Market Manipulation of Bitcoin: Evidence from Mining the Mt. Gox\n Transaction Network

Abstract

The cryptocurrency market is a very huge market without effective\nsupervision. It is of great importance for investors and regulators to\nrecognize whether there are market manipulation and its manipulation patterns.\nThis paper proposes an approach to mine the transaction networks of exchanges\nfor answering this question.By taking the leaked transaction history of Mt. Gox\nBitcoin exchange as a sample,we first divide the accounts into three categories\naccording to its characteristic and then construct the transaction history into\nthree graphs. Many observations and findings are obtained via analyzing the\nconstructed graphs. To evaluate the influence of the accounts' transaction\nbehavior on the Bitcoin exchange price,the graphs are reconstructed into series\nand reshaped as matrices. By using singular value decomposition (SVD) on the\nmatrices, we identify many base networks which have a great correlation with\nthe price fluctuation. When further analyzing the most important accounts in\nthe base networks, plenty of market manipulation patterns are found. According\nto these findings, we conclude that there was serious market manipulation in\nMt. Gox exchange and the cryptocurrency market must strengthen the supervision.\n