Bitcoin's Price Was Artificially Inflated Last Year, Researchers Say (nytimes.com)

A concentrated campaign of price manipulation may have accounted for at least half of the increase in the price of Bitcoin and other big cryptocurrencies last year, according to a paper released on Wednesday by an academic with a history of spotting fraud in financial markets. From a report, first shared to us by reader davidwr: The paper by John Griffin, a finance professor at the University of Texas, and Amin Shams, a graduate student, is likely to stoke a debate about how much of Bitcoin's skyrocketing gain last year was caused by the covert actions of a few big players, rather than real demand from investors. Many industry players expressed concern at the time that the prices were being pushed up at least partly by activity at Bitfinex, one of the largest and least regulated exchanges in the industry. The exchange, which is registered in the Caribbean with offices in Asia, was subpoenaed by American regulators shortly after articles about the concerns appeared in The New York Times and other publications. Mr. Griffin looked at the flow of digital tokens going in and out of Bitfinex and identified several distinct patterns that suggest that someone or some people at the exchange successfully worked to push up prices when they sagged at other exchanges. To do that, the person or people used a secondary virtual currency, known as Tether, which was created and sold by the owners of Bitfinex, to buy up those other cryptocurrencies.

Comments

It was Willybot

[xack]

The big MtGox bubble in 2013 was caused by Willybot. Other bots have been developed since then to pump the price. I seen the price of Bitcoin rise over a 1000 dollars in a minute at the peak of the bubble due to bot activity.

Re:It was Willybot

[Joce640k]

Anybody who looks at a graph of bitcoin prices can see it's artificial. It goes in stairsteps, not the sloping ups and downs of human buying. Sometimes the humans come in and mess it up but watch it for a few days and you'll see it clearly. Robotrading.

(find a 12 or 24 hour view of prices to see it best)

It goes up a step, up a step, up a step, ... then crashes down again. Somebody definitely a lot of robots set up doing the pumping and dumping.

It has no intrinsic value

[Theaetetus]

So the price is always artificially inflated.

Re:It has no intrinsic value

[Hognoxious]

*froth froth* fiat currency *froth froth* inflation *froth froth* tax *froth froth* Venezuela *froth froth*.

(roman_mir is temporarily indisposed)

Re:It has no intrinsic value

[pellik]

That's not really true. It's like saying that because music can be copied it has no intrinsic value. There is a utility value in bitcoin that other payment methods don't offer. It also has value to people who have trouble keeping or moving money in other formats due to legal issues (Russia). Bitcoin has found a real niche and it's not going to collapse to nothing unless another coin fully takes its place.

Re:It has no intrinsic value

[Drethon]

Doesn't the same go for all money since we went off the gold standard?

Isn't that true when we were on the gold standard? The value of gold had to be artificially be held down in order to make gold the standard of trade. Ultimately all any form of money represents is an intermediate form to convert the value of your work into goods you desire, though gold at least has some value in electronics but I think that value is swamped by the perceived value for jewelry.

Re:It has no intrinsic value

[Spy Handler]

That's not really true. It's like saying that because music can be copied it has no intrinsic value.

Depends what you mean by music.

I have a mp3 file of Beethoven's Piano Concerto #5. What is the value of my mp3 file? How much will I get if I were to sell it? What is its liquidity?

Answer is zero. On the other hand if you're talking about the artistic value of the piece or its contribution to human culture, then the answer is priceless.

Re:It has no intrinsic value

[DontBeAMoran]

Beethoven's Piano Concerto #5 is priceless.
Bitcoin's value is price-less.
Ergo, Beethoven invented Bitcoin.

Re:It has no intrinsic value

[OldPappy]

If I recall correctly, at one time, the US government set the price of gold at $35 per ounce. They also had laws on the book which prevented ordinary citizens from buying and selling gold, except in jewelry, and other items. Don't recall all the ins and outs of this.

Re:It has no intrinsic value

[bill_mcgonigle]

We're told by many here on /. that music HAS no intrinsic value because it CAN be copied. That pirating music OK, because the artist made their money once on the sale of the first recording, so there is no need for them to make money on later sales of that product.

Who says that? All value is relative and individual.

*Many* people are willing to pay eighty-nine cents or a buck twenty nine for a song. Others are willing to pay fourteen dollars a month for unlimited music.

Some people are willing to pay three dollars for the utility that a crypto provides; others are willing to pay twenty thousand.

In all those cases a market allocates the resources from the people who value something more to the people who value something less.

It's only in the Socialist ideal of one fixed value for a commodity that anybody can dare announce that an orange is worth more than an apple. But that fails every time it's tried, and for obvious reasons. Mises's "Economic Calculation Problem" paper is a good read on the technical subject, or Hazlit's "Economics in One Lesson" is a more gentle introduction. Both are available for free just a google search away, but that doesn't mean nobody values them. It's left as an exercise for the reader to figure out what additional actors may be involved in the value chain.

No value at all

[pubwvj]

Bitcoin has no value. It is just smoke and mirrors.

Paper money is only mildly better, especially now that it has no gold backing.

Gold backed was also not real.

Gold in fact has no real value other than what it can actually be used for to make things of use.

To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

Re:No value at all

[ljw1004]

To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

Thanks for your 2c^H^H^H half a bean

Re:No value at all

[Jeremi]

Bitcoin has no value. It is just smoke and mirrors.

Also, Justin Beiber has no value, because I can't stand his music or his personality.

Also, Windows 10 has no value, because I don't like Microsoft and only use MacOS and Linux.

Also, stating that "X has no value" has no value, since that's really just a statement of your personal opinion of X's value to you. X obviously has some value, at least to the people who are using X, otherwise they would not be willing to pay money for X. It's a buyer's willingness to pay for X that defines X's value -- at least for that buyer. You can disagree with the buyer's estimate, but doing so is no more useful than disagreeing with their taste in music, or anything else.

Re:No value at all

[jwhyche]

What is the value of firewood in a computer simulation?

It is L$99 which would translate into about say, 90 cents depending on the exchange.

https://marketplace.secondlife...

Re:No value at all

[desdinova 216]

it's not the gold itself, it's the latinum that is contained within.

It actually does

[rsilvergun]

it has the value of the drugs it's being used to buy and money laundering done with it. That's what formed the base of the Crypto currency market (with a smattering of ransomware and video game 'skin' gambling). A serious of transactions that needed to be kept off the books. It was only later Crypto currencies branched out into unregulated and unbacked securities (e.g. the "Proof of Stake" coins that have become so popular).

If you want to see Bitcoin's price _really_ tank legalize drugs, crack down on money laundering and kill the securities scams. It'll go back to a few bucks a coin while the rest of the currencies will be worthless.

Well, at least some non-fraud profit in BC

[gweihir]

This is an excellent research opportunity into how unregulated markets will be manipulated. I am glad to see somebody took it.

Just like LIBO

[ve3oat]

We all remember LIBO, right? The London Interbank Offered Rate. One of the causes of the 2008 bank crash, especially in Europe. Same thing -- under the table manipulation of a rate by a few key players for their own benefit. It can and will happen in any unregulated market. Just finished reading "Open Secret" by Erin Arvedlund, 2014, ISBN 978-1-59184-668-0. "The global banking conspiracy that swindled investors out of billions". I would recommend it highly. Cryptocurrency investors, watch out!

Pump And Dump

[ComputerGeek01]

It's almost as if investment stuff is regulated for a reason: https://www.investopedia.com/t...

Re:"Researchers"

[ISayWeOnlyToBePolite]

And how do we know these "researchers" are not artificially pushing down the price of Bitcoin now...

They are actually real researchers who have written a paper describing their findings. Previous to this they released a paper about manipulation of the VIX. To describe and expose asset manipulation publicly while being held to the standards of science is their career, and they are doing quite well. To suggest that they also secretly engage in asset manipulation seems far fetched at best.

Google "Layering"

[rsilvergun]

why do you think there are so many crypto currencies now? You buy Monero with cash and then Ethereum with your Monero and maybe two or three other currencies in there and then finally buy some bitcoin and cash it out. That's how you do the money laundering.

As for buying drugs with bitcoin, yeah, and lots of folks get caught. Lots of folks don't. Right now in a lot of the world drug laws are selectively enforced. In America if you're middle class or above and white you can pretty much do drugs with impunity. Depending on your jurisdiction you can do drugs if your black as long as you stick to your side of town.

Our drug policy is how we enforce racial segregation in the parts of the country that want it. It's also how we bust up groups of young people when they start protesting for change. This isn't me making crap up either. Nixon's old aids admitted to it.

Re:Google "Layering"

[ET3D]

The main reason there are so many cryptocurrencies is that it's easier to make money off a new currency than an old one. If a coin takes off, early adopters make a lot of money.