BITCOIN prices tumbled today as the US Justice Department opens a criminal probe on price manipulation. The cryptocurrency could plummet below $7,000 as pressure to introduce regulation builds. Why is bitcoin going down?
Bitcoin prices are dropping today amid a price manipulation scandal.
The cryptocurrency fell more than 1 percent today to trade at $7,539, as of 6.30pm BST.
BTC took a hit with news the US Justice Department would be launching a criminal investigation probe into price manipulation.
The cryptocurrency market has lived under the shadow of regulation since its inception, but the latest development could force the market closer to regulation.
The rest of the market seems to be fairing well against BTC, with Ethereum trading at $588. Ripple rose 4.79 percent to trade at $0.625, while Litecoin rose to trade at $122.
Why is bitcoin going down?
Despite its positive results in the previous few weeks, bitcoin is taking a hit amid a price manipulation scandal.
The US Justice Department suspects traders are now manipulating BTC prices, an illegal practice in regular markets.
The cryptocurrency world is regularly suspected of facilitating nefarious deeds, beginning its journey to popularity as an anonymous currency to trade for drugs and paraphernalia on the Deep Web.
However, the cryptocurrency market may now be moving to more ‘white-collar crimes’ as a criminal investigation is launched.
The Justice Department is focussing on certain tricks that can influence prices of digital currencies, including spoofing which sees traders flood the market with fake orders before swiftly cancelling them, duping other traders into buying or selling.
The practice has afflicted various other stock markets, but this is the first investigation into cryptocurrency and how the market is run.
John Griffin, a University of Texas finance professor who has studied manipulation said: “There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market.”
Because of the inherently anonymous nature of cryptocurrencies, authorities worry bitcoin could be facilitating fraud and price manipulation, especially considering the wild price fluctuations and volatility that are known to hit the cryptocurrency market.
The bitcoin price has taken a 20 percent hit form its May 4 peak, as regulation speculation circles the market.
Concern over the ability to manipulate traders in the cryptocurrency market has forced other countries, like China and Japan to either ban or fully regulate cryptocurrency exchanges.
The increased scrutiny has seen bitcoin prices drop more than $8,000 from 2017’s high.
Some market participants have alleged that crypto manipulation is rampant. 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.
A Justice Department spokesman and CFTC officials are yet to respond or comment.