Markus and Willy, the bots behind Bitcoin’s price movements


Bitcoin is plunging right now. The price of the digital currency went under $7,500 today, according to major exchanges like Coinbase. Bitcoin was hitting $20,000 in December, 2017. Many are wondering what is going on and for how long. Does the price volatility and plunge of Bitcoin mean the end for the cryptocurrency? With all of that, some experts and enthusiasts believe that Bitcoin can actually hit the $50,000 price point in the near future.

While that may not be true, experts have found the single most shocking truth about one of the plunges that Bitcoin experienced.

Back in 2013, when Bitcoin was not at all that popular, the digital currency went up from $150 to $1,000 within just sixty days. That jump is one of the first glorious moments for Bitcoin. However, while the normal way this price jump should happen is because there is a lot of demand for the coin from investors, experts conducted a study on the price movement of Bitcoin and found something rather shocking.

Their paper, ‘Price Manipulation in the Bitcoin Ecosystem’, explains the real person behind the Bitcoin’s price movements during that time. The researchers that performed the study and designed the paper were  researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman, scientists from Tandy School of Computer Science at The University of Tulsa and the Berglas School of Economics at Tel Aviv University

Quoting from Express, the researchers wrote in their paper the following:

“This paper identifies and analyses the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange, in which approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired. 

“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. 

“Based on rigorous analysis with extensive robustness checks, the paper demonstrates that the suspicious trading activity likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”

What they found was that the price movements of Bitcoin were caused by two bots, Markus and Willy. Both bots seemed to be performing legitimate Bitcoin trades, but it turned out they did not actually own the Bitcoin they were using, which is essential to boosting the price of the currency in a natural way, leaving the fact that the two were actually bots.

Such price manipulation has been “governed” by bots for millions of trades during the Mt. Gox hack.

The paper also says:

“The publicly reported trading volume at Mt. Gox included the fraudulent transactions, thereby signalling to the market that heavy trading activity was taking place.  Indeed, the paper later shows that even if the fraudulent activity is set aside, average trading volume on all major exchanges trading bitcoins and USD was much higher on days the bots were active. The associated increase in “non-bot” trading was, of course, profitable for Mt. Gox, since it collected transaction fees.” 

The even more disturbing fact about the two bots is that one of them, the Willy Bot was also used for stealing roughly 650,000 of Bitcoins from Mt. Gox in June 2011 and that the exchange owner Mark Karpales took huge effort to cover up the loss for several years, Express reported today.

With speculations around Bitcoin’s viability and endurance in times of price manipulations, questions about the origin of the currency, the actual reasons behind price jumps and downs and the motive behind the initial creation of the digital asset may turn out to be of vital importance for investors.

 

 

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Markus and Willy, the bots behind Bitcoin's price movements

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