Is Bitcoin Manipulation the Worst in the World?

Reading Time: 3 minutes
  • Bitcoin manipulation is caused by a number of external forces
  • The list has been growing over the years as Bitcoin has become more institutionalized
  • What are the various influences that can impact the Bitcoin price?

Bitcoin used to be beholden to nothing more than its own price whims, but these days the scenario is much different. There are now a huge range of factors that cause Bitcoin manipulation, and taking them all together is enough to make any trader consider giving up the game altogether. In a sign of just how much things have changed over the years, we look at what factors impact Bitcoin manipulation today – if you can handle it.

Miners Selling

We have seen at least two occasions this year where Bitcoin miners have sold their BTC in larger amounts on the open market, crashing the price in the process. Services exist to monitor the outflow of Bitcoin from miners to exchanges, and such activity should be taken as an indication that a short-term dump could be imminent.

Whale Manipulation

Whales, holders of large amounts of Bitcoin, have the potential to use their positional size to their advantage, which they do on a regular basis. By selling what for them is a small amount of BTC is enough to start a cascade of sales by frightened novice investors, forcing the price lower where they can buy the Bitcoin back for a cheaper price.

Another form of Bitcoin manipulation that whales engage in is ‘stop runs’, where whales push the price up or down enough to liquidate many long/short positions at no loss to themselves, often profiting from the reversal.

Institutional Manipulation

In 2019, the former Commodity Futures Trading Commission (CFTC) head Chris Giancarlo revealed how the Trump administration hatched a plan to pop the Bitcoin bubble by helping to introduce futures services through the CME and Cboe.

The Bitcoin community was largely bullish on the arrival of Wall St., hailing it as the moment when institutions were finally getting into cryptocurrency. However, the introduction of futures contracts merely offered Wall St. the chance to short Bitcoin – which they took. Bitcoin peaked at $19,800 on December 17 before embarking on a lengthy bear market where it bottomed out at $3,115.

Institutions are now firmly into the crypto game, which has resulted in more Bitcoin manipulation in the form of placement of bad news or FUD at strategic times, usually done in order for those behind it to pick up some Bitcoin on the cheap.

Stocks and Commodities

More so than ever, Bitcoin is intrinsically linked to the performance of the stock market and the commodities market. It is no coincidence that Bitcoin tanked this weekend after the Dow Jones, the S&P 500, and the Nasdaq all fell following huge rises since March.

Bitcoin has followed an almost identical pattern, and even when the traditional stock markets are behaving well, if gold has a bad day you can bet your last satoshi that Bitcoin won’t be far behind. The fact that Bitcoin manipulation goes on via the movement of both on-risk and off-risk assets shows how Bitcoin is still trying to find a definite identity in the institutional world.

The U.S. Dollar

Going back as far as 2016, Bitcoin has been inversely correlated to the U.S. dollar, which makes sense if it is gradually becoming seen in some quarters as a hedge against the currency. The 2017 bull run was fueled partly by a crashing dollar, and the pattern has been repeated this year in the wake of the coronavirus pandemic, showing just how much Bitcoin manipulation is caused by the value of the dollar.

Some believe that the dollar is about to rally having crashed to lows not seen for a year and a half. If this were to happen then it could scupper any Bitcoin bull run, illustrating the impact that Bitcoin’s avowed enemy, fiat currency, can have on its digital nemesis.

Bitcoin Manipulation Will Only Get Worse

As we can see, there are a huge number of factors that can impact the level of Bitcoin manipulation on a short- and long-term basis. Those engaging in active trading of Bitcoin and other cryptocurrencies have a lot of factors to take into account alongside the fundamental and technical aspects of their particular coins.

With it becoming part of the financial establishment, the level of Bitcoin manipulation is only going to increase – just one more reason why holding is likely the best option out there.