We don’t support any short-term positions in the Bitcoin market.
We frequently repeat that it is hard to exactly pinpoint what’s behind a given price move. While some reasons given by the media might have merit, in most of the cases claiming that “Bitcoin moved because X” (plug whatever you want for X) might not be warranted. This is probably done for the sake of a “good story” but does not have to have much to do with actual reasons for the price fluctuations.
At times, these fluctuations might simply be random. At other times, the reason behind them might be hidden from our eyes and from the eyes of the reporters posting various kinds of analyses on media websites.
Take, for example, the exorbitant rise in the value of Bitcoin in November last year. Recall what was written about the reasons for that at the time: demand from China, possibility of positive government response in the U.S., or breaking of ties with Silk Road were all cited as the possible drivers of the surge in price which brought Bitcoin as high as to the $1,200 territory.
As it turns out, these reasons might have actually contributed a lot less to the wild rise of Bitcoin than was claimed at that time. An extremely curious report was released yesterday under the title “The Willy Report”. Its author analyzed trading log data from Mt. Gox and came to the unsettling conclusion that the exchange rate at Mt. Gox might have been artificially propped up. More than that, it might also be possible that the unimaginable rallies of April and November 2013 could be attributed to trading bots (specific programs designed to trade in an automatic manner).
Our fair warning is that all of the analysis in The Willy Report is highly speculative, and there’s no actual proof of any wrongdoing on the part of Mt. Gox. However, the data seems at least puzzling as it is analyzed.
Without getting into too many technical details, it would seem that special programs were active on Mt. Gox. These programs would trade according to pre-determined rules and had specific characteristics which distinguished them from regular customer accounts. For example, they would have different ID numbers in the database or wouldn’t pay fees.
Based on these distinguishing features, the author of The Willy Report compiled reports on the trading activities of the accounts they suspected to be actually trading bots. As it turned out, these suspect accounts had been buying Bitcoin, and buying it heavily without selling much of what they had bought.
The author comes to the conclusion that these bots might have artificially led to an explosion in price in November 2013 and possibly April 2013.
Now comes the really interesting part: the author of the report added up the amounts bought by two bots, who they dubbed “Willy” and “Markus.” Willy bought around BTC270,000, Markus around BTC300,000 and then Willy added another BTC80,000. This totals BTC650,000, which the author describes as “suspiciously close to the supposedly lost ~650,000 BTC.”
Is it possible that the bitcoins lost at Mt. Gox are tied to these suspicious buying patterns? Again, this is pure speculation and no actual proof has been seen. However, this analysis would provide an interesting point to clear up for the official investigation in Japan.
Now, let’s turn to the charts.