Was The Entire Run Up Of Bitcoin On Mt. Gox Just A Pump And Dump?
THERE’S intriguing evidence that last year’s run up of the price of Bitcoin on MtGox was simply a pump and dump operation by the owners of the site. For there was a result buyer, every few minutes, of ever more of the cryptocurrency. And no one can really say where that money has gone. It seems to be a phantasmal account, one that existed only on the site, in order to increase demand for the currency and thus push its price up. In the finance world this is known as a pump and dump scheme. Keep buying small amounts of something and watch the price creep up. Then dump the whole holding back into the market before anyone cottons on to what you’re doing. Done right this can be very profitable.
Unfortunately of course the site itself went bankrupt before they could cash out. The information is all here on this blog set up specifically to tell us all about it.
So basically, each time, (1) an account was created, (2) the account spent some very exact amount of USD to market-buy coins ($2,500,000 was most common), (3) a new account was created very shortly after. Repeat. In total, a staggering ~$112 million was spent to buy close to 270,000 BTC – the bulk of which was bought in November. So if you were wondering how Bitcoin suddenly appreciated in value by a factor of 10 within the span of one month, well, this may be why. Not Chinese investors, not the Silkroad bust – these events may have contributed, but they may not have been main reason. But more on that later.
Or there’s an easier to follow (less technical; you see) recap of the story here:
Speculation now falls on whether the activity is the result of outside hackers gaming the system for profit (like Mt. Gox CEO Mark Karpeles’ claims) or an inside job, representing the interests of the (very) few people with access to the exchange’s innards?
The best bet is that it was an inside job. Because seriously, there’s no one at all out there who would have spent $112 million in real money on amassing Bitcoin, not for just one account. All of which makes it most amusing that MtGox itself did go bust in such an amazing manner. They really couldn’t run a piss up in a bewery those people. Not if you’re manipulating your own prices and you *still* manage to go bust.
Photo: A woman sitting on the terrace looks up as an ATM cash-to-bitcoin machine, right, flashes its screen inside a tea house in Amsterdam, Netherlands, Friday, May 16, 2014. The Dutch capital is hosting Bitcoin 2014, a peer-to-peer electronic payment system, from May 15 till May 17, an annual international forum, exhibition and networking conference organised by the Bitcoin Foundation.