
Price manipulation in the Bitcoin ecosystem - stablemap
http://voxeu.org/article/price-manipulation-bitcoin-ecosystem
======
xxxxxxxx
A very weak article - is it really surprising that someone who had access to
the back end was able to buy enough to drive the price up?

There is a better version of the story here:
[https://willyreport.wordpress.com/2014/05/25/the-willy-
repor...](https://willyreport.wordpress.com/2014/05/25/the-willy-report-proof-
of-massive-fraudulent-trading-activity-at-mt-gox-and-how-it-has-affected-the-
price-of-bitcoin/)

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jnordwick
All they do make a regression analysis and say that two traders traded on days
the market went up. Given you can actually track every transaction you would
think they would be able to point to size of the transactions, percentage of
daily volume, or something more interesting. Instead they simply tell you the
average amount the rate increased in days these guys traded.

Weak.

~~~
Twisell
But their conclusions are fair, they don't overreach and call for more study
on the matter as any scientist should do.

 _As mainstream finance invests in cryptocurrency assets and as countries take
steps toward legalising Bitcoin as a payment system (as Japan did in April
2017), it is important to understand how susceptible cryptocurrency markets
are to manipulation. We encourage the nascent cryptocurrency industry to work
with regulators and researchers to share anonymised transaction data so that
more confidence can be placed in the veracity of exchange rates._

~~~
jnordwick
But they didn't show manipulation. They showed two parties trading on up days.

~~~
EGreg
Heard of the Look Elsewhere effect?

Obligatory XKCD: [https://xkcd.com/882/](https://xkcd.com/882/)

~~~
Twisell
Not really relevant here however.

And they call for more study to confirm or deny their finding. So far so good.

It's people that might overact in a way or another, this article is just a
piece of data.

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jamesrom
I haven't read this paper, but I remember it being theorised that Mt. Gox
operated on a fractional reserve by using bots to manipulate the price.

That after being "hacked" and losing the coins, they kept operating even
though they knew they couldn't payout everyone. They tried to make up the
losses by manipulating the market against their users.

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factorialboy
I thought it was common knowledge that cryptocurrencies get pumped and dumped.
And they're unregulated so it's legal to do so if you are a whale.

~~~
Hermel
This is not about pumping and dumping, it's about misappropriating client
funds. Using your own money to pump is debatable. Buying Bitcoins with money
you do not actually have (but promise to be available for withdrawal at any
time) is fraud.

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anothercomment
I don't see the relevancy to today's Bitcoin price? Presumably MtGox was able
to execute the fake trades because they didn't have to provide the money for
it? It was simply a number in the database, if the dollars couldn't actually
be withdrawn?

Sure, another market could try to pull the same stunt, but do they even have
the same scale nowadays? There are many more markets than at the time of
MtGox.

~~~
kolinko
I don't think many people claim this things can happen in such scale any more.

I see this article as an additional proof that the spike back then was caused
in large part by the ponzi scheme MtGox was.

(Having said that, there were also other good news back then that helped the
price - like the hearing in US Senate regarding crypto, that went very well)

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danmaz74
Talking about price manipulation, maybe somebody here from MIT knows if this
is something official, or - manipulation?
[http://litecoin.mit.edu/](http://litecoin.mit.edu/)

~~~
2_listerine_pls
What's that?

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ryanmarsh
_Due to the unregulated, decentralised environment in which they operate,
cryptocurrencies are under constant threat of attack._

Due to the fact they have money, financial systems are under constant threat
of theft and fraud.

FTFY

~~~
kolinko
Also, such attacks make the system more robust in long term.

Kind of like open source systems end up safer long term, because every single
day people are trying to find bugs in their source codes.

~~~
posterboy
except that every update introduces two new buggy features for each bugfix,
while the usability is not always great except where copied from existing
solutions

------
joeyspn
An interesting analysis that Nanex twitted some weeks ago:
[http://parasec.net/transmission/order-book-
visualisation/#sh...](http://parasec.net/transmission/order-book-
visualisation/#shinanigans)

The visualization code (R) is available here: [https://github.com/phil8192/ob-
analytics](https://github.com/phil8192/ob-analytics)

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rodorgas
This article could be a tweet with that table.

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jpatokal
TL;DR: Researchers claim to have proof that the 2013 spike to $1,000 was
engineered through fraud. It's unclear how much relevance this has to today's
far deeper markets. Which isn't to say there isn't fraud going on today, as
even a casual glance at ICOs will show, just that it's going to be that much
harder to manipulate the price.

 _In recent work, we show that the first time Bitcoin reached an exchange rate
of more than $1,000, the meteoric rise was driven by fraud (Gandal et al.
2017). We leverage a unique and very detailed dataset to examine suspicious
trading activity that occurred over a ten-month period in 2013 on Mt. Gox, the
leading Bitcoin currency exchange at the time. We first quantify the extent of
the suspicious /fraudulent trading activity and show that it constitutes a
large fraction of trading on the days the activity occurred. We then show how
this trading activity affected the exchange rates at Mt. Gox and other leading
currency exchanges_ [at the time].

~~~
tinfoilman
It is commonly accepted that the mxGoT willy bot was the cause of the price
rise in 2013 from 200 to 1000 dollars.

History

Gox started as a trading platform in 2010 by McCaleb. He sold this to Mark in
2011. It is rumored that Mark was using customers BTC to expand Gox or/and it
was already sold to Mark missing 80,000 BTC. When the price started to go up,
Gox was forced to create the willy bot to try and buy back (at a higher price)
the bitcoins they missing as they were running a technical fractional
reserve). The willy bot drove the price up because it was always buying and in
turn defeated its own purpose as it ended up bankrupting MxGot by driving the
price so high that they could never hope to recover the missing btc. I wonder
if they had not created the bot if they could have made GoT solvant again over
a longer time frame.

This sort of thing is still happening, Poloneix is rumored to be inside
trading, There was a DDOS attack a few days ago which caused price drops and
it is rumored the Dossers were shorting the currencys on the exchanges. One of
the exchanges had such little liquidity that a whale was able to dump eth
yesterday causing a massive price drop on one exchange (which I am prety sure
they then used to buy up cheap coins but you never know)

Anyone activity trading in Cryptoland is at the mercy of these whales, they
are mainpulating price, daily pump and dumps on alts and no regulartion

That said, I cannot stop watching it all, i just hlod coins I like the
technical merit of

Some light reading

History of Gox
[https://en.wikipedia.org/wiki/Mt._Gox](https://en.wikipedia.org/wiki/Mt._Gox)
Information on McCaleb selling to Mark talk of missing 80k
[http://www.thedailybeast.com/behind-the-biggest-bitcoin-
heis...](http://www.thedailybeast.com/behind-the-biggest-bitcoin-heist-in-
history-inside-the-implosion-of-mt-gox) Links on Willybot
[http://www.coindesk.com/bot-named-willy-did-mt-goxs-
automate...](http://www.coindesk.com/bot-named-willy-did-mt-goxs-automated-
trading-pump-bitcoin-price/) Poloneix insider [https://coinidol.com/suspicion-
of-insider-trading-at-polonie...](https://coinidol.com/suspicion-of-insider-
trading-at-poloniex/)

~~~
calpaterson
This is just what stock exchanges were like in the 19th and maybe early 20th
centuries. Reading "Reminiscences of a Stock Operator" which covers the period
~1890s-1920s I was stunned by how common (relative to now) inside trading,
price manipulation and short squeezes were.

Most of these are now prohibited which I'm sure doesn't eliminate them but it
makes them much less common - short squeezes in particular are now very very
rare. BTC markets obviously won't have any restrictions.

Amazon link for anyone interested in the book (make sure you get the annotated
edition):
[https://www.amazon.co.uk/dp/0470481595/](https://www.amazon.co.uk/dp/0470481595/)

~~~
eigenvalue
Short squeezes happen all the time. Look at the ticker RH in the past few
months, or AMD over the past couple days!

~~~
peller
I think perhaps a better example would be the bulk shipping industry during
November of last year; take a look at DRYS in particular. $5 to $120 in a
week, followed immediately by a breakdown right back to $5. (It's split a
bunch of times since then, so the adjusted prices on a current chart are
different, but what's important to note is the exponential shape of the price
action in conjunction with absolutely zero fundamental reasons for a price
increase.)

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natehouk
I have potential sources that the top trading firms in the world were involved
in the manipulation.

~~~
jacquesm
Sources or potential sources? That makes a huge difference. A potential source
that something is true means nothing. A source _at_ one of the top trading
firms willing to verify this would be newsworthy (if confirmed).

~~~
natehouk
Source is not _at_ one of the top trading firms, but _was_ at one of the top
trading firms.

