2017) and their volatility (Bariviera 2017), resulting in a rich history of “bubbles” (Gerlach et al. A major problem surrounding cryptocurrencies-but also, one of the reasons why they have become well known to the general public-are the heavy tails of their return distribution (Chan et al. The implementation and the characteristics (including the strictly technological ones) of blockchain technology, when proposed as a replacement for standard fiat currency are subject to ongoing discussion (Berentsen and Schär 2018 Dierksmeier and Seele 2018 Ertz and Boily 2019 Glaser and Bezzenberger 2015). While it is indisputable that the blockchain by itself had and has a great influence on public discourse, with innovation potential comparable to that of the Internet (as it fosters a decentralized infrastructure for economic transactions), financial experts remain generally skeptical. These include, but are not limited to, supply chain management, data sharing, accounting, e-voting, or, as the most prominent area, finance. The blockchain, and more in general distributed ledgers, facilitate innovation in multiple domains of activity. Every transaction that occurs is recorded in a public ledger. Rather than being issued by competent governmental authorities, their implementation is based on the principles of cryptography used to validate all transactions and generate new currency. The insights gained from the model, especially the connection between liquidity and manipulation efficiency, unfold a discussion on how to prevent illicit behavior.Ĭryptocurrencies are a digital alternative to legal fiat money. 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. 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. Simulation results provide a satisfactory fit to historical data. 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. 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. 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. Such behavior can be a source of systemic risk and increasing distrust for the market participants, consequences that call for viable countermeasures. 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.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |