Is the price of BTC being manipulated downwards by miners and whales, or is this conspiracy theory FUD?

According to Bloomberg, the US Department of Justice (DOJ) apparently now working with the SEC and CFTC to investigate market manipulation of Bitcoin price, particularly via spoofing and wash-trading. Hours after this Bloomberg publication, articles published by CoinTelegraph and CCN jumped on the 'market manipulation' headline bandwagon.

Generally such Bitcoin price manipulation conspiracy theories point their finger at the largest players in the crypto-space, claiming they are exerting their influence in order to manipulate the trading price of Bitcoin and other cryptocurrencies.

@TheCryptoFam

A typical example of such manipulation conspiracy theory was put forth by @TheCryptoFam, who claims that the slowing declines since the last all-time-high (ATH) are because the major Bitcoin holders (whales) are running out BTC to dump; yet the same pattern can be easily explained by the slow exhaustion of dip-sellers (so called 'weak hands') from the market.

Certainly there are incentives for whales and miners to manipulate the price upwards and incentives for anyone wanting to increase their BTC holdings to manipulate the price downwards. And perhaps there are players large enough to achieve such manipulation, if they're willing to accept the inherent risks of do so (getting caught short, etc.); however, evidence of such behavior is almost always lacking. There's no solid evidence even for the "massive" liquidation of the Mt. Gox stash a few months ago—which, compared with miner sell offs (~4500BTC/week), was not really even that massive.

Until there is concrete evidence for actual Bitcoin market manipulation, such headlines themselves should be viewed suspiciously as attempts at manipulation of the market—as perhaps they themselves have more impact on market sentiment (a.k.a. FUD) than the manipulation conspiracies they finger.

Tone Vays, for one, does not believe market manipulation is driving force behind the latest price decline from the ATH at the start of 2018. Instead, he posits the decline to natural market forces correcting the price downwards from the previously overvalued ATH.

google-trends-interest-over-time-buy-sell-bitcoin
trends.google.com

According to Google trends data, there is more general interest in buying than selling; but of course this is a dramatic oversimplification of any real market sentiments. For example, anyone googling 'how to buy bitcoin' will likely lack the power to influence price in any significant way; and any BTC holder should already know how to sell it and will not be googling 'how to sell bitcoin.'

What is informative in the above data however, is the dramatic loss of general interest of new BTC buyers over the past 5 months. Such broad shifts in the masses are almost always the cause of large market shift, and since the ATH, the spike in new BTC buyers has all but faded away to background levels. Surely this is a clear indication of a decline in interest of new investors that correlates nicely with the falling price. While correlation does not necessarily equal causation, it's highly probable that the decline in price is simply the result of the slowing of new investments and vice versa.

Contrary to the prior manipulation conspiracy theories, the above Google trends data shows concrete evidence for the relation of declining price to natural market forces.

But whatever the cause, BTC continues to fall below the 50 day moving average for the first time in over two years.

Feature image from Shutterstock

Verified on Po.et

June 6th 2018, 02:36

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Landon Mutch

Landon Mutch

@landonmutch — traveling, trailer-dwelling, software developer, writer, geologist, autodidact, traditional hacker, subversive, Bitcoin maximalist, contributor to Lightning Network protocol.

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