Is it possible that one person or group could have influenced the price of Bitcoin to reach nearly 10 times the initial value? Multiple researchers have been analyzing the possible manipulation of Bitcoin by a few key holders. Neil Gandal, JT Hamrick, Tyler Moore and Tali Oberman published “Price Manipulation in the Bitcoin Ecosystem” with their findings. They have found activity that supports meddling in Bitcoin, shown especially in 2013 where the price jumped from $150 to $1,000 in under 2 months.
Price manipulation like this was evident with several cryptocurrencies back when markets contained a very limited number of investors. Even today, the researchers state many small cryptocurrencies face the possibility of price manipulation if they don’t hold a large user base. There are over 843 cryptos and that number continues to grow. Even when the user base has also seen large growth, there still is a possibility for someone to control the market. The influence typically comes from simple supply and demand which can be controlled when one to two users hold a vast majority of coin.
They state the manipulations also were impacted by the Mt. Gox hack. The nearly 600,000 Bitcoin stolen has played a part in the pricing changes according to the researchers. They reported,
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.
They go on to discuss further how they trading volumes were much higher on days the bots were active. This influenced the market price and while exchange owners may have known about it but did nothing, as disclosing the information would have released the fact they lost over $188 million in Bitcoin. They concluded that these actions led to the inflated trading numbers that pushed Bitcoin up to over $1,000 in 2013.
The possibility of Bitcoin being manipulated is worrisome to larger entities from governments to financial service firms among others. As many of them look to move towards the adoption of cryptocurrency, the easy manipulation can be a major roadblock in the future.