Bitcoin price took a hit yesterday as the US Department of Justice initiated 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 cryptocurrency market, however, seemed unaffected by the disturbance, with Ethereum trading at $588. Ripple rose 4.79 percent to trade at $0.625, while Litecoin rose to trade at $122. The Bitcoin price has taken a 20% hit form its May 4 peak, as regulation speculation circles the market.
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 increased scrutiny has seen bitcoin prices drop more than $8,000 from 2017’s high.
The practice has afflicted various other stock markets, but this is the first investigation into cryptocurrency and how the market is run.
“There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market,” said John Griffin, a University of Texas finance professor.
Big names in the crypto community have expressed optimism regarding the criminal probe.
Mike Novogratz, billionaire investor and former hedge fund manager believes that it will contribute to the long-term health of the cryptocurrency market.
“Weeding out the bad actors is a good thing, not a bad thing for the health of the market,” Novogratz said. “Plenty of exchanges have these inflated volume numbers to create some sense of excitement around coins.”
Cameron Winklevoss and Fundstrat founder Tom Lee also propounded the idea, saying the investigation was “really welcome news”, and it will “deter bad actors”
Fundstrat has predicted that the bitcoin price will reach $25,000 before the end of the year, an outlook it has not wavered from despite the recent downturn.
Bitcoin has since stabilized at a present value of $7,554 on Bitfinex.