Crypto markets stabilize; USA launches criminal probe into alleged bitcoin price manipulation

Bitcoin price drop news Why is bitcoin going down? BTC falling today

The US Justice Department has opened a criminal investigation into potential market manipulation of bitcoin prices, according to a Bloomberg report.

Representation of the Bitcoin virtual currency standing on the PC motherboard is seen in this illustration picture, February 3, 2018.

The investigation is focused on illegal practices that can influence prices - such as spoofing, or flooding the market with fake orders to trick other traders into buying or selling, said the people, who asked not to be identified because the review is private.

Bloomberg reported that the Justice Department was working with the Commodity Futures Trading Commission, which oversees cryptocurrency derivatives, for the investigation.

Spokespeople for the Justice Department and the CFTC didn't immediately return requests for comment. Painting the tape, where traders trade amongst themselves to make it look like there is a flurry of activity going on, is yet another method of market manipulation. China recently banned all cryptocurrency exchanges, and Japan and the Philippines have begun to regulate them. Their popularity exploded a year ago, with the price of bitcoin rising from $960 in January to a peak of nearly $20,000 in December.

Bitcoin prices have fallen by $8,000 in the last year
CoinMarketCapBitcoin prices have fallen by $8,000 in the last year

Claims about price manipulation in digital currency have been circulating for years, but to date, there has been little concrete evidence that trading conspiracies exist. So, in the latest regulatory attempt, the United States has launched the investigation which is in its early stage that will cover Bitcoin and Ether.

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.

These kinds of activities allow bad actors to manipulate the price of assets in their favor. Then there's 'pump and dump, ' where an investor spreads misplaced confidence in a security, and then sells their own shares for profit while the security tanks.

Another tactic is supposedly "washing", whereby a network of individuals and groups trade with each other, to give the impression that there is demand in the market for a particular type of digital currency. Institutional investors are slowly entering the market, and as soon as there will be more friendly regulations, the results will be even better.

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