Bitcoin as of today is still being manipulated by whales and a lot can be attributed to the latter. However, that may be the least to worry about considering the fact that it could potentially worsen after wall street troops into the market. Nonetheless, here are some reasons why Bitcoin price is still being manipulated.
The unregulated nature of the market means that a few whales can own large amounts of Bitcoin without drawing additional rules and scrutiny from the authorities in comparison to the stock market. In the same vein, whales of recent through wash trading and arbitraging have manipulated the Bitcoin price to the $8,000 price tag it is currently valued at.
Manipulating Bitcoin Price Using WashTrading
Wash trading, for instance, is when a trader simultaneously buys and sells an asset in a bid to give a false impression that there is a high demand for it. It is believed that the high trading volumes we’re seeing of late, can largely be attributed to wash trading on a number of exchanges and even on popular ones.
We’ll like to draw an inference from the reports by Bitwise Asset Management and Blockchain Transparency Institute (BTI). Bitwise on March 22, 2019, stated that out of 81 popular cryptocurrency exchanges, only 10 were not faking their Bitcoin trading volume. The exchanges which were not found wanting are Binance, Coinbase, Bitfinex, bitFlyerUSA, Krakenfx, BittrexExchange, Poloniex, Circlepay, itBit, and Gemini.
On the same note, Blockchain Transparency Institute’s (BTI) in its April 2019 report listed a number of exchanges that have a certain percentage of wash trading. According to BTI, “We found 17 of the CMC Top 25 exchanges to be over 99%+ fake with many greater than 99.5% fake volumes, including 35 of the top 50 adjusted volume rankings.”
While Binance, a Malta-based exchange had a real trade volume of 85 percent at the time, it is disappointing to know that exchanges like HitBtc, OKEX, Bibox. Coinbene, Idax, and Fatbtc had real trades of 7 percent, 9 percent, 7 percent, 2 percent, 2 percent, and 1 percent respectively.
Arbitrage Used in Manipulating Bitcoin Price
Asides from wash trading’s use to manipulate the price of cryptocurrencies, another bone of contention is arbitration. This is the process of buying a virtual asset cheap on one exchange and then selling it for a higher price on another exchange. The method is usually employed by whales since one has to buy virtual assets worth hundreds of thousands of dollars in order to take advantage of small gains on exchanges.
In all these activities, one stablecoin has been in the spotlight and that is Tether (USDT), a stablecoin that is reportedly backed by the dollar. There have been claims that USDT was used to manipulate Bitcoin price in 2017 when it attained its all-time high of $20,000. In November 2018, the U.S. Department of Justice (DOJ) began an investigation to ascertain if Bitfinex and Tether Ltd had used the stablecoin to manipulate Bitcoin price.
Just when we thought the storm is over, another claim emerged that Tether is issuing millions of dollars worth of USDT to the market in a bid to spike Bitcoin price. The claim was backed by the fact that on April 8, 2019, the total supply of USDT increased by 417 Million. Now, it has gotten to a point where many have called for USDT to be delisted from Binance.
We agree there has been a Bitcoin price manipulation and the crypto community feels the same too. Let’s bring it closer home. Mati Greenspan, a senior analyst for eToro carried out a poll on January 21, 2019, to determine what led to the decline in Bitcoin price. And guess what? a majority of respondents agreed that it was caused by price manipulation.
That aside, things could get pretty bad if wall street institution enters the market. There were already claims in 2018 that wall street is manipulating Bitcoin price which led to its 1.5-year low as of December 2018. But in what way one may ask? In their comments and interviews in mainstream media outlets.
Some instances of these are the case of Goldman Sachs who said on February 7, 2018, that “Most cryptocurrencies are going to zero”. George Soroson on January 24 stated that “Bitcoin is a bubble”, and Jamie Dimon of JP Morgan on September 12, 2017, said, “Bitcoin is a fraud”. These comments are believed to be made to lower Bitcoin price to a point where it is cheap enough for them to buy into the market.