Bitcoin Price Manipulation: One Person Drove BTC From $150 to $1,000
New research from Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman shows that the Bitcoin Price Manipulation by just one or two major players. Here, is why you should not ignore the fact.
CoinCrump – A researchers from The University of Tulsa, USA and Berglas School of Economics Tel Aviv University, Israel reveals some of the critical factors and major players driving the Bitcoin. Bitcoin has experienced tremendous growth since it was launched in 2009, reached the all-time high level, i.e., $19.87K on Sunday, 17 December 2017. And currently, 16,805,225 Bitcoins is in supply out of 21,000,000 Bitcoin which are still under process. Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman in a research paper titled “Price Manipulation in the Bitcoin Ecosystem” describes to what extent the Bitcoin ecosystem is in wrong hands.
Bitcoin Price Manipulation
It may be true that the Bitcoin Price might be manipulated by the one or two major players. They also identified and analyzed the impact of the suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired.
“During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”
The team also find that the market is tiny for various cryptocurrencies including early Bitcoin.
“Despite the huge increase in market capitalization, similar to the bitcoin market in 2013 (the period examined), markets for these other cryptocurrencies are very thin. The number of cryptocurrencies has increased from approximately 80 during the period examined to 843 today! Many of these markets are thin and subject to price manipulation.”
Additionally, the Bitcoin Price surged by US$ 12.19 K (1,484.13%) with a total volume of over US$ 206.29 Billion in just one year. It was similar to the bitcoin market in 2013 (the period they examined), markets for these other cryptocurrencies are fragile. Thus, they suggested that manipulation can be feasible in such setting.
According to the research, the first time Bitcoin reached an exchange rate of more than $1,000, the rise was driven by fraud and took three years for the Bitcoin Price to achieve the same level again. Keeping the historical data in mind, the Bitcoin might take few more years to reach the all-time high level again.
Markus and Willy Bitcoin Bot Trades
The Bitcoin Price Manipulation happened primarily via two bots, Markus and Willy. It seemed to be performing valid trades but did not own the bitcoin they were using. The researchers also reveal that during the Mt. Gox hack a number of these bots were able to create fake trades and make off with millions while manipulating the price of BTC.
“The publicly reported trading volume at Mt. Gox included the fraudulent transactions, thereby signaling to the market that heavy trading activity was taking place. Indeed, the paper later shows that even if the fraudulent activity is set aside, average trading volume on all major exchanges trading bitcoins and USD was much higher on days the bots were active. The associated increase in “non-bot” trading was, of course, profitable for Mt. Gox, since it collected transaction fees.”
“But the Willy Bot likely served another purpose as well. A theory, initially espoused in a Reddit post shortly after Mt. Gox’s collapse (Anonymous, 2014b), is that hackers stole a huge number (approximately 650,000) of bitcoins from Mt. Gox in June 2011 and that the exchange owner Mark Karpales took extraordinary steps to cover up the loss for several years.”
They also added:
“During both periods, the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity.
“Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”
Moreover, Japan and South Korea are stepping up to regulate Bitcoin exchanges partially. Recently, Korean cryptocurrency investors and adopters who refuse to include their real names into their anonymous virtual trading accounts will be fined.
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