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Researchers Find That One Person Likely Drove Bitcoin From $150 to $1,000 (techcrunch.com)
An anonymous reader shares a report: Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman have written a fascinating paper on Bitcoin price manipulation. Entitled "Price Manipulation in the Bitcoin Ecosystem" and appearing in the recent issue of the Journal of Monetary Economics the paper describes to what degree the Bitcoin ecosystem is controlled by bad actors. To many it's been obvious that the Bitcoin markets are, at the very least, being manipulated by one or two big players. "This paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired," the researchers wrote.
"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 found that many instances of price manipulation happened simply because the market was very thin for various cryptocurrencies including early Bitcoin.
"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 found that many instances of price manipulation happened simply because the market was very thin for various cryptocurrencies including early Bitcoin.
Why do people get upset that 1% of the population owns 50% of the world's wealth. And in response they flock to something like bitcoin, where 1000 people or 0.007% owns 40% of the wealth?
So they said "in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired." and the article explains "The manipulation happened primarily via two bots, Markus and Willy, that seemed to be performing valid trades but did not actually own the bitcoin they were using." If you own BTC, all you can do is sell it. So someone who owns or controls a bunch of bitcoins can only drive down the price. Someone who owns a ton of USD can make the price go up. So at a fundamental level this article makes no sense. Now registering trades for currency they didn't actually own through some kind of security vulnerability makes sense because the exchange would register that the trade happened without verifying fund ownership change, which absolutely would drive up the price. So maybe they're saying that happened instead?