In the wake of dramatic movement in the bitcoin prices and other digital currencies, US has launched a probe into the BTC price manipulation. Bitcoin has dropped about 20% since last month’s peak that raised the hackles of the authorities resulting in this investigation that might soon bring the greens back.
US launches criminal probe into BTC price manipulation
For the past few weeks, cryptocurrency market has been experiencing drastic price movements. River of red is flowing in the entire market dragging the BTC prices to $7,390 level. In the wake of such a severe situation, US is launching a criminal probe to get into the depth of the matter.
The US Justice Department is leading the investigation that would look into the trader manipulation of bitcoin among other virtual currencies. Reportedly, the dramatic turn of events in the red-hot market has led the authorities to believe that it is rife with misconduct.
The focus of the investigation would be on the illegal practices like fake orders or spoofing that can potentially influence the prices. Federal prosecutors along with CFTC are working on this as they believe due to volatility and lack of regulations, the market is susceptible to frauds.
In recent months, CFTC sent a subpoena to Bitfinex, a crypto exchange. The regulatory agency also sent a subpoena to Tether which might have been used to manipulate the prices of bitcoin, last year.
From May 5 when Bitcoin was at $9,928, it has taken a plunge of 25 percent in about 20 days. So, in the latest regulatory attempt, the US has launched the investigation which is in its early stage that will cover Bitcoin and Ether.
Regulators to tackle trader manipulation, Bitcoin red end to see the light
Wash trading and spoofing that had been rampant in the equity and futures market before regulators root them out are tactics Justice Department is looking for in crypto market.
Spoofing involves submitting a string of orders and then canceling them once price moves in the trader’s desired direction. Whereas in wash trade, the cheater trades with himself to present a false demand in the market in order to lure others.
According to John Griffin, a University of Texas finance professor limited oversight makes the market a target for crooks, stating:
“There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market.”
It’s not the first time, as last year, a blog revealed about market manipulation caused by someone nicknamed “Spoofy”. The trader dominated the BTC price by reportedly placing the order of $1 million without executing them.
For small market cap cryptos, there have been reports of various groups organizing the schemes to manipulate their prices as well.
Just like equity market, which was ridden with manipulators, was cleaned out by the authorities, the entry of regulators will strengthen the crypto market while driving the bad factors out.
Now, with the involvement of regulators in the cryptocurrency market, we might soon see the end of ongoing severe price dump.
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Lauren, a blockchain, and a cryptocurrency strategist has created a project of crypto price predictions for each month.