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Study Suggests Bitcoin Price is Being Manipulated

posted by mrpg on Thursday June 14 2018, @04:39AM   Printer-friendly
from the fake-money-fake-news dept.

hubie writes:

The price of Bitcoin went on a tremendous bull run that peaked in late 2017. The New York Times is reporting that an academic paper suggests that the price of Bitcoin was being manipulated. They argue that the sudden gain in value in Bitcoin and other virtual currencies in the last year was caused by a small group of participants, particularly the cryptocurrency exchange Bitfinex.

Mr. Griffin looked at the flow of digital tokens going in and out of Bitfinex and identified several distinct patterns that suggest that someone or some people at the exchange successfully worked to push up prices when they sagged at other exchanges. To do that, the person or people used a secondary virtual currency, known as Tether, which was created and sold by the owners of Bitfinex, to buy up those other cryptocurrencies.

This paper follows another paper published in 2017 that tied the sudden and large increases in Bitcoin value seen in late 2013 to manipulation by the currency exchange M. Gox.

Original Submission

 
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  • (Score: 2, Informative) by Anonymous Coward on Thursday June 14 2018, @05:15PM (2 children)

    by Anonymous Coward on Thursday June 14 2018, @05:15PM (#693015)

    Jesus, it is right in the caption of the figure you call out:

    The graphs show the average flow per quantiles of lagged return, controlling for 3-hour lagged volatility calculated using five-minute returns.

    I understand we're touching on various people's sacred cows here, but geez, they're kicking into full Fox News-style attack-the-messenger mode here. It is actually a pretty thorough paper. For instance:

    To illustrate the potential magnitude and predictive effect of Tether issuances on Bitcoin prices,
    we focus on the hours with the largest lagged combined Bitcoin and Tether flows on the two
    blockchains. These 87 hours have large negative returns before the flows but are followed by large
    return reversals. These 87 events account for less than 1% of our time series (over the period from
    the beginning of March 2017 to the end of March 2018), yet are associated with 50% of Bitcoin’s
    compounded return, and 64% of the returns on six other large cryptocurrencies (Dash, Ethereum
    Classic, Ethereum, Litecoin, Monero, and Zcash).6 A bootstrap analysis with 10,000 simulations
    demonstrates that this behavior never occurs randomly.

    Consistent with Tether being used to buy Bitcoin when prices drop, we find a statistically and
    economically strong reversal in Bitcoin prices, but only following negative returns. The Bitcoin
    reversal did not exist before Tether was prevalent in the market and disappears during the period
    when Tether stops being printed.

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  • (Score: 0) by Anonymous Coward on Thursday June 14 2018, @06:38PM

    by Anonymous Coward on Thursday June 14 2018, @06:38PM (#693098)

    What do you think youve demonstrated? Yet another magic number of 5 minutes...

  • (Score: 0) by Anonymous Coward on Thursday June 14 2018, @07:35PM

    by Anonymous Coward on Thursday June 14 2018, @07:35PM (#693129)

    sacred cows

    What sacred cow? Everyone knows tether is shady stuff and would even watch it be created and trade on that public info. Tether could have been 100% backed by people funding the creation of tethers just to get others to have certain expectations and then trading on that, would that still be "manipulation"? This paper doesn't clarify anything about what was going on. Why not answer a real question like "How was the peg maintained"?

    attack-the-messenger mode

    Attaching the messenger would be looking at the authors credentials, public statements, etc. I have no idea who the author(s) even is/are and do not care, so never mentioned or referred to them. Questioning the methods is not attacking the messenger...