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Bitcoin Businesses The Almighty Buck

Bitcoin's Price Was Artificially Inflated Last Year, Researchers Say (nytimes.com) 209

Posted by msmash from the closer-look dept.
A concentrated campaign of price manipulation may have accounted for at least half of the increase in the price of Bitcoin and other big cryptocurrencies last year, according to a paper released on Wednesday by an academic with a history of spotting fraud in financial markets. From a report, first shared to us by reader davidwr: The paper by John Griffin, a finance professor at the University of Texas, and Amin Shams, a graduate student, is likely to stoke a debate about how much of Bitcoin's skyrocketing gain last year was caused by the covert actions of a few big players, rather than real demand from investors. Many industry players expressed concern at the time that the prices were being pushed up at least partly by activity at Bitfinex, one of the largest and least regulated exchanges in the industry. The exchange, which is registered in the Caribbean with offices in Asia, was subpoenaed by American regulators shortly after articles about the concerns appeared in The New York Times and other publications. 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.
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Bitcoin's Price Was Artificially Inflated Last Year, Researchers Say More

Bitcoin's Price Was Artificially Inflated Last Year, Researchers Say

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  • It was Willybot (Score:5, Informative)

    by xack ( 5304745 ) on Wednesday June 13, 2018 @11:45AM (#56777826)
    The big MtGox bubble in 2013 was caused by Willybot. Other bots have been developed since then to pump the price. I seen the price of Bitcoin rise over a 1000 dollars in a minute at the peak of the bubble due to bot activity.
    • Thank you for not calling it "Mount Gox"...

    • Anybody who looks at a graph of bitcoin prices can see it's artificial. It goes in stairsteps, not the sloping ups and downs of human buying. Sometimes the humans come in and mess it up but watch it for a few days and you'll see it clearly. Robotrading.

      (find a 12 or 24 hour view of prices to see it best)

      It goes up a step, up a step, up a step, ... then crashes down again. Somebody definitely a lot of robots set up doing the pumping and dumping.

      • Re: (Score:2)

        by dcw3 ( 649211 )

        You mean like stock prices, and automated trading? Why should this be any different?

  • So the price is always artificially inflated.

    • It actually does (Score:5, Interesting)

      by rsilvergun ( 571051 ) on Wednesday June 13, 2018 @11:52AM (#56777886)
      it has the value of the drugs it's being used to buy and money laundering done with it. That's what formed the base of the Crypto currency market (with a smattering of ransomware and video game 'skin' gambling). A serious of transactions that needed to be kept off the books. It was only later Crypto currencies branched out into unregulated and unbacked securities (e.g. the "Proof of Stake" coins that have become so popular).

      If you want to see Bitcoin's price _really_ tank legalize drugs, crack down on money laundering and kill the securities scams. It'll go back to a few bucks a coin while the rest of the currencies will be worthless.

      • That fact that you think Bitcoin is used for illegal things is a sure sign you're clueless. Bitcoin is not an anonymous currency. For all your untraceable things you use Monero.

        • The fact that you think Bitcoin isn't used for illegal things in spite of its lack of built-in anonymity features is a sure sign that you're being obtuse. Early darknet black markets primarily used Bitcoin. You don't need to provide a name or address to have a wallet.

        • Google "Layering" (Score:3, Interesting)

          by rsilvergun ( 571051 )
          why do you think there are so many crypto currencies now? You buy Monero with cash and then Ethereum with your Monero and maybe two or three other currencies in there and then finally buy some bitcoin and cash it out. That's how you do the money laundering.

          As for buying drugs with bitcoin, yeah, and lots of folks get caught. Lots of folks don't. Right now in a lot of the world drug laws are selectively enforced. In America if you're middle class or above and white you can pretty much do drugs with impuni

          • Nixon's old aids admitted to it.

            Good thing Nixon's aids aren't running the country right now.

            • but their successors are. That's blindingly obvious enough I really shouldn't have to point it out...

              • but their successors are. That's blindingly obvious enough I really shouldn't have to point it out...

                But really, telling people they are retards when they don't agree with you, how's that working? Educating a lot of folks? Changing peoples' minds much? Converting people to your way of thinking?

                • I said you were ignoring a blindingly obvious point. I didn't say why you were ignoring it. There's probably no converting you. You're either a professional troll or someone like me: completely beaten into the ground by life and lashing out. I lash out from the left with hope for the future. You're doing it from the right with hope that it all burns. I can't convert you, you're too far gone. What I can do is keep your kind from doing any more harm.

          • Re: (Score:3)

            by ET3D ( 1169851 )

            The main reason there are so many cryptocurrencies is that it's easier to make money off a new currency than an old one. If a coin takes off, early adopters make a lot of money.

          • Re: (Score:2)

            by dcw3 ( 649211 )

            I'm gonna call your post racist. Primarily because you clearly think we're still living in the 60s.

      • A serious of transactions that needed to be kept off the books.

        Off the books ? Using a system with a distributed public ledger ? (which can by design be checked and controlled by all nodes of the network ?)
        Somebody hasn't been paying attention to *what* bitcoin protocole was designed for.
        The main point isn't off the books. It's pretty much the opposite : it ends up in everyone's book by design.
        The main point is that there isn't (in theory, though in practice some mining pools are becoming worrying) a single central authority.
        There's no "Bitcoin Inc." that you can sue

    • *froth froth* fiat currency *froth froth* inflation *froth froth* tax *froth froth* Venezuela *froth froth*.

      (roman_mir is temporarily indisposed)

    • Re: (Score:3)

      by pellik ( 193063 )
      That's not really true. It's like saying that because music can be copied it has no intrinsic value. There is a utility value in bitcoin that other payment methods don't offer. It also has value to people who have trouble keeping or moving money in other formats due to legal issues (Russia). Bitcoin has found a real niche and it's not going to collapse to nothing unless another coin fully takes its place.

      • That's not really true. It's like saying that because music can be copied it has no intrinsic value.

        Depends what you mean by music.

        I have a mp3 file of Beethoven's Piano Concerto #5. What is the value of my mp3 file? How much will I get if I were to sell it? What is its liquidity?

        Answer is zero. On the other hand if you're talking about the artistic value of the piece or its contribution to human culture, then the answer is priceless.

      • Bitcoin has found a real niche and it's not going to collapse to nothing unless another coin fully takes its place.

        Yes and it's niche is transactions on the gray or black market where you have no other choice but to use it.

    • Doesn't the same go for all money since we went off the gold standard?

      • Doesn't the same go for all money since we went off the gold standard?

        Isn't that true when we were on the gold standard? The value of gold had to be artificially be held down in order to make gold the standard of trade. Ultimately all any form of money represents is an intermediate form to convert the value of your work into goods you desire, though gold at least has some value in electronics but I think that value is swamped by the perceived value for jewelry.

      • "Doesn't the same go for all money since we went off the gold standard?"

        A gold standard MIGHT have some provide some stabilization. Sometimes. Maybe.

        But unless all borrowing and lending is prohibited or at least the exchange of IOUs is prohibited, the money supply can expand or contract and inflation/deflation/speculation etc can still occur. Further, any new supply of Gold will be inflationary and any failure to find more Gold will be deflationary. Gold based currency is only perfectly stable if just e

    • You mean like most modern currencies, US dollar, Euro, etc? None of them are backed by anything tangible and most of their supply (85%+) is virtual.

  • No value at all (Score:4, Insightful)

    by pubwvj ( 1045960 ) on Wednesday June 13, 2018 @11:49AM (#56777866)

    Bitcoin has no value. It is just smoke and mirrors.

    Paper money is only mildly better, especially now that it has no gold backing.

    Gold backed was also not real.

    Gold in fact has no real value other than what it can actually be used for to make things of use.

    To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

    • Re: (Score:2)

      by pellik ( 193063 )
      But how can we be sure what we perceive is real? What is the value of firewood in a computer simulation?

      • But how can we be sure what we perceive is real? What is the value of firewood in a computer simulation?

        To repeat the common sense argument made by G. E. Moore for an external world:

        Here is one hand,
        And here is another.
        There are at least two external objects in the world.
        Therefore, an external world exists.

        You don't have to fully agree, just accept that it's probably real enough and that actions are likely to have consequences and you'll be fine.

      • Re: (Score:3)

        by jwhyche ( 6192 )

        What is the value of firewood in a computer simulation?

        It is L$99 which would translate into about say, 90 cents depending on the exchange.

        https://marketplace.secondlife... [secondlife.com]

    • Value is a perceived desire within someone for something.

      So based on your list of valuable things.. Did you post this from 1840's rural Minnesota?

    • Re:No value at all (Score:5, Funny)

      by ljw1004 ( 764174 ) on Wednesday June 13, 2018 @12:06PM (#56777988)

      To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

      Thanks for your 2c^H^H^H half a bean

    • Re: (Score:3)

      by Jeremi ( 14640 )

      Bitcoin has no value. It is just smoke and mirrors.

      Also, Justin Beiber has no value, because I can't stand his music or his personality.

      Also, Windows 10 has no value, because I don't like Microsoft and only use MacOS and Linux.

      Also, stating that "X has no value" has no value, since that's really just a statement of your personal opinion of X's value to you. X obviously has some value, at least to the people who are using X, otherwise they would not be willing to pay money for X. It's a buyer's willingness to pay for X that defines X's value -- at least fo

      • slashdot is like a nocoiner HQ.. they really want bitcoin to go away and stop trammeling their lawn.

    • Yep and hauling around firewood in your pocket does not go very well. Gold and silver as high density value items, that represent the value of what they can be traded for more than intrinsic value, works great. Paper money even better in that it is even more value dense, electronic money is closing on infinitely value dense (I can carry entire country's value on my phone) is amazing, except for how easy it can be manipulated.

      • "except for how easy it can be manipulated."

        Well that, and the theft thing. The fact that anonymous entities somehow manage to walk off with other anonymous entities' cryptocurrency despite the purported difficulty of doing so is less than encouraging.

    • >Bitcoin has no value. It is just smoke and mirrors. Paper money is only mildly better, especially now that it has no gold backing.

      The difference between Bitcoin & cash is how easy it is to lose your Bitcoin. Lose the private key to your Bitcoin wallet, and you'll never be able to recover it. Lose the key to a safe that money's kept in, at least you can still open the safe. Sure, you can burn money and destroy it, but lost money can usually still be found.

      Gold backed was also not real. Gold in fact has no real value other than what it can actually be used for to make things of use. To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

      Isn't that true about anything, including beans, firewood, pork, tools, etc.? How much value do beans have to someone allergic to them? How much value does firewood have to someon

      • Gold is almost universally recognized by most cultures throughout history as being a valuable commodity.

        And that's because god has taught us to like gold so that we would search for it, refine it, store it, etc. And once god comes back they will take all the gold from us.

        p.s.: god is aliens.

      • Re: (Score:2)

        by sjames ( 1099 )

        On the other hand, how much value does gold have to someone who is starving? If the starvation is serious enough, the Jew or Muslim will eat the pork in order to live. Most vegetarians will as well.

    • Re: (Score:2)

      by DRJlaw ( 946416 )

      Bitcoin has no value. It is just smoke and mirrors.

      Paper money is only mildly better, especially now that it has no gold backing.

      Gold backed was also not real.

      Gold in fact has no real value other than what it can actually be used for to make things of use.

      To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

      Insightful, yet the analysis of paper money misses the point. The things that have "real" value at the things that other peopl

    • The value of beans is as real as the value of anything, bitcoin included.

      Before you start making claims about what has value, consider defining value first.

      If you feel value is a thing that enables you to use something to actually do something, get something, trade something or get something done, then beans are as valuable as bitcoin is.

      But from your comment about "smoke and mirrors", it seems like perhaps you feel that value is only real if it is somehow permanent, unchanging, unfleeting. If that's your

    • Bitcoin has no value. It is just smoke and mirrors.

      Paper money is only mildly better, especially now that it has no gold backing.

      Gold backed was also not real.

      Gold in fact has no real value other than what it can actually be used for to make things of use.

      To find something with real value we need to go back to beans, firewood, pork, tools, etc. These sorts of things have real value.

      Real currencies are debt backed. They are backed by everybody talking loans to buy things, and that way tied to the value of all those things bought on a loan. Assuming most companies would always want to have most of their economic worth fully active, that makes the majority of the worth of the entire country being the backing of the country's currency.

      • Real currencies are debt backed.

        Not really they aren't. What every currency and every asset for that matter are backed by is nothing more than belief. People believe it has value and so it does. Usually there is some rationality to this belief but not always. You cannot explain the price of gold based on any sort of rational valuation. (Which is why a gold standard is a stupid idea) You can say a currency is backed by something but all you are doing in that case is making a derivative [wikipedia.org] and the value still ultimately depends on belief

    • Paper money is only mildly better, especially now that it has no gold backing.

      Um, what? Your BTC lost ~20% of it's value over the last week. The dollar in my pocket pretty much has the same buying power as it did a year ago.

    • Re: (Score:2)

      by dcw3 ( 649211 )

      "Real value" is in the eye of the beholder. Approximately 7 billion people seem to be just fine with the "real value" of paper money, and could give a rat's ass that Neanderthals whine about fiat currencies.

  • Shocked, shocked is anyone?

  • Well, at least some non-fraud profit in BC (Score:5, Insightful)

    by gweihir ( 88907 ) on Wednesday June 13, 2018 @12:05PM (#56777982)

    This is an excellent research opportunity into how unregulated markets will be manipulated. I am glad to see somebody took it.

  • Pity the fool who jumped in at $15k expecting a rocket ride to riches..

  • It was clear to me from the outset that Crypto-Coins were even funnier money than government fiat currency. Now we see that the eCoins are rather more susceptible to all sorts of fudgery.

    • Re: (Score:2)

      by jythie ( 914043 )
      Smaller the pool, the easier it is for wealthy parties to manipulate it. I wish I could remember the actual events, but I can recall years ago in class we went over case studies of firms or even individuals able to manipulate the currencies of small/poor nations. Cryptocurrency, even all the coins put together, is still well within the range of what well financed individuals can screw with and fleece other investors.

      • Smaller the pool, the easier it is for wealthy parties to manipulate it. I wish I could remember the actual events, but I can recall years ago in class we went over case studies of firms or even individuals able to manipulate the currencies of small/poor nations. Cryptocurrency, even all the coins put together, is still well within the range of what well financed individuals can screw with and fleece other investors.

        My point is that in the modern age, with electronic coins, people can manipulate the exchanges directly via hacking, exploiting the coin's algorithms, etc. Yes, it is clear that many of the crypto-currencies are basically closely held by a few individuals or organizations and can be easily manipulated by old-school brute force financial trickery too,

      • Cryptocurrency, even all the coins put together, is still well within the range of what well financed individuals can screw with and fleece other investors.

        The British Pound is well within the range [thebalance.com] of what well financed individuals and hedge funds can screw with. Bitcoin and other so called cryptocurrencies are childs play by comparison.

    • some thing has been done in metals markets too, there is nothing about crypto-currency markets that is special

  • Just like LIBO (Score:3)

    by ve3oat ( 884827 ) on Wednesday June 13, 2018 @12:23PM (#56778114) Homepage
    We all remember LIBO, right? The London Interbank Offered Rate. One of the causes of the 2008 bank crash, especially in Europe. Same thing -- under the table manipulation of a rate by a few key players for their own benefit. It can and will happen in any unregulated market. Just finished reading "Open Secret" by Erin Arvedlund, 2014, ISBN 978-1-59184-668-0. "The global banking conspiracy that swindled investors out of billions". I would recommend it highly. Cryptocurrency investors, watch out!

  • Raise your hand if you're surprised.

  • Pump And Dump (Score:4)

    by ComputerGeek01 ( 1182793 ) on Wednesday June 13, 2018 @12:34PM (#56778202)

    It's almost as if investment stuff is regulated for a reason: https://www.investopedia.com/t... [investopedia.com]

  • Anyone that watched the buy/hold/sell orders on any exchange knew that was what was happening.

  • It was much higher than the 10 month turnaround on equipment + electricity which has been the norm for a very long time. BUT it was almost exclusively due to idiots in Wall Street dumping money into it when the SEC said they could mixed with idiots reacting to idiots on Wall Street doing this.
  • Thats unpossible.
  • Pump and dump - it's not just for hookers anymore.

  • Bitcoin.

    rather than real demand from investors

    Investors in... bitcoin. You've ready entered crazy town. It's an internet currency. People speculating on it are already nuts. The fact that things are crazy in crazy town isn't shocking at all. And frankly it doesn't subtract from it's utility. IF you get $50 worth of bitcoin, do your transactions, and then sell your coins for cash, bitcoin still does it's job. Cheaper, faster, more secure international money transfers. ...And laundering. That too.

  • What exactly is the problem here? They bought bitcoins when they were cheaper. This seems totally normal to me. Even if it was with the intent to push the prices up, isn't that also done with everything? Three central banks do that for sure. And if rising prices animate others to buy something without intrinsic value then it's their fault I would say.

  • The entire thing is a get rich quick scam of one form or another. Really, why would you invest in this stuff?

  • A concentrated campaign of price manipulation may have accounted for at least half of the increase in the price of Bitcoin and other big cryptocurrencies last year,

    Just say it. It's a Ponzi scheme. Admit it and you'll feel better.

    If you are an honest believer in cryptocurrencies I admire your earnest faith in humanity but virtually everything about cryptocurrences virtually screams scam to anyone with a functioning brain and any sense of skepticism. It is nothing more than a bunch of greedy people trying to make a fast buck from credulous fools using the latest financial fad.

    • eh, same things done with metals like gold and silver too...no difference

      doesn't matter what the market's good/currency is, can be done in all of them

      • eh, same things done with metals like gold and silver too...no difference

        Oh but there are some very big and important differences. Not the least of which is that you don't have to handle and exchange a hunk of metal.

        doesn't matter what the market's good/currency is, can be done in all of them

        In principle yes but some crimes are far more elegant and easy to get away with than others. Cryptocurrency is a criminal's wet dream. Hard to trace, hard to restrict, no physical object to handle, crosses borders easily, confused and conflicted to non existent regulations, fairly easy to convert to other currencies or assets, and a bunch of greedy fools clamoring

      • Re: (Score:2)

        by dcw3 ( 649211 )

        The vast majority of civilization doesn't treat currency as an investment. Sure there are folks that do, but they are a tiny fraction of 1%. Until there's some price stabilization, buying and selling crypto currency will put you at the mercy of the wild swings in value, not something that most of the public or businesses care to be involved with.

  • I'm shocked, shocked I say, that scammers would go to where the money is. Sure, I believe crypto currency is the way of the future, but I predict a lot of shenanigans before the general public feels comfortably safe in its usage.

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