Historical Context of Manipulation
For hundreds of years markets have been manipulated in various ways. The story goes that during 19th century the Rothschild's used their hasty communication lines to exploit knowledge of how the Battle of Waterloo played out, making a fortune in the process. The Hunt brothers tried to corner the market on silver in the early 1980's creating conditions that allowed the price of silver to be bid up to over 150USD (in 1980) but then precipitously decline back to about 10USD. George Soros made billions in trading global currencies over several decades. He was able to break many countries currency simply by placing his bet. So many other people believed in his tactics that this was enough to cause a tsunami into or out of a given currency. He, along with other speculators, was even able to "break" than Bank of England in the early 90's.
With our super high speed society, a lot of these old tactics are quite passé, but they live on in more modern terms. There are high speed fiber-optic communication lines run between major exchanges, like the CME in Chicago and the NY Stock Exchange, to give their owners a fraction of a second lead in much the same way Nathan Mayer Rothschild did hundreds of years ago. These high speed lines, and the high frequency trading (HFT) that goes along with them, can be used to "run stops". That is, when you own a stock you will often have a set value, called a stop-loss, where the stock will automatically be sold. This is named such as to stop you from taking too much loss on any one stock. HFT allows those with super fast infrastructure to place excess sell orders for a particular stock. These orders are only active for a fraction of a second, and then canceled. The stock price does decline, albeit temporarily, and the stop-loss you have in place will activate. Your stock is sold at the depressed price and almost instantly regains its actual, pre-manipulated, price.
Another oldie but goodie that is still around today is the Exchange Stabilization Fund, or ESF. This was established in 1934 by the US Treasury Dept. It is officially tasked with trading foreign exchange on the global market to "stabilize" currencies. The origins of this are quite exasperating, but that is another article; I would suggest to anyone that hates the Federal Reserve to look into it though. Fair warning, your head may explode! Anyway, the ESF was set up in response to a similar institution in England. These, and other, institutions the world over are literally there to "stabilize", which is really just another word for manipulate, markets. Maybe not so much for profit as in the previous examples, but, IMHO, a far more sinister goal of papering over the cracks in an otherwise illusory monetary system.
As a last example I'll cite the, less overt, Working Group on Financial Markets, aka the Plunge Protection Team. While officially the PPT is supposed to give recommendations in times of economic turbulence many people believe that it in fact trades on various markets around the world, in response to the aforementioned turbulence, to "stabilize" them. This was established in 1988 after the market crash a year earlier.
Precedent of manipulation, both sanctioned and not, set.
Perfectly Secure Software
Moving our attention to bitcoin, we see that many of the attacks and defenses on bitcoin center around "hacks", EMPs, and the loss of internet connectivity. If you know anything about traditional EMP blasts, then no more needs to be said - it isn't going to happen. You'd need dozens of nukes detonating over a country the size of the USA to be effective. More realistic approaches might cite things like the "internet kill switches" any remotely modern country has. Still, I don't think this is a terribly realistic reason not to own bitcoin. In the event your country has to kill the 'net, you've probably got bigger fish to fry. See: Egypt and Syria.
As far as the individual is concerned, the intelligence community owns all your communications already and if you are a targeted individual - game over. Don't believe me? Ask Mark Klein about AT&T's room 641A or William Binney about BLARNEY, ThinThread, Trailblazer or a dozen other programs built to know everything about your on-line life. Even Truecrypt, a once renowned encryption package, removed their warrant canary insinuating that the alphabet agencies have a way in. Even the mighty Linux is likely compromised. When Linus Torvalds was asked if he had ever been approached by the US Government about installing a back-door into the Linux kernel he said "no" while emphatically shaking his head yes.
This implies that there is also no such thing as anonymity on-line. If you think that you can't be targeted because you are using Tor or I2P, I've got a correlation attack to sell you. Bitcoin seems to be fairly safe in terms of traditional hacking, but, in short, there is no need to "hack" anything; it is all already vulnerable.
The main risk to bitcoin I can see is on the human security side. That is, the exchanges. There is no regulation at all, and while some people would say that is a good thing because no organizations are manipulating anything, it does open the door to many more private manipulators. Think back to the first part of this article and how many private individuals manipulated larger and more secure markets than bitcoin. There is very little stopping someone from simply stealing the bitcoin you store on their exchange, MTGox style. Not much you can do about that except keep your bitcoins in so called cold storage or paper wallets and only move them onto an exchange when you plan to sell them. So while there is a concern here, it can be mitigated.
But now this is where it gets interesting. Let's say I am a billionaire and I want to manipulate the entire bitcoin market, not some kiddie exchange theft shenanigans. First let's consider the market cap of bitcoin, the total worth of all bitcoins. As of this writing, 2107/06, the bitcoin market cap is about 8 billion USD. If we extrapolate a 3000 USD price of bitcoin to the eventual 21 million total bitcoins, that would give us a total market cap of about 60 billion dollars.
It sounds like a load of cash, but in global market terms, it is a pittance. Several individuals hold more wealth than this. The US's quantitative (QE) easing program a few years back was purchasing over 60 billion every single month, for months on end. 60 billion USD is an estimate of the total reconstruction costs after destroying Iraq. 60 billions is 0.5% of the yearly consumer spending of USA citizens (12 Trillion USD). Again, 60 billion is nothing.
Now assuming I am not a total idiot I, as a sinister billionaire, could have easily bought up ALL of the bitcoin long before it ever reach such high prices. If I owned all the bitcoins though, there would be no way to profit, right? Well, like the Hunt's brothers before if I simply cornered the market it would cause the price to go sky high, kind of like it has. Then I could cash out for a pretty profit, likely crashing the market in the process - kind of like what has happened several times on the long ascent upward. I'll get to how to accomplish this in the next section.
Maybe I am even more sinister though, and I want to herd everyone into a digital currency so that I can have more control over the world population. Things like negative interest rates are circumvented by simply holding cash. You might think bitcoin also circumvents things like negative interest rates, but you aren't seeing the longer game. By introducing bitcoin, and making sure it succeeds by manipulating (for successful adoption, not profit) the market, I can get people accustom to a cashless society. Then, when the time is right, pull the rug out from under bitcoin in any number of ways (see earlier: the internet is totally controlled by the intelligence community), killing people's confidence in bitcoin and offering up a secure solution from an accredited institution. Kind of like how we see all the banks, VISA, etc getting into the blockchain game now-a-days.
I see it as being one of three main options:
Bitcoin and its brethren are legit and the powers that be are shaking in their boots.
Bitcoin is a vehicle create for whatever reason and has now been manipulated to the point where the oligarchy has de facto control.
Bitcoin was created to usher in a new age of cashless digital currency.
Given the events of the past few years, and the historical context of manipulated markets and the intelligence community, I'd place my money strongly on option 3.
Bots and VPNs
Now on to some nuts and bolts of how a sufficiently funded entity could easily gain control of the entire bitcoin market. Step one would be to create a botnet. This is nothing more than a bunch of computers all over the world under your control. You probably wouldn't want to use zombies (computers infected with your botnet), but that could work. I would suggest that someone with the kind of money needed to pull something like this off would simply rent a load of virtual private servers (VPS) the world over as it would be more reliable and harder to detect. The use of virtual private networks (VPN) could also be employed to further obfuscate network activity and simulate traffic anywhere in the world as needed.
Each of these bots would have a wallet attached to it. Initially you would buy bitcoins spread out over these many accounts. Assuming we are still in the early phase, you could then simulate activity by trading bitcoin among your own botnet. That is, you could move bitcoins from your left hand to your right hand, but everyone else in the market would see it as legitimate activity. Of course you would want to do this in repressive locations like China to lend an even greater air of legitimacy. This would make it appear that there were many people the world over interested in bitcoin while in reality would be a simulated market through and through.
This is only phase one of bitcoin adoption through manipulation though. After some time the actual market participants would increase and so would the value of bitcoin. You could continue the manipulation if you had long-term objectives, or you could cash out (slowly) at any time without much market disruption. Maybe even cash out all at once and see some wild swings in the price; exactly what we have seen. Again, I am assuming the worst case scenario that bitcoin is simply a vehicle to normalize the adoption of digital currencies, so profit is not the motive. It would cost next to nothing to get the market propped up before the actual public started participating to the point where it could stand on its own.
Back in the early days of bitcoin, no mainstream news reported on it. It was relegated to the bank alleys of the internet. When activity increased and the price spiked up initially a few stories were presented, but without much substance. This was probably done as a simple introduction of the concept to the few financially astute public. As more and more volatility and price spikes occurred, more coverage was given. Now that the idea has gone fairly mainstream, you have places like Goldman-Sachs, JP Morgan, and like ilk throwing their predictions into the fray as well as developing what I believe will be the replacement blockchains when bitcoin is tarnished by some calamity.
I believe this is all part of a plan to usher in the cashless society that has been promoted so heavily these past few years. Whether or not bitcoin is the final shape the cashless/digital cash society adopts, it is undeniably a stepping stone in that direction. A digital currency won't be able to hide on the sidelines in a market crash, it won't be able to avoid bank failures, it won't be able to transact un-surveiled.
Centralization Through Decentralization
It sounds counterintuitive, but I also believe the future is to be centralized via decentralization. Historically speaking, the British Empire knew that it was fighting a losing battle to keep all of her colonies in line. Men like John Seely and Cecil Rhodes worked under the influences of John Ruskin to bring about a new system of organizing the Empire. It was to be called a Commonwealth and the colonies were to be "set free" to govern as they see fit, but with a connection to a centralize authority in London where each Commonwealth member would have some kind of representation. In short, the idea was to let the colonies do their own thing so long as they headed in the same direction, London's direction.
Today you hear about decentralization when talking about the internet in general, Tor-like networks generally, and, of course, bitcoin. We also see the no nations/no boarders movement pushing towards decentralization. Simultaneously organizations like the United Nations and the European Union seem to, or are trying to, gathering more centralized control. This process is not at all lost on the modern oligarchy and control class; see the book "The Spider and the Starfish", which outlines the pros and cons of centralization and decentralization as well as how these methods of structuring a system (global governance) can be utilized effectively. Interesting aside: Rhodes scholar Bill Clinton promoted "The Spider and the Starfish", but I am sure those at the top are all buffoons, right?
I believe this is all part of an overarching strategy, and the many flavors of bitcoin are allowed only so long as they march in the designated direction - a cashless surveillance state society direction.
Rainbow Table Speculation
(This section is pure speculation)
I understand that bitcoins are mined through a process that involves calculating hash values. The winner is the one who's value meets a particular criteria. I am not sure where these criteria are set or if there is any method for collecting the resultant calculated hashes, success or failure. If there is a way to collected the calculated hashes, there may be some way of generating a rainbow table from them. (I've also wondered about SETI and Folding@Home) A rainbow table is a list of pre-calculated hashes that can be used to very effectively brute force a password. Again, this is pure speculation and could be disproved easily if there is a transparent view of where the criteria hashes are generated and where the final hashes are sent. Still, the conspiratorial side of me sees operations like bitcoin as sophisticated intelligence programs that often have multifaceted benefits.
Fighting the Bankers
Lastly, but most importantly, I see many members of the whatever-coin community as being vehemently anti-government. Many criticize the Federal Reserve and Modern Monetary Theory. Rightly so I might add. They see bitcoins as a way of circumventing a corrupt organization, but as I have pointed out, the market cap of bitcoin is so low that it is no way even close to a replacement. Even with the extreme divisibility, bitcoin lack the infrastructure to function in the same way traditional clearinghouses like SWIFT or CHIPS. While I have no doubt that such an infrastructure could be built in time, and likely will given my position on how bitcoins are to bring about a new digital cash age, this does not seem to be anything more than replacing one millstone around our collective neck with another.
To be truly effective in a counterattack on the powers that be, we must first recognize that their power lies not in the control of the financial mechanisms, but in the masses participation in their financial schemes. Historically general strikes were used to great effect to bring about many of the changes we take for granted today - like the 8 hour work day. In modern times a strike seems much less likely to be effective as globalization and the world's population is such that someone else is almost certainly willing to take the strikers place.
On the other hand, a boycott is an extremely effective tool to disrupt the financial machinations. In the era surrounding WW1, boycotts were a common economic attack; Germany was boycotted and China boycotted Japan, resulting in an invasion, as two examples. It is clear to see that as time goes on businesses are becoming more and more financialized. Look no further than General Motors. They used to be a car producer, but today they are nothing more than a bank with a subsidiary that produces cars. Even then, the cars are only produced to generate loans, the real bread and butter of the modern financialized global economy. Consider the last few economic busts - hot money chasing dot com and hot money bidding up real estate. We still see these exact things happening today, money chasing investment returns - not money being deployed in actual production gains.
If you want to strike at the corporate oligarchy, you must hit them where it hurts: their bottom line. There are no scabs that are going to take your place in a boycott, there are no laws or decrees that can force you to buy stuff. If people are literally forced to spend money, ala the modern health care of the USA, it does little more than show how the emperor has no clothes and will likely result in more and more people realizing that it is the consumer that feeds the machine so many of us are fed up with.
In closing, consider that the yearly consumer spending by the citizens of the USA is now at about 12 TRILLION dollars. Imagine the amount of power the oligarchy gains when we hand over all that cash that we had to labor a collectively enormous number of hours for. Imagine the USA we could build with that 12 trillion dollar budget; no more crumbling roads, no more lead pipes, the sky is the limit. While the numbers are different, the same argument holds true for every nation around the globe. If we simply take our ball and go home, the game is over.