A Time-series Analysis of How Google Trends Searches Affect Cryptocurrency Prices for Decentralized Finance and Non-Fungible Tokens

Abstract

Boosted by blockchain technology, the sphere of Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) is expanding globally. Although valuations of major cryptocurrencies Bitcoin and Ethereum likely will set the future of crypto-assets, the post-2020 expansion of cryptocurrency markets prompted explosive growth of DeFi- and NFT-branded altcoins. This study constructs time-series models to examine DeFi- and NFT-related cryptocurrencies and to clarify how their weekly prices fluctuated over a one-year period. Using Google Trends data, we measure how weekly Internet searches into crypto markets generally and specific branded cryptocurrencies affected price fluctuations for each coin. Results show that Bitcoin prices modeled as an exogenous variable have a positive effect on Ethereum prices. On average, brand-specific and market-level Google searches were estimated to be negative but not statistically convincing for DeFi- and NFT-branded altcoins.