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The value of Bitcoin has skyrocketed over the last year, reaching nearly $20,000 several weeks ago before dipping back downward. That'due south far from the first toll fasten for Bitcoin — the naturally volatile cryptocurrency has been up and downwardly for its entire existence. Economists recently took a await the spike that commencement sent Bitcoin over $1,000, finding information technology was most likely the effect of a single person using bots to make a quick buck.

Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman used data from the now-defunct Mt. Gox Bitcoin exchange. That was still the premier place to store and trade Bitcoin back in belatedly 2022 when the value of a single Bitcoin jumped almost x-fold in a matter of two months. The price crashed dorsum down soon thereafter, presumably after the person behind the scheme sold off some Bitcoins for a tidy profit.

The researchers found that manipulating the price of Bitcoin was viable for a single person because the cryptocurrency market was very thin. Small spikes in trading volume over the form of days or weeks could prop up the cost, and that'southward what the perpetrator did with a pair of shady bots on Mt. Gox, which the researchers named Markus and Willy.

Mt. Gox eventually imploded after hackers made off with every bit many as 600,000 Bitcoins valued at more than $180 million at the fourth dimension. When the exchange was compromised, bad actors as well managed to run bots like Markus and Willy. They may or may not have been directly connected with the theft — that'south non really addressed in the report. These bots appeared to make valid trades, but they did not actually ain the Bitcoin being traded. This artificially boosted the cost past every bit much as four percent per day on days with suspicious trades. On days when the bots weren't active, the toll barbarous slightly.

A graph of BTC price from the same fourth dimension studied in the paper.

Trading volume for Bitcoin is naturally much higher now, so it'due south harder for a single person with a few bots to pump up the price with a compromised exchange. Yet, there are however no safeguards in place due to Bitcoin'south decentralized nature. Information technology'southward not the only cryptocurrency out there, though. The researchers note that betwixt 2022 and now, the number of traded cryptocurrencies has ballooned from about fourscore to 843. Many of these could nevertheless exist vulnerable to toll manipulation.

The risks associated with cryptocurrency haven't stopped people from trading it. Even in the wake of contempo drops in value, the Bitcoin faithful remain certain of its usefulness.