Regulations

US Government Will Fight Against Cryptocurrency Market Manipulation

US Government Will Fight Against Cryptocurrency Market Manipulation

The United State’s Justice Department (DOJ) will finally try to put to rest the several paranoid comments of Bitcoin prices being manipulated.

The DOJ will work alongside the Commodities and Futures Trading Commission (CFTC)  to understand what type of illegal trading strategies are taken to manipulate the cryptocurrency markets.

According to sources, the investigation will focus on specific tactics used illegally for influencing prices. These include ‘spoofing’ which is flooding the market with fake orders to trick other people into buying or selling. It is done by submitting orders and then canceling once the price moves in the desired direction.

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Another tactic is called ‘wash trading’ where the same trader sells a cryptocurrency and repurchases it from the market to show there is a lot of confidence in a particular cryptocurrency.

These type of tactics convert potential investors into new traders and hence leads to a higher market cap and demand for a particular cryptocurrency.

The two reported cryptocurrencies being seriously taken a look at is Bitcoin and Ethereum’s Ether.

John Griffins, a finance professor from the University of Texas who has prior qualifications in manipulation studies and digital coin markets commented on the issue.

“There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market,” Griffin said.

Manipulation is being fought against by certain exchanges. For example, the Winklevoss twins, famous for making money off Facebook has also tightened their exchange, Gemini Trust Co. They have hired Nasdaq to look into the surveillance of digital coins being traded on their exchange. The twins also urge exchanges and platforms to join together to serve as a self-regulatory body for the cryptocurrency industry.

Image Source: “Flickr”

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