Breaking: US Criminal Probe to Look Into Potential Bitcoin Price Manipulation

Francisco Memoria
  • The US Department of Justice has recently launched a criminal probe into potential bitcoin price manipulation.
  • The investigation is in its early stages, and is said to be targetting illegal activities like wash trading and spoofing.

The US Department of Justice (DOJ) has reportedly launched a criminal probe into whether traders are actively manipulating the price of various cryptocurrencies, including bitcoin. The probe is said to be after spoofing and wash trading.

According to Bloomberg, the move is a culmination of the US’ scrutiny into cryptocurrency markets, which some claim are rife with misconduct. Bloomberg’s report cites four people familiar with the matter.

The investigation, according to the unnamed sources, is still in its early stages and is focusing on illegal practices that can influence prices. These include spoofing the market with fake orders to trick other traders, and wash trading to create fake trading volume.

Federal prosecutors, Bloomberg adds, are working with the Commodity Futures Trading Commission (CFTC), a financial regulator, on the investigation. Notably, the CFTC is a derivatives watchdog that doesn’t regulate markets in which actual cryptocurrencies are traded. Nevertheless, it has the authority to act if it spots fraud.

The limited oversight, University of Texas finance professor John Griffin noted, makes the cryptocurrency ecosystem a target for crooks. He was quoted as saying:

“There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market.”

John Griffin

Various cryptocurrency enthusiasts have long believed bitcoin’s price is actively being manipulated. According to CryptoCompare data, the flagship cryptocurrency has fallen from a nearly $20,000 all-time high in mid-December, to about $7,500 at press time.

The cryptocurrency’s bearish period has notably seen it various odd patterns, which some critics claim to be proof of price manipulation. Last year, a blogger known as Bitfinex’ed documented the actions of “Spoofy,” a single entity the blogger claims is dominating bitcoin’s price.

According to his work, Spoofy was a trader or group of traders that often placed orders of $1 million or more, without actually executing them. Its goal was to trick other traders and force the cryptocurrency’s price to go in the direction it wanted it to go.

As for other cryptocurrencies, it’s well-known various groups organize “pump and dump” schemes to manipulate their prices, especially when it comes to small-cap cryptos. As covered, last month a group of cryptocurrency influencers were reported to the FBI and the US Securities and Exchange Commission (SEC) for orchestrating these schemes.

Bitcoin Price On Track to Record First Green Monthly Candle in Over 6 Months

  • The bitcoin price is exhibiting low volatility levels and trading in a tight $3,300 to $3,700 range since Jan 11th.
  • BTC price has not managed to record signficant upward or downward price movements in recent weeks.

Bitcoin (BTC), the world’s most dominant cryptocurrency, is currently on track to record a green monthly candle for the first time in over 6 months.

Josh Rager, a widely-followed cryptocurrency trader, argued via Twitter that if the bitcoin price manages to remain above $3,413 for the rest of this month, then BTC could potentially record a green monthly candle. In the last two months, since setting a 12-month low at $3,122, bitcoin’s price has recovered by approximately 15%. BTC is currently trading at $3,746.69 according to CryptoCompare data.

The bitcoin price must stay above the $3,500 mark by the end of this month in order to record a net positive in February 2019. Since January 11th, 2019, bitcoin has been trading in a relatively tight range between $3,300 and $3,700 - as the digital asset has not been able to register any large price changes above or below key support levels.

On-Chain Transaction Volume Changes Could Affect Price

According to several crypto analysts, bitcoin could begin to recover by the second half of this year - which is when technical indicators for BTC are expected to start pointing toward a surge in the price of the cryptocurrency. Other fundamental developments such as changes in the on-chain transaction volume could also lead to a potential increase in bitcoin price.

In mid-December 2018, Mark Dow, a former International Monetary Fund (IMF) economist, had argued that if BTC does not recover soon, then it would be susceptible to trading at even lower prices. Dow had remarked:

If bitcoin can’t bounce to at least $5k – $6k soon, it’s a really bad sign for the cyberbulls. And if it breaks down thru the yellow line at any point, even the HODLers need to GTFO.

Bitcoin Price May Decline Further If It Can't Break Out Of Tight Range

If bitcoin can achieve its first green monthly candle since July 2018, then it might lead to positive price movements in the near-term, analysts have argued. However, if bitcoin continues to trade in the mid-$3,000 to $3,700 range for a few more weeks, then it would be a sign that BTC price has stabilized (due to low volatility).

According to Twitter user Hsaka (@HsakaTrades), bitcoin price might drop further (from current levels) if it remains in the $3,500 to $3,700 range. He noted (via Twitter):

Haven't the slightest as to which way this expands. A right proper stalemate as of now, wicks on both sides without any follow through of either. If I was hard-pressed, I'd say I'm leaning towards more downside.

Although the bitcoin price has not recorded any large price movements (in recent weeks), several altcoins, including ERC-20 compliant tokens, have registered substantial gains against BTC and the USD. Binance Coin (BNB), the native utility token used by the crypto exchange Binance, recently recorded over a 50% price increase (from around $6 to just over $9) in a span of two weeks - following reports that Binance managed to remain profitable even during the current bear market.