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Author Topic: Researchers find that one person likely drove Bitcoin from $150 to $1,000  (Read 42 times)
Hydrogen
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January 15, 2018, 11:29:50 PM
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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. “Despite the huge increase in market capitalization, similar to the bitcoin market in 2013 (the period examined), markets for these other cryptocurrencies are very thin. The number of cryptocurrencies has increased from approximately 80 during the period examined to 843 today! Many of these markets are thin and subject to price manipulation.”

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. During the Mt. Gox hack a number of these bots were able to create fake trades and make off with millions while manipulating the price of BTC.

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The publicly reported trading volume at Mt. Gox included the fraudulent transactions, thereby signaling to the market that heavy trading activity was taking place. Indeed, the paper later shows that even if the fraudulent activity is set aside, average trading volume on all major exchanges trading bitcoins and USD was much higher on days the bots were active. The associated increase in “non-bot” trading was, of course, profitable for Mt. Gox, since it collected transaction fees.

But the Willy Bot likely served another purpose as well. A theory, initially espoused in a Reddit post shortly after Mt. Gox’s collapse (Anonymous, 2014b), is that hackers stole a huge number (approximately 650,000) of bitcoins from Mt. Gox in June 2011 and that the exchange owner Mark Karpales took extraordinary steps to cover up the loss for several years.

The bottom line is simple: if Bitcoin wants to be taken seriously it probably shouldn’t be this easy or legal to manipulate the markets. While decentralization is supposed to replace regulation it’s clear that there is still a way to go before it can be truly taken seriously. “As mainstream finance invests in cryptocurrency assets and as countries take steps toward legalizing bitcoin as a payment system (as Japan did in April 2017), it is important to understand how susceptible cryptocurrency markets are to manipulation. Our study provides a first examination,” write the researchers.

https://techcrunch.com/2018/01/15/researchers-finds-that-one-person-likely-drove-bitcoin-from-150-to-1000/

....

There is interesting exposition contained here. Some parts might sound bad but I think the honest truth is, far worse things happen in regulated markets. If you want background info on "suspicious activity" in regulated markets, one might look at goldman sachs deals involving greece which largely contributed to the poor state of their economy. There are many examples of corruption, fraud, money laundering for terrorists, drug cartels and organized crime which occur regularly in regulated markets. Unfortunately, those examples go unreported.

These "reports" on bitcoin look more like smear campaigns with a generous amount of political spin applied than they do objective or independent analysis. Markets with low volume such as altcoins are manipulated as an industry standard simply because its the path of least resistance. That's something which happens around the world in currency markets, penny stocks and elsewhere. Its a normal and routine thing. Bitcoin is the only place where those practices are criticized, as far as I can tell, which would appear to create a double standard.

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January 16, 2018, 12:05:16 AM
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It's what we call hypocrisy, if people knew how the traditional finance is operating, with secret datacenter, dark fiber paid by citizens, well-developed bots, and advanced algorithms....

 Sad Can't believe we need to pay to read this paper damn.  We need to pay when it's interesting but stupidity is free on TV

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February 06, 2018, 05:12:26 AM
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This is happening again now at Gate.io exchange I believe.

Here's one of the wallet addresses involved:

https://etherscan.io/address/0x77cdc9a4f33f8cf2392a651553519923ef23808a/#tokentxns

It trades directly between Gate.io and Binance and moves the exact same number everytime. Doesn't resemble human activity. I have several more on watchlist. But nobody cares.

The number of wallet addresses this price manipulation scheme entails is tremendous. It's impossible for a human to maintain such a rate of transactions while maintaining the order book at gate.io as well. I opened up an album containing a few screenshots made during the last few days (total is >300), just check the order book. The screencaps should be viewed from bottom to top, ascending up chronologically.  And this is just for the QSP token btw.

https://imgur.com/a/jbM45

Was able to trace the activity of some suspected wallets to a contract. Not via QSP token transfers, but by tracing the first deposit made on that address, and so on. The contract creator emerged 611 days ago, and the traced contract was created 545 days ago.

https://etherscan.io/address/0xdd51f01d9fc0fd084c1a4737bbfa5becb6ced9bc

It is very confusing because eventually you do not even know anymore how you got at a certain address.

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February 06, 2018, 05:48:30 AM
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It's what we call hypocrisy, if people knew how the traditional finance is operating, with secret datacenter, dark fiber paid by citizens, well-developed bots, and advanced algorithms....

 Sad Can't believe we need to pay to read this paper damn.  We need to pay when it's interesting but stupidity is free on TV

http://weis2017.econinfosec.org/wp-content/uploads/sites/3/2017/05/WEIS_2017_paper_21.pdf

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