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Journal of Social Computing 2023, 4(4): 382-397 https://doi.org/10.23919/JSC.2023.0027
Open Access | Issue | Published: 31 December 2023

Bitcoin Price Manipulation Regulation from a Game Perspective

Show Author's Information Yingxin Gao1,  Yanmei Zhang1( ),  Zheng Lin1,  Aihua Jiang2
School of Information, Central University of Finance and Economics, Beijing 100081, China
School of Taxation, Central University of Finance and Economics, Beijing 100081, China
Keywords:
Bitcoin, price manipulation, game model, behavioral finance, financial regulation
Cite this article:
Gao Y, Zhang Y, Lin Z, et al. Bitcoin Price Manipulation Regulation from a Game Perspective. Journal of Social Computing, 2023, 4(4): 382-397. https://doi.org/10.23919/JSC.2023.0027
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Abstract Full text About this article

Frequent price manipulation in the Bitcoin market will lead to market risk and seriously disrupt the financial order, but there is less research on its regulation. We address the Bitcoin price manipulation problem by building a regulatory game model. First, we study the price manipulation mechanism of the Bitcoin market based on behavioral finance and clarify the boundary conditions. Second, we introduce regulator constraints and establish a game model between the manipulator and the regulator. Further, through variable deconstruction, parameter verification, and simulation analysis, we explore how to achieve effective regulation of Bitcoin price manipulation. We find that the effective regulation of Bitcoin price manipulation can be achieved in three ways: (1) Adjust the penalty coefficient with a certain lower threshold so that the manipulator’s expected return is negative; (2) Set the lowest possible price fluctuation standard while ensuring that it does not interfere with market-based transactions; (3) The simulation of price manipulation regulation is optimized and most efficiently controlled when the probability of investigation is dynamically adjusted by a concave function on the price fluctuation standard.


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About this article

Bitcoin Price Manipulation Regulation from a Game Perspective

Show Author's information Yingxin Gao1, Yanmei Zhang1( ), Zheng Lin1, Aihua Jiang2
School of Information, Central University of Finance and Economics, Beijing 100081, China
School of Taxation, Central University of Finance and Economics, Beijing 100081, China

Abstract

Frequent price manipulation in the Bitcoin market will lead to market risk and seriously disrupt the financial order, but there is less research on its regulation. We address the Bitcoin price manipulation problem by building a regulatory game model. First, we study the price manipulation mechanism of the Bitcoin market based on behavioral finance and clarify the boundary conditions. Second, we introduce regulator constraints and establish a game model between the manipulator and the regulator. Further, through variable deconstruction, parameter verification, and simulation analysis, we explore how to achieve effective regulation of Bitcoin price manipulation. We find that the effective regulation of Bitcoin price manipulation can be achieved in three ways: (1) Adjust the penalty coefficient with a certain lower threshold so that the manipulator’s expected return is negative; (2) Set the lowest possible price fluctuation standard while ensuring that it does not interfere with market-based transactions; (3) The simulation of price manipulation regulation is optimized and most efficiently controlled when the probability of investigation is dynamically adjusted by a concave function on the price fluctuation standard.

Keywords: Bitcoin, price manipulation, game model, behavioral finance, financial regulation

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Publication history

Received: 30 June 2023
Revised: 13 December 2023
Accepted: 17 December 2023
Published: 31 December 2023
Issue date: December 2023

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© The author(s) 2023.

Acknowledgements

Acknowledgment

This work was supported by the National Science Foundation of China (No. 61602536), Emerging Interdisciplinary Project of Central University of Finance and Economics (CUFE), and Financial Sustainable Development Research Team.

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The articles published in this open access journal are distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/).

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