Bloomberg has recently published a report stating that a criminal probe has been opened by the United States Department of Justice (DOJ). It will investigate reports that the price of Bitcoin (including other cryptocurrencies) has been manipulated.
Spoofing is a dishonest financial manipulation of a stock, a commodity, or a coin. It is caused when brokers fill a buy or a sell order for a specific item, but then the buyer or seller cancels that order. This action is a manipulation which will make a stock, commodity, or a coin to increase or decrease in value and can be perceived as a manipulation of the market demand for that particular item. While this practice is not isolated to the cryptocurrency market, the lack of regulations and monitoring tools of cryptocurrencies makes it harder for the various regulatory bodies to police and safeguard the rest of us from a potential catastrophe.
Bitcoin and other cryptocurrencies are notoriously volatile. The value of a Bitcoin peaked at $20,000 in December 2017 and has since fallen by nearly 200% to settle at $7,465 this morning. Looking at various charts, the price fluctuation of a Bitcoin is unusual and obviously canceled orders of cryptocurrencies could be linked to rumours of spoofing, which is why the DOJ has initiated its probe. Working with Commodity Futures Trading Commission (CFTC), a regulatory body that the DOJ hopes to investigate various derivatives trades. Together, the two organisations hope to clarify the position and ensure a fair and open market.
The US government has been actively looking at the cryptocurrency market. The Securities and Exchange Commission (SEC) has been struggling to figure out the correct way to specifically regulate the initial coin offerings (ICO) market and has even created its own fake ICO. Just this week, new research has been published by the Wall Street Journal and China’s National Committee of Experts as they have uncovered that almost 20% of all the initial coin offerings on the market have been deemed a scam.
With so much to lose, and so much to gain, it's no wonder why governments are beginning to look at cryptocurrencies and begin to enforce a more viable and safe tradable market.