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Bitcoin Prices Manipulated On The Weekend?

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Bitcoin prices and volumes on Mt Gox showed very strange patterns at a normally slow time.

Bitcoin logoAnother reason why FX brokers are still generally reluctant to add Bitcoin trading... Coinsetter Blog pointed out a very interesting phenomenon, whereby it questioned whether Bitcoin prices were being manipulated this past Sunday, June 2. After several weeks of relative stability in the Bitcoin market, Coinsetter pointed out that this weekend saw a rapid and otherwise unexplained drop in Bitcoin prices, as per the chart below: Another reason why FX brokers are still generally reluctant to add Bitcoin trading...

After hovering near the $130 level the prior week, strong selling pressures forced the Bitcoin price down to about $120 over the course of just several hours. Alongside the price movement came a large jump in volume. Coinsetter also noticed multiple "clog sales" (i.e. small transactions of the same size in rapid progression). In all, $5.3 million of Bitcoins were sold off during a seven hour period. This equated to more than 40,000 BTC of trading volume, which was returned to the market as buy orders about an hour later. Coinsetter's prognosis: possible market manipulation.

Manipulating the market for instruments having low trading volume such as Bitcoin is fairly easy. Coinsetter points out that given that Bitcoin's displayed and perceived current price is based on the "last price", big selling on a small orderbook can make it appear that prices are dropping for a more legitimate purpose.

Bitcoin prices this week have drifted back up a little, but remain below last week's $130 level.

We'll keep following this story. Stay tuned to LeapRate...

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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