Researchers looking into the Mt Gox Bitcoin exchange hack in 2013 have claimed that someone was manipulating cryptocurrency prices at the time. This is due to sudden increases in Bitcoin value that coincided with specific times at which suspicious activity took place within the exchange.
Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman have written a paper titled “Price Manipulation in the Bitcoin Ecosystem”; which describes how a small number of bad actors are capable of impacting the price of cryptocurrencies. In the event studied, the price of Bitcoin jumped from $150 to $1000 over the course of two months.
According to the researchers, the Bitcoin exchange rate rose by four percent on days when suspicious trading activity was conducted. This stood in contrast with the days when nothing suspicious happened and the exchange rate actually declined.
This manipulation was supposedly done by a pair of bots – Markus and Willy. Both of which are said to conducted Bitcoin trades using currency neither actually owned. It is also suspected that this price manipulation happened after 650,000 BTC was stolen from Mt Gox; and took advantage of owner Mark Karpeles’ attempts to cover the situation up.
The researchers are not exactly saying that the use of cryptocurrency is a bad thing. Instead, they are advocating that people understand how price manipulation could happen in a decentralised system with no regulation. This is especially since the explosion of different currencies makes for markets with very few buyers and sellers; which results more vulnerability to price manipulation.