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Suspicious Trades Likely Caused Significant Jump In Bitcoin Price: Study

Tue, 16th Jan 2018 09:37


WASHINGTON (Alliance News) - Suspicious trades on a Bitcoin currency exchange likely caused the significant jump in bitcoin price to USD1000 from USD150 in just two months, according to a study on Bitcoin price manipulation. The unregulated cryptocurrency markets remain vulnerable to manipulation, it said.

The paper, entitled "Price Manipulation in the Bitcoin Ecosystem", appearing in the recent issue of the Journal of Monetary Economics, notes that a single actor likely drove the USD/BTC exchange rate in late 2013, when the rate jumped from around USD150 to more than USD1,000 in two months.

The price has now reached around USD11,000 a coin, after touching nearly USD20,000 in last December.

The study, done by researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman, describes the influence and control of bad actors in the Bitcoin ecosystem.

The paper identifies and analyzes the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which around 600,000 bitcoins valued at USD188 million were fraudulently acquired.

It shows that trading volume on all exchanges increased greatly on days with suspicious activity. As per the paper, the USD-BTC exchange rate rose by an average of four % on days when suspicious trades took place, compared to a slight decline on days without suspicious activity.

Bitcoin, whose demand has soared following the unimaginable price hike, offers the potential to disrupt payment systems and traditional currencies. It has also been subject to security breaches and wild price fluctuations, the paper said.

"As mainstream finance invests in cryptocurrency assets and as countries take steps toward legalizing bitcoin as a payment system (as Japan did in April 2017), it is important to understand how susceptible cryptocurrency markets are to manipulation. Our study provides a first examination," the researchers wrote.

A year ago, digital currency bitcoin, which works like virtual tokens, was worth less than USD800, touching USD1,000 at the start of last year. The currency has fluctuated wildly since it was launched in 2009.

In November last year, bitcoin surged to break the USD10,000 mark for the first time, while in December, it reached near USD20,000 after CME Group, the world's largest futures exchange, launched its bitcoin futures.

The hype around Bitcoin and blockchain has brought other cryptocurrencies, including Ethereum and Ripple, also into focus.

Meanwhile, the price of various cryptocurrencies plunged in early January after reports cited South Korea's justice minister Park Sang-ki that the country is readying a bill to ban all crypto trading, over "great concerns."

As of 4.13 am ET, bitcoin is down 12.03% at USD11,951.61 at CoinDesk, and Ethereum is down 13.48% at USD1,116.64. Ripple, which had once traded around USD3.84, is currently trading at USD1.37, down 18.26%.

Copyright RTT News/dpa-AFX

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