Bitcoin Price Likely Manipulated?
Bitcoin – Invest At Your Own Risk
Does this come as a huge surprise?
If it does to anyone, I am quite frankly surprised. Everyone should at the very least have the slightest suspicion that the Bitcoin market was, has and is being manipulated.
It is after all only a logical sequence of events if you were paying attention to Bitcoin prices at all not to mention that quite a bit of cryptocurrency across the board is currently being acquired fraudulently in some fashion or another.
Bitcoin prices were not moving then, suddenly it made a pretty significant jump.
Now according to a recent issue of the Journal of Monetary Economics, 4 researchers came together and wrote an article titled “Price Manipulation in the Bitcoin Ecosystem,” that paper shows just how the Bitcoin ecosystem is being manipulated.
The researchers are Neil Ganddal, JT Hamrick, Tyler Moore and Tali Oberman.
According to the paper, the researchers took a look at the Mt. Gox Bitcoin currency exchange and began to casually notice that roughly $600,000 bitcoins that were valued at $188 million just so happened to have been fraudulently acquired.
Looks like someone forgot to cover their tracks but not so much that we actually know the identity of said criminal.
“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.”
According to what the team was able to learn, the price manipulations looked like they were happening when the market was fairly thin for various cryptocurrencies.
“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.”
So who is responsible for the manipulation?
According to researchers it appears that two bots named Markus and Willy were conducting what appeared to be legitimate trades yet they did not actually own any bitcoin that they were using which helped drive up the price.
Mt. Gox was hacked before, during the hack a number of bots did in fact make away with millions.
This is bad news for bitcoin as it clearly demonstrates how easy it is to manipulate the markets and to make off with millions.
While I am all for breaking off the grid and deregulation here, I still think Bitcoin as well as other cryptocurrencies have a long way to go in terms of developing actual levels of standards, checks and balances, you know something like security and quality checks are firmly in place.
At least it should be considering now that many countries are looking to legalize cryptocurrency and accept cryptocurrency as a form of payment not to mention that the finance industry is also seeking to invest in it pretty heavily.
Cristal M Clark
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What are your thoughts