Was Bitcoin's All-Time High a Mt. Gox Fabrication?

Jayanand Sagar | May 25, 2014 | 4:08 pm

Was Bitcoin's All-Time High a Mt. Gox Fabrication?

Jayanand Sagar | May 25, 2014 | 4:08 pm

In the months following the collapse of Tokyo-based Mt. Gox, the bitcoin community is still struggling to understand what brought the oldest and once-largest exchange to its knees.

How did it lose so much money? Where did it go?

They’re answers we’re very much looking for, but a new report published at The Willy Report raises even more questions, particularly surround the exchange and its relationship to the price of bitcoin.

The report spotlights two trading bots that were spotted by community members last year, given the names “Willy” and “Markus”.

Both bots would purchase somewhere between 10 – 20 bitcoins every 5 to 10 minutes non-stop for a least one month. In total, the report indicates that somewhere in the neighborhood of 570,000 bitcoins were purchased, valued at hundreds of millions of dollars.

These actions took place in November, when the bitcoin price soared past $1,200 — leading the report’s writer to draw a connection between Markus and Willy to Mt. Gox.

But how do trading bots point that finger at Mt. Gox and not, perhaps, a rich investor looking to get into the bitcoin space? Further, why would Mt. Gox inflate the price artificially?

The Markus bot never had to pay any fees on his trades, curiously enough, and continued trading right through the numerous amount of times Mt. Gox experienced downtime. And as pointed out by our friends at CryptoCoins News, both trading bots had no country code attached to their accounts.

But there’s real flavor in this next tidbit of information:

In a released version of trading logs, the user identification belonging to Markus was changed to ‘634’. Going back to a leaked user account list from 2011, user ID 634 was attached to the handle “MagicalTux” — which is of course the alias the belongs to Gox CEO Mark Karpeles.

Assuming the information provided can be traced back to Mt. Gox, what we could be looking at here is the company’s last-ditch effort to save themselves upon realizing their reserves had been depleted.

The report’s author closes:

“Barring similar shenanigans at other exchanges (looking at you China) I think this means we may be at a ‘fair’ valuation now, and that this knowledge will not hurt the price all that much. That said, despite everyone’s expectations, it seems unlikely that there will be another huge ‘bubble’, seeing as they were never ‘real’ in the first place.”

We implore you to read the The Willy Report article here.

What do you think? Damning evidence or pure speculation?

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