Interest in DeFi came in two waves
DeFi was the hottest sector in the cryptocurrency market in early 2021, and it seemed like not a day went by without some newly emerging agriculture or loan protocol reaching $ 1 billion in total locked value.
Total market capitalization of the top 100 DeFi tokens. Source: CoinGecko
Data from CoinGecko shows that the total market capitalization of the top 100 DeFi tokens began to rise rapidly in mid-January and eventually the figure peaked in mid-May after the entire cryptocurrency market proceeded to liquidate. .
Searching for “DeFi” on Google Trends produces the following graph, which actually shows an increase in the number of inquiries around the same time that the market capitalization of DeFi tokens began to increase.
DeFi search interest over time. Source: Google Trends
This figure continued to rise even after the number of inquiries decreased during the month of March.
The spikes seen in the number of searches in April and again in May also occurred around the same time as the spikes in DeFi’s market capitalization.
Searches for “NFT” went parabolic in late February
The rise of non-fungible tokens, or NFTs, in February and March caught the world’s attention when big-name celebrities like NFL veteran Rob Gronkowski and Twitter CEO Jack Dorsey joined the action and established auction houses as Sotheby’s helped facilitate NFT auctions, including the recent sale of CryptoPunk # 7523, which sold for a record $ 11.8 million.
THETA / USDT vs. AXS / USDT vs. EJN / USDT vs. CHZ / USDT vs. MANA / USDT 1-day chart. Source: TradingView
Some of the biggest monthly gains from NFT projects include a 443% gain in the THETA price between March 1 and 21, and a 530% gain in the Axie Infinity Shards (AXS) price on February 23rd. to March 15. Chiliz (CHZ) experienced a 3,690% increase in price between February 13 and March 13.
The price increase coincided with an increase in NFT-related searches recorded by Google Trends.
NFT search interest over time. Source: Google Trends
While it was widely reported that NFTs stole the thunder from DeFi, evidence of the turnover can be seen when the DeFi and NFT search interest charts are combined. As shown below, there is a sudden and massive spike in NFT queries as DeFi searches drop.
Search interest in DeFi (blue) versus search interest in NFT (red). Source: Google Trends
The magnitude of NFT’s search queries was also significantly greater than DeFi’s, suggesting that non-fungible tokens may be an optimal route to foster widespread crypto adoption.
Looking at the period from late February to early March on the price charts, a drop in the price of DeFi tokens is observed around the same time that the prices of NFT tokens start to rise, indicating a certain level. rotation from DeFi to NFT. .
Both charts show spikes in search interest that align with price increases in related DeFi and NFT tokens, and also manage to capture the declining interest seen when prices fell in June and July.
Related: Striking a Chord: DeFi’s Domino Effect on NFTs and Web 3.0 Adoption
Twitter mentions may also suggest growing adoption
Twitter is also a good source for information on which currencies retail investors might be interested in, and analyzing the number of Twitter mentions can help determine which projects have the potential to see future price movements.
In 2021, Polygon emerged as one of the most promising layer two solutions for the Ethereum network, with mentions on social media increasing significantly as the price of its native MATIC token rose 700% from $ 0.33 on April 26. to its all-time high of $ 2.68 on May 18.
Price of MATIC versus volume of tweets. Source: TheTIE
As seen in the chart above, TheTIE data shows that most of the big jumps in MATIC’s price coincided with spikes in tweet volume where the keyword “MATIC” was mentioned.
Google Trends also shows an increase in searches for “Polygon” during this time period, with the initial spike in interest occurring during the week of April 25 to May 1.
Search interest of polygons over time. Source: Google Trends
While many analysts and trend watchers prefer to use technical and fundamental analysis to stay on top of developing trends, it is important to remember that no cryptocurrency project is of value without the people involved in the network.
This means that valuable information can always be found by analyzing information and advertisements that capture people’s attention and initiate audience engagement.
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