Now this is getting really interesting.

I am still in learning mode on cryptocurrencies. Every twist and turn is like a new flower patch around the bend. When I last wrote about the price patterns in Bitcoin a week and a half ago, I gave a qualified call for a bottom in the price of Bitcoin. The cryptocurrency was clinging to the $6000 level, so I just happened to write that piece at THE current short-term bottom. I did not quite feel comfortable calling a bottom because the data were incomplete. A few days later, the Google Search trend data did indeed show a spike in activity just as Bitcoin hit its latest attempt to bottom.

Source: Google Search Trends. Price data from Yahoo Finance

Extremes in Bitcoin price activity have typically generated spikes in Google Search Trends. The extremes have marked tops and bottoms.

As a reminder, I use Google Search trends to determine a change in direction for the underlying price of the search target. In this case, the search target is “Bitcoin.” The change in direction typically comes when extremes occur in both the recent price change and the search index. The term “extreme” is a bit subjective here, but it generally refers to a large percentage move in a short amount of time.

Going from right to left in the above chart, I examine the most recent episode of extremes. After Bitcoin started plunging from $10,000 on February 1, the search index spiked. The price stopped going down but for only about 2 days. After price plunged toward $6000 (intraday), the search index spiked well above the previous spike. That bottom has held ever since. Yet, the immediate drop of the index to what I have to assume is a kind baseline worries me about the sustainability of the bounce. It is as if new interest quickly evaporated. At this stage of the Bitcoin run-up, new interest and new money are key ingredients for upward momentum.

The next episode to the left on the chart was a single spike immediately following news from China of additional regulatory tightening on Bitcon trading on January 15th. Price bottomed out and recovered a bit, but this action preceded the eventual breakdown below $10,000.