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The value of Bitcoin has skyrocketed over the last year, reaching nearly $twenty,000 several weeks ago earlier dipping back down. That'due south far from the first toll fasten for Bitcoin — the naturally volatile cryptocurrency has been upwards and downwardly for its entire beingness. Economists recently took a await the spike that beginning sent Bitcoin over $1,000, finding it was near likely the issue of a unmarried person using bots to make a quick cadet.

Researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman used information from the at present-defunct Mt. Gox Bitcoin exchange. That was notwithstanding the premier place to store and trade Bitcoin back in late 2013 when the value of a single Bitcoin jumped almost 10-fold in a affair of two months. The cost crashed back downwardly shortly thereafter, presumably after the person backside the scheme sold off some Bitcoins for a tidy profit.

The researchers plant that manipulating the price of Bitcoin was feasible for a single person considering the cryptocurrency market was very thin. Small spikes in trading volume over the course of days or weeks could prop up the cost, and that's 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 as many every bit 600,000 Bitcoins valued at more than than $180 million at the time. When the exchange was compromised, bad actors too managed to run bots like Markus and Willy. They may or may not have been straight connected with the theft — that's not really addressed in the study. These bots appeared to make valid trades, but they did non really own the Bitcoin being traded. This artificially boosted the toll by as much as 4 per centum per day on days with suspicious trades. On days when the bots weren't agile, the price fell slightly.

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

Trading volume for Bitcoin is naturally much higher now, so information technology's 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's decentralized nature. Information technology'south not the only cryptocurrency out there, though. The researchers note that between 2013 and now, the number of traded cryptocurrencies has ballooned from about 80 to 843. Many of these could still exist vulnerable to price manipulation.

The risks associated with cryptocurrency haven't stopped people from trading information technology. Even in the wake of recent drops in value, the Bitcoin true-blue remain certain of its usefulness.