Price Manipulation in the Bitcoin Ecosystem

Price Manipulation in the Bitcoin Ecosystem

Over the years, there have been many articles on the possibility of Bitcoin price being manipulated by some invisible forces and big players in the market. The demand for the authenticity of this claim has been on the rise in recent times, and this post presents some reported evidence on this case.

Affirmation of Bitcoin Price Manipulation

One of the evidence of Bitcoin price manipulation comes from the research conducted by Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman. The study entitled “Price manipulation in the Bitcoin ecosystem established that one person single-handedly drove the Bitcoin price from $150 to $1000 in 2013.

According to the findings, there was a suspicious transaction of 600000 Bitcoins on the MT Gox cryptocurrency exchange website. In each of the period where this suspicious transaction was identified, the USD-BTC exchange rates rose by averagely 4%. Also, two known bots were used on MT Gox which created fake trades that appeared to be valid. According to the report, the bots caused the BTC price to rise. Trading volume on all the exchanges recorded a significant rise in the days of the suspicious transaction.

The report explained that Bitcoin price manipulation has been easy due to how thin the cryptocurrency market is, despite the significant market cap.

The Bitcoin Whale

A recent report revealed that 40% of Bitcoin ate held by just 1000 people. According to Aaron Brown, former managing director and head of financial markets research at AQR Capital Management, it is always possible for them to come together to sell half of their holdings each. In this case, the price may be significantly affected. The Bitcoin price operates in normal demand and supply, and large coin holders have all the ability to determine which direction the price should move.

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In 2014, it was reported that someone identified as Bearwhale moved 30,000 Bitcoins to an exchange platform to sell each coin for $300. This news brought fears into many other crypto investors for the fear that the market would crash.

The University of Texas finance processors John Griffin and Amin Shams also released a report which emphasized that Tether has been continuously used to stabilize and manipulate the Bitcoin Price. The report entitled “Is Bitcoin really un-tethered?” hinted that Tether was sued to buy a massive quantity of Bitcoin at the point when the price begins to fall.

According to the report, “Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.” Also, it was reported that there had been a pressure on Bitcoin price in months which a considerable quantity of Tether was issued, and this kind of correlation was not found with other cryptocurrencies.