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Researchers Find That One Person Likely Drove Bitcoin From $150 to $1,000 (techcrunch.com)

Posted by msmash on from the closer-look dept.

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.

25 of 117 comments (clear)

  1. That's not true! That's impossible! by Anonymous Coward · · Score: 2, Funny

    (searches feelings)

    Nnnnnooooooooooooo!!!!

  2. Re:That's not true! That's impossible! by bobbied · · Score: 2

    I got to hand it to you..... Um.... Sorry... You need to get that looked at.

    --
    "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  3. Poorly worded by JeffSh · · Score: 4, Insightful

    this is a disingenuous post. It doesn't mention the analysis is about the 2013 mt gox event until the second paragraph yet somehow infers during the first paragraph that bitcoin is a highly manipulated market subject to the whims of 1 or 2 individuals.

    i don't believe that's the case in 2017. the market is completely different in 2017 vs 2013 yet a naive reading of this post may infer conclusions are being drawn about 2017/18.

    1. Re:Poorly worded by JoeyRox · · Score: 3, Insightful

      i don't believe that's the case in 2017. the market is completely different in 2017 vs 2013 yet a naive reading of this post may infer conclusions are being drawn about 2017/18.

      The daily volume for bitcoin is less than $150M, so the market is still exceedingly vulnerable to price manipulation from a few large holders trading back and forth.

    2. Re:Poorly worded by Baron_Yam · · Score: 5, Insightful

      The people who are emotionally and financially invested don't want to know that.

    3. Re:Poorly worded by GlobalEcho · · Score: 4, Informative

      The daily volume is considerably more than you cite, at $600 million/day and that is just in USD terms. Overall volume is about triple that.

      I actually agree with you about it being vulnerable, but we should base our arguments on solid numbers.

    4. Re:Poorly worded by GameboyRMH · · Score: 2

      People do get addicted to gambling.

      --
      "When information is power, privacy is freedom" - Jah-Wren Ryel
    5. Re:Poorly worded by Black+Parrot · · Score: 2, Funny

      This is more evidence that Slashdot editors are non-neutral reporters pushing an anti-Cryptocurrency agenda

      Funny, I thought it was a bitcoin/tesla fan site.

      --
      Sheesh, evil *and* a jerk. -- Jade
    6. Re:Poorly worded by DarkOx · · Score: 4, Informative

      don't believe that's the case in 2017. the market is completely different in 2017 vs 2013

      Completely different in that yes there is wider distribution now than back 2k13. To say the market is completely different is a bit of streach. This page has some tables with data from September '17. You can clearly see that top 1-2% people have about half the BTC market.

      https://medium.com/@BambouClub...

      Oddly that is pretty close to the distribution of wealth in general across the world. Maybe this is simply a feature of some other driver in modern finance....Another topic.

      At any rate it cannot be said that BTC isn't thinly traded and their are not a handful of people with large enough holdings to manipulate the market. This isn't a BTC specific problem, Soros did it with the Pound in the 90s but... its clearly not a problem BTC has solved either.

      --
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    7. Re:Poorly worded by ceoyoyo · · Score: 2

      And the Winklevoss twins alone own something like $1 billion worth. They could be manipulating it just trading each other coins.

  4. Wealth distribution by Solandri · · Score: 5, Interesting

    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?

    1. Re:Wealth distribution by nine-times · · Score: 2

      A few things:

      1) Your post is a little ambiguous. Do you want an explanation as to why people get upset that 1% of the population owns 50% of the world's wealth? Or are you just asking why those people who are upset also like bitcoin?
      2) I'm not sure it's the same people. That is, the people who are upset about the disparity in wealth distribution are the same people buying bitcoin, at least not exclusively.
      3) In either case, I doubt that they're buying bitcoin in response to being upset about the disparity in wealth distribution. At least not directly.
      4) It's really not the same thing anyway. Complaining that a small percentage of bitcoin owners have 40% of bitcoin is a bit like complaining... maybe it's like complaining that a tiny percent of airplane owners own a large percent of all airplanes. That's not a perfect analogy, but the unequal distribution makes sense-- i.e. few people really want or need many airplanes, whereas everyone wants some form of wealth.

    2. Re:Wealth distribution by Gavagai80 · · Score: 2, Informative

      Because they're different people. The ones flocking to bitcoin (besides the speculators who have no personal values, and the drug addicts) are the libertarians who object the government regulations and taxation and laws that limit the 1% to a mere 50% of the world's wealth.

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      This space intentionally left blank
    3. Re:Wealth distribution by ad454 · · Score: 4, Insightful

      Oh please, not this again.

      The minimum amount of money required to be successful at life varies per region, and must be sufficient to buy a modest 2-3 bedroom family home and car, while being able to raise a small family in modest comfort without incurring massive debt, while still having enough for retirement and unforeseen medical issues.

      In the San Francisco Bay or Vancouver BC area, not even $100k per year is enough for this, due to massive home prices.

    4. Re:Wealth distribution by rogoshen1 · · Score: 2, Insightful

      I've always thought that study, and the theory behind it is something cooked up by MBA types to justify not handing out raises/bonuses

      "See, we'd pay you more -- but we care too much about you and your emotional well being to give you more money."

      The corollary is that the C levels and board members are so lavishly compensated out of deep seated feelings of self loathing.

    5. Re:Wealth distribution by ceoyoyo · · Score: 2

      I doubt it. There's strong association in management theory between financial compensation and performance. If you pay people more, they're more likely to do what you want.

      That study suggests that's only true up to a point, that point being what you tend to pay your best non-upper management employees.

      The logical implication of that is that paying upper-level managers more money will not correlate with better performance, which is certainly the opposite of what the MBA-types like to claim ("we have to pay the CEO millions otherwise we won't be able to attract a good one!")

      Oddly, when you look at actual executive performance versus salary you find out this is not the case. Executive performance is correlated with salary... negatively.

  5. Re:It was me... by Oswald+McWeany · · Score: 4, Funny

    I was selling a bridge and some beach front property in Arizona...

    If you have any left I'll buy it with some dogecoin.

    --
    "That's the way to do it" - Punch
  6. Re:Where is the proof? by Pinky's+Brain · · Score: 2

    Don't lie so much to yourself so much, it's a bad habit for a gambler. No such thing as pot committed in this game, get out in time.

  7. This is incorrect at a basic level by slashmydots · · Score: 4, Interesting

    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?

    1. Re:This is incorrect at a basic level by dknj · · Score: 2

      a) there was a transaction malleability issue which could be exploited for free bitcoins on the mtgox platform. this is rumored to have happened, thus someone could have had a database entry of 6000 BTC when in reality his wallet was already emptied. trades on mtgox were offchain.

      b) if you own the platform, then you can turn an invalid scenario into a valid one.

  8. Controlled by bad actors by wonkey_monkey · · Score: 3, Funny

    the paper describes to what degree the Bitcoin ecosystem is controlled by bad actors.

    Jeez, Shatner gets the blame for everything these days.

    --
    systemd is Roko's Basilisk.
  9. Re:It was me... by SScorpio · · Score: 3, Funny

    You wouldn't happen to be selling the London Bridge, would you? If so I might be interested.

    https://en.wikipedia.org/wiki/London_Bridge_(Lake_Havasu_City)

  10. Re:It was me... by Actually,+I+do+RTFA · · Score: 3, Funny

    some beach front property in Arizona

    I wonder if future generations won't get the joke, due to there being beachfront property in Arizona.

    --
    Your ad here. Ask me how!
  11. I don't think they do by rsilvergun · · Score: 2

    most of the folks I know who are gun-ho on bitcoin are libertarian types, not leftists. e.g. they're flocking to bitcoin because they see it as a way out using fiat currencies. The actual left are nervous about bitcoin for the same reason. Too much power in anyone's hands usually get abused.

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  12. Yes, it is different this time :-) by perpenso · · Score: 2

    the market is completely different in 2017 vs 2013

    Yes, in 2013 we only had geek speculators, today we have wall street and non-geek general public speculators. A far healthier environment. ;-)