Bitcoin Price Manipulation – Now and Then!

Since its advent in 2009, bitcoin has attracted the support of technology enthusiasts who were appealed to the technical side of bitcoin as a medium of exchange, as well as libertarians and crypto-anarchists who were interested in the decentralized nature of bitcoin that is not controlled by any government or any other form of central authority. On the other side of the picture lies a group of individuals who are “anti-bitcoin”. Those individuals claim that bitcoin actually has no intrinsic value and that its price has been heavily manipulated during its early days, especially during the period proceeding Mt. Gox’s collapse early in 2014.

A recently published paper delved deep into evidence of bitcoin price manipulation during 2013. The researchers identified and analyzed the effects of suspicious trading activity (STA) that took place on Mt. Gox’s bitcoin trading platform during the period between February and November 2013. They discussed two specific STA periods during which around 600,000 bitcoins, which were worth approximately $188 million back then, were acquired by entities who actually did not pay for the coins. Throughout the second period, the BTCUSD exchange rate surged by approximately $20 on Mt. Gox’s trading platform, on days when STA was detected, oppositely to a slight drop on days when no STA took place. As per the researchers’ thorough analysis along with extensive robustness checks, they concluded that the unprecedented surge in the BTCUSD exchange rate that took place in late 2013, occurred secondary to the suspicious trading activity (STA) that took place mainly on Mt. Gox, leading to a rise in the price of a single bitcoin from $150 to more than $1,000 in a period of around 2 months.

Not only during the early days, but also today some are accused of attempting to manipulate bitcoin price. Last January, The People’s Bank of China (PBOC), China’s Central Bank, stated that it had started “spot investigations” that involved bitcoin exchanges in Beijing and Shanghai to avert market risks. The investigation included Houbi, BTCC and OKCoin, and aimed at detecting any possible manipulation of bitcoin price, unauthorized financing, money laundering among other issues. Back then, bitcoin price increased above $800 and was just beginning to be affected by the bullish wave that has been pushing price to higher levels since the beginning of 2017. Some think that the bullish wave that has been controlling the market since the beginning of the year, was mainly catalyzed by the high momentum of buying originating from China, as bitcoin was one of the few ways the Chinese people could resort to in order to bypass capital controls in China.

BTCC is one of the world’s biggest bitcoin exchanges and one of China’s “big four” bitcoin exchanges, yet it has long been thought, by many bitcoin enthusiasts on Bitcointalk.org, to manipulate trading volumes via the use of trading bots. Many users on Reddit’s r/bitcoin believe that the high volume of bitcoin traded on BTCC is partly secondary to the use of trading bots, yet if this is true, it won’t be long until the People’s Bank of China (PBOC) will discover this, especially that Chinese bitcoin exchanges are literally now under the microscope. No one can argue that a fake high trading volume will help attract more buyers, both investors or speculators, which will create more demand helping push price to higher levels.

With the surge of bitcoin’s market capitalization, currently exceeding $40 billion, it is almost impossible for an individual, or a group of individuals, to manipulate bitcoin price via pumping and dumping. One must own tens of thousands of bitcoins to be able to move the market. Roger Ver is a prominent example of someone who could manipulate bitcoin’s price. Roger is rumored to own around 300,000 bitcoins, which are worth around $744 million at today’s bitcoin price of $2,480. Roger is a supporter of Bitcoin Unlimited, which is a solution to increase bitcoin’s block size that could fork bitcoin’s blockchain into two separate chains, yielding two separate coins; Bitcoin BTC and Bitcoin Unlimited BTU. Many think that if the fork actually happens, Roger will sell, i.e. dump, all of his 300,000 bitcoins to push the price of BTC to low levels, which would increase the price of BTU. Will this really happen? Well, we will have to wait and see!