Bitcoin Price Manipulation – The U.S Department of Justice just launched an investigation into whether traders are manipulating the price of Bitcoin and other digital tokens, Bloomberg reported this morning.
The investigation primarily focuses on illegal practices that can influence the price of these coins, such as “spoofing” – flooding the market with fake orders to trick other traders into buying or selling. Another illicit tactic the DOJ is looking into is called ‘wash trading,’ which traders trade with themselves to create the illusion of volume. This tactic is prevalent in equity and futures markets.
John Griffin, a University of Texas finance professor who has studied market manipulation, told a reporter at Bloomberg, “There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market.”
The DOJ’s investigation is still in its early stages and is following the country’s latest crackdown on various blockchain projects, in both Canada and the U.S.
Cryptocurrency trading is fragmented in dozens of cryptocurrency exchanges and platforms across the globe, many of which are located in Asia and aren’t registered with the SEC or CFTC. The CFTC doesn’t regulate the trading of cryptocurrency, but if it finds fraud in the ‘spot market,’ it holds the authority to impose sanctions.
The Winklevoss Twins, who own the Gemini Exchange, conducted a surveillance of the digital coins being traded on their platform last month. The twins then urged other trading platforms to band together to potentially form a group that would ‘self-regulate’ the industry.
It seems that the duo sensed the government oversight drawing near. Many market participants have alleged that cryptocurrency manipulation is rampant, and you can clearly see that by the hundreds of ‘pump’ tactics initiated a day.
The question then that remains is – how do we stop it? Not the regulators, or the government, but us, the cryptocurrency enthusiasts and investors. Can it be stopped without these regulators intervening?
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