U.S Authorities have Launched Criminal Investigations into Bitcoin Price Manipulation

Bitcoin Price manipulation

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United States Justice Department has launched criminal investigations into whether traders are manipulating the price of Bitcoin and other cryptocurrencies. It’s suspected that there might be price manipulation and that’s why the price of Bitcoin and other currencies keep on going up and down. Several people familiar with this matter have said that there could misconduct in the red-hot market.

The probe will focus on illegal activities which can influence prices like spoofing or flooding the market with orders which do not exist so as to trick other traders to buy or sell. The US Federal investigators have joined hands with the Commodity Futures Trading Commission which has been overseeing derivatives tied to Bitcoin.
These authorities are now worried that cryptocurrencies are prone to fraud for different reasons like wild price swings which can make it easy to push the value of the currencies around, skepticism for the exchanges which are actively pursuing cheaters, and the lack of regulations like the ones that govern other assets.

Bitcoin’s price is currently on the drop, and it’s currently trading at around 7,410 dollars which is about 20 percent down from the may peak.

The concerns about the manipulation of cryptocurrency prices led to China banning crypto exchanges and countries like Philippines and Japan to regulate the market which resulted in dropping which sent Bitcoin below 8,000 dollars this year. However, people still continue to invest heavily in the sector of something which is now leading to conferences, celebrity endorsements and attention from the Wall Street.

The specific bad tactics that the US departments are investigating include spoofing and wash trading which are forms of cheating which regulators spend many years trying to get out of futures and equities markets. Spoofing happens by traders making orders to buy and then cancels the orders after the prices move in their desired directions while wash trading involves giving false information of market demand to encourage other people to join the market. The Coins being investigated include Bitcoin and Ether.

The investigations is geared towards cracking down the industry which is mainly embraced by people who do not trust banks and government’s control over the monetary policy. Bitcoin raised in a very meteoric way in 2017 moving from 1,000 dollars moving to almost 20,000 dollars before the end of the year. The rise made many traders join the market without actually knowing its risks.

Crypto trading is now being done in many platforms all over the world, and most of the trading platforms are not registered by the CFTC or even the SEC. CFTC works to investigate fraud in spot markets, and if it finds any, then it imposes sanctions.

Why Crypto markets are an easy target for fraudulent activities

There is little regulation in the crypto market which makes it an easy target for crooks. According to John Griffin a Finance Professor at the University of Texas:

“There is very little regulation of manipulative trading in the crypto sector, spoofing and wash trading. It’s very easy to spoof in this sector.”

Many market participants have said that cryptocurrency manipulation is very high. Mid last year a blogger flagged actions of a spoofy nickname for one trader which were alleged to have placed one million orders without actually executing them. Investigations will be carried on such people and even exchanges which many be involved and action taken against them.

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