Manipulation of the Bitcoin market: an agent-based study

【Author】 Fratric, Peter; Sileno, Giovanni; Klous, Sander; van Engers, Tom

【Source】FINANCIAL INNOVATION

【影响因子】6.793

【Abstract】Fraudulent actions of a trader or a group of traders can cause substantial disturbance to the market, both directly influencing the price of an asset or indirectly by misinforming other market participants. Such behavior can be a source of systemic risk and increasing distrust for the market participants, consequences that call for viable countermeasures. Building on the foundations provided by the extant literature, this study aims to design an agent-based market model capable of reproducing the behavior of the Bitcoin market during the time of an alleged Bitcoin price manipulation that occurred between 2017 and early 2018. The model includes the mechanisms of a limit order book market and several agents associated with different trading strategies, including a fraudulent agent, initialized from empirical data and who performs market manipulation. The model is validated with respect to the Bitcoin price as well as the amount of Bitcoins obtained by the fraudulent agent and the traded volume. Simulation results provide a satisfactory fit to historical data. Several price dips and volume anomalies are explained by the actions of the fraudulent trader, completing the known body of evidence extracted from blockchain activity. The model suggests that the presence of the fraudulent agent was essential to obtain Bitcoin price development in the given time period; without this agent, it would have been very unlikely that the price had reached the heights as it did in late 2017. The insights gained from the model, especially the connection between liquidity and manipulation efficiency, unfold a discussion on how to prevent illicit behavior.

【Keywords】Agent-based modelling; Cryptocurrency; Market manipulation; Liquidity; Bitcoin

【发表时间】2022 JUN 1

【收录时间】2022-06-12

【文献类型】实证性文章

【主题类别】

区块链治理-市场治理-欺诈犯罪