Bitcoin's boom in 2017 was largely market manipulation

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Ad Orientem
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Bitcoin's boom in 2017 was largely market manipulation

Post by Ad Orientem » Mon Nov 04, 2019 2:52 pm

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A forensic study on bitcoin’s 2017 boom has found that nearly the entire rise of the digital currency at the time is attributable to “one large player,” although the market manipulator remains unidentified.

Finance professors John Griffin and Amin Shams – instructors at University of Texas and the Ohio State University, respectively – analyzed over 200 gigabytes of data for the transaction history between bitcoin and tether, another digital currency. Tether is an asset known as a “stablecoin,” which has its trading value connected to the dollar.

The professors’ study found that tethers being traded for bitcoins revealed a pattern.

“We find that the identified patterns are not present on other flows, and almost the entire price impact can be attributed to this one large player,” Griffin and Shams wrote. “We map this data across both blockchains and find that the one player or entity (labeled as 1LSg throughout the paper) is behind the majority of the patterns we document.”

Griffin and Shams were able to follow the clusters of data to a source: “One large account at Bitfinex.” The digital currency exchange Bitfinex is one of the largest in the world. The study found that, through Bitfinex, the single player was able to manipulate demand for bitcoin via “extreme” flows of tethers. The Wall Street Journal first reported on the updated study’s results on Monday.

The manipulation occurred as bitcoin rose to an all-time high of nearly $20,000 in late 2017, the study found. Bitcoin traded at about $9,300 on Monday.

“One of the SEC’s top worries is that crypto is subject to manipulation. This study appears to lend credibility to that argument,” Cowen analyst Jaret Seiberg said in a note on Monday.

The study comes after an analysis published in March found that 95% bitcoin spot trading is faked. The survey, created by cryptocurrency asset manager Bitwise for the SEC, found that only $273 million of about $6 billion in average daily bitcoin volume was legitimate.

Read the rest here.
https://www.cnbc.com/2019/11/04/study-s ... 20000.html
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bitcoininthevp
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Re: Bitcoin's boom in 2017 was largely market manipulation

Post by bitcoininthevp » Wed Nov 06, 2019 12:26 pm

Here is another viewpoint on it:
https://www.bloomberg.com/opinion/artic ... her-trader

Additionally, Harry pointed out (I believe in a radio show discussing Hunt brothers and silver) that individuals transacting voluntarily does not constitute "manipulation". So far, and I am not deep into the details of this paper, it does not seem that anything fraudulent was going on. It sounds like "worst case" was some whale (large bitcoin holder perhaps) was executing a series of trades across exchanges.
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dualstow
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Re: Bitcoin's boom in 2017 was largely market manipulation

Post by dualstow » Wed Nov 06, 2019 5:06 pm

Interesting!
New York City disbanded its anticrime unit of plainclothes officers on June 15, part of a $1 billion reduction in the city’s police budget. —WSJ
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Kbg
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Re: Bitcoin's boom in 2017 was largely market manipulation

Post by Kbg » Wed Nov 06, 2019 10:08 pm

bitcoininthevp wrote:
Wed Nov 06, 2019 12:26 pm
Here is another viewpoint on it:
https://www.bloomberg.com/opinion/artic ... her-trader

Additionally, Harry pointed out (I believe in a radio show discussing Hunt brothers and silver) that individuals transacting voluntarily does not constitute "manipulation". So far, and I am not deep into the details of this paper, it does not seem that anything fraudulent was going on. It sounds like "worst case" was some whale (large bitcoin holder perhaps) was executing a series of trades across exchanges.
Poor markets don't need to be illegal, they just have to lack actual liquidity. I'd never own Bitcoin as a cash replacement holding...speculation, yes. Cash substitute, oh heavens no.
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