Market manipulation of Cryptocurrencies: Evidence from Social Media and Transaction Data

Abstract

The cryptocurrency market cap experienced a great increase in recent years. However, large price fluctuations demonstrate the need for governance structures and identify whether there are market manipulations. In this paper, we conducted three analyses – social media data analysis, blockchain data analysis, and price bubble analysis – to investigate whether market manipulation exists on Bitcoin, Ethereum, and Dogecoin platforms. Social media data analysis aims to find the reasons for the price fluctuations. Blockchain data analysis is used to find the detailed behavior of the manipulators. Price bubble analysis is used to investigate the relation between price fluctuation and manipulators’ behavior. By using the three analyses, we show that market manipulation exists on Bitcoin, Ethereum and Dogecoin. However, market manipulation of Bitcoin is limited, and for most of Bitcoin’s price fluctuations, we found other explanations. The price for Ethereum is most sensitive to technical updates. Technical companies/teams usually hype some new concepts, e.g., ICO, DeFi, which causes a price spike. The price of Dogecoin has a high correlation with Elon Musk’s Twitter activity, which shows influential individuals have the ability to manipulate its prices. Also, the poor monetary liquidity of Dogecoin allows some users to manipulate its price.