Study Reveals Bitcoin’s 2013 Price Surge Was Driven by Individual Manipulation

Researchers from Tel Aviv University have discovered that the dramatic rise in Bitcoin’s price at the end of 2013—from $150 to over $1,000 in just two months—was caused by the actions of a single individual. According to TechCrunch, this person may have been the owner of the cryptocurrency exchange Mt. Gox.

Trading Bots and Market Manipulation

The study’s authors found that, in late 2013, two trading bots named Markus and Willy appeared on the Mt. Gox exchange. At that time, Mt. Gox handled about 70% of all mined bitcoins. During this period, Bitcoin’s price began to soar, increasing by an average of 4% per day. The bots simulated trading activity by buying up bitcoins but never selling them to anyone else. Additionally, the Markus bot’s trades were not subject to the usual exchange fees.

These manipulative trading practices reportedly earned their operator around $188 million.

Possible Motive Behind the Manipulation

The researchers suggest that Mt. Gox owner Mark Karpeles may have launched the bots to conceal the fact that hackers had stolen about 650,000 bitcoins from the exchange since 2011. The price manipulation may have helped keep the exchange afloat for a while, but by 2015, Mt. Gox ultimately went bankrupt and shut down.

Implications for the Cryptocurrency Market

“As traditional financial institutions begin investing in cryptocurrency assets, and as some countries take steps to legalize Bitcoin as a payment system (as Japan did in April 2017), it’s important to understand how susceptible cryptocurrency markets are to manipulation. Our research provides the first insight into this,” the authors wrote.