A recent paper written by researchers Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman sheds light on the shadowy world of cryptocurrency, mainly Bitcoin. In their paper, "Price Manipulation in the Bitcoin Ecosystem," they describe how much effect a few people can have on the price fluctuations that have gripped investors over the past few years.

The paper focused on the now defunct Mt. Gox trading platform. The site was infamously hacked, leading to hundreds of millions of dollars of Bitcoin being lost or stolen. The hack eventually forced the company to shut down.

The time period in question was late 2013. During the end of that year, the value of Bitcoin skyrocketed from around $150 per coin to just over $1,000. It seemed as if the public was finally buying into the hype and the soaring popularity was the reason for the massive price jump.

It seemed too good to be true and ultimately it was. Further analysis revealed several bots were employed with making various trades to manipulate the value of Bitcoin. Two of the bots studied during the Mt. Gox hack were trading large sums of Bitcoin back and forth, even though they didn't own the coin. Regardless, each bot was able to make out with the profits from each trade, which ended up costing Mt. Gox millions.

Can Bitcoin be trusted?

It's tough to say how much these bots truly manipulated the price of Bitcoin. During the time periods that were researched, there were higher than average levels of trading and other factors that could be attributed to the sudden spike in value.

That was 5 years ago. Now, the value of Bitcoin has jumped exponentially as it ranges in the $15,000 to $20,000 range.

The enormous increase over the last 18 months has made many people rich, but the signs of price manipulation are still there.

Seeing how those with large hordes of Bitcoin react to price fluctuations is telling. When a major holder sells off a large portion of their stake in any investment, it is a sign that they are selling at a high point.

When Bitcoin was climbing higher and higher in their recent value explosion, analysts argued that the sky was the limit. Some even said that Bitcoin was destined to hit $1 million per coin in less than a decade.

Statements like those add to the fuel that is driving Bitcoins value up. However, as it recently has come back down from the $20,000 mark and settled in the mid teens, one has to wonder if another major price drop is coming.

There is no worse sign for an investment than when it loses the public's trust. Once that happens, many won't be able to sell their Bitcoin fast enough.
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