Blavatnik ICRC rigorous scientific research directly impacts policy

The Journal of Monetary Economics, a top journal in economics, recently published the paper "Price Manipulation in the Bitcoin Ecosystem" (Gandal et. al, 2018).  In the paper, Neil Gandal, JT Hamrick, Tyler Moore, and Tali Oberman identify and analyze the impact of suspicious trading activity on the Mt. Gox Bitcoin currency exchange: approximately 600,000 bitcoins (BTC) valued at $188 million were fraudulently acquired.


They found that the USD-BTC exchange rate rose by an average of four percent on days when suspicious trades took place, compared to a slight decline on days without suspicious activity. Based on rigorous analysis with extensive robustness checks, they concluded that the suspicious trading activity by the Mt. Gox exchange itself likely caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months. 


The paper has been well cited in the academic literature (it already has 57 Google citations) – and received coverage by the NY Times and many other leading media outlets. More importantly, this is an example of academic research having a direct impact in the real world.


In a recent ruling, the U.S. Securities and Exchange Commission (SEC)  rejected a proposal to include Bitcoin in an Exchange Traded Fund  (ETF.)  The rejection of the proposal (submitted by Cameron and Tyler Winklevoss) was in part taken because concerns of possible price manipulation. In their recent order (Release No. 34-83723; File No. SR-BatsBZX-2016-30), the SEC remarked that Gandal et. al, 2018 paper and several other academic studies “supplement the Commission’s conclusion” that the proposers have not shown that Bitcoin markets are “resistant to manipulation.” The SEC notes that they would have rejected the proposal even without these academic papers. Nevertheless, it is important that the SEC is using academic research as supplemental material. 


This research itself demonstrates that there is concern about short-term pricing and, perhaps, liquidity issues associated with some exchanges. It shows that when markets are developing, the usual checks and balances that can be used to detect manipulation and other issues cannot be deployed due to a lack of longer time series data on “normal” behavior.



Gandal, N., Hamrick, J. T., Moore, T., & Oberman, T. (2018). Price manipulation in the Bitcoin ecosystem. MONEC Journal of Monetary Economics, 95, 86-96. doi:10.1016/j.jmoneco.2017.12.004

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