Published: Sat, May 26, 2018
Markets | By Otis Pena

USA launches criminal probe into Bitcoin price manipulation

USA launches criminal probe into Bitcoin price manipulation

We discussed the weak technical set-up of the cryptocurrency market at our Weekly Cryptocurrency Webinar yesterday. In the wake of such a severe situation, U.S. is launching a criminal probe to get into the depth of the matter.

News broke today (May 24) that the US Justice Department has opened a criminal investigation into market manipulation of bitcoin prices. The CFTC only has oversight powers on crypto derivatives. BTC is down 20 percent since a May 5 peak of $9,895.

The investigation is said to be in its "early stages" with prosecutors reportedly looking into a cryptocurrency trading markets including that of bitcoin and ethereum's ether token.

One of the most important hedge fund managers and billionaire investor, Michael Novogratz, said that the investigation that is being carried out by the U.S. Department of Justice (DOJ) is a "good thing" for the cryptocurrency market. Spoofing is when a trader makes a series of orders, but then cancels them after the price moves in the direction they want.

The risky "wash trading" involves a person buying and selling assets to himself in a short time period, to effectively create an illusion of heightened market activity, attracting unsuspecting traders to dive in. "It would be easy to spoof this market".

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There are about 26 ways to manipulate a market, according to a study past year. Last year, a blogger flagged the actions of "Spoofy", a nickname for a trader or group of traders that have allegedly placed $1 million orders without executing them.

For small market cap cryptos, there have been reports of various groups organizing the schemes to manipulate their prices as well.

For example, during the notorious Mt. Gox attack, the embattled Japanese exchange saw a host of trades that appeared valid, but were actually made by bots that did not actually own the cryptocurrency behind those trades.

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The presented content may include the personal opinion of the author and is subject to market condition. Institutional investors are slowly entering the market, and as soon as there will be more friendly regulations, the results will be even better. The author or the publication does not hold any responsibility for your personal financial loss.

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