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This week in bitcoin: Do we blame the bots?

In this week’s bitcoin review, we take a look at whether bots were to blame for bitcoin’s astronomic rise late last year and how everything somehow ties back to MtGox.

Willy and Markus

When bitcoin prices jumped from $200 to $1,200 at the end of the last year, there was mad speculation about who was to blame: did bitcoin finally catch on? Is this its true value? Maybe it’s just the Chinese or Wall Street manipulating the markets? A new report released on Sunday seems to point the finger (and at least partial blame) at two bots: Willy and Markus.

Published anonymously, the “Willy Report” asserted that the two bots spent much of 2013 repeatedly and predictably creating new MtGox accounts and buying up large sums of bitcoin. The total of their buys was “suspiciously close” to the 650,000 bitcoins MtGox CEO Mark Karpeles claims the company lost, the report said. What’s also interesting is that it looks like bot accounts were able to trade on the MtGox exchange when it was down for half an hour in January, executing four transactions in an obvious bot-like manner.

Then, according to the Guardian, WordPress yanked the report from its website during the week because of a violation of its terms of service. However after the British newspaper got in contact with WordPress’s parent company Automattic the site has since reappeared with no explanation.

So, should we believe it? The report seems to echo what a lot of people have been postulating on bitcoin forums that some obvious market manipulation was at play to drive the price up that high. However, some of the logs that this paper is based off appear to be incomplete as other users are showing that some of their confirmed transactions are not in the logs. Either way, it seems like it would have been hard for MtGox to not know something about this or catch the patterns themselves, which just ends up casting a larger shadow over the once preeminent exchange.

The market this week

Bitcoin has been climbing slowly this week, closing at $565.51 Thursday — almost $40 higher than last week. But the slow climb of the week turned into an upwards race as price jumped another $40 in the last 16 hours, trading for $604 as of 9:30am PDT.
Bitcoin price through May 29
For background on why we’re using Coindesk’s Bitcoin Price Index, see the note at the bottom of the post. 

In other news we covered this week:

Here are some of the best reads from around the web this week:

  • In MtGox news for this week, it looks like an unnamed executive of Tibanne (but likely to be Mark Karpeles, operator of the exchange) told the Wall Street Journal that they were looking to sell its trademark on the word “bitcoin” in the European Union and Japan.
  • This is why you shouldn’t hack “Bitcoin Jesus.” Wired detailed how Roger Ver was hacked, but issued a bitcoin bounty to get his identity back.
  • It’s time for bitcoin to come out of the closet, said Huffington Post.
  • Walmart hasn’t gone as far as accepting bitcoin yet, but at least you can buy mining equipment from the megaretailer now.

Bitcoin in 2014

The history of bitcoin’s price

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A note on our data: We use CoinDesk’s Bitcoin Price Index to obtain both a historical and current reflection of the Bitcoin market. The BPI is an average of the three Bitcoin exchanges which meet their criteria: Bitstamp, BTC-e and Bitfinex. To see the criteria for inclusion or for price updates by the minute, visit CoinDesk. Since the market never closes, the “closing price” as noted in the graphics is based on end of day Greenwich Mean Time (GMT) or British Summer Time (BST). 

Photo from Thinkstock/Nevarpp

4 Responses to “This week in bitcoin: Do we blame the bots?”

  1. Stckpkr7000

    This is a simply supply vs demand issue. High demand + large % ownership followed by only 12 millionish available Bitcoin….. Throw some good news into the mix and bam! Bitcoin is incredibly undervalued imho….

  2. manipulation is a regular occurrence, while there are manipulators everywhere or wise kids in the class, i have a question to ask, and it sounds very simple, where does bitcoin get it’s value from. if you limit cocaine, you control the price, bad example perhaps, but i have watched the interest in bitcoin, and deem it an assault on paper money, but it’s just the same as money, perhaps, the answer to the surge in bitcoin value, is the creation of a one world currency, as that is what bitcoin is heading too, unless someone can tell me otherwise.

    • BullBearPig

      One-world currency often implies a central regulating authority or New World Order. Bitcoin disrupts that notion by having a decentralized ledger that cannot be manipulated by any single authority. Certainly money talks with bitcoin as much as any commodity, but as the cryptocurrency grows in popularity, this becomes less of a threat to its existence.

      The value of bitcoin, to me at this stage, actually comes from these big, legitimate players who have stepped in recently. Before the Winklevie and others started putting piles of real cash behind it, I was too scared of what the US government might have to say about it. After all, with Congress’ help, they could have quietly crushed it like a bug. But now it’s too late, I’m afraid. Now that there are powerful players with skin in the game, all they can do is watch this play out. It’s going to be a fun ride.