Bitcoin price manipulation is a hot topic. The concern that cryptocurrency is vulnerable to manipulation has given rise to multiple studies, investigations, and a lot of confusion. But what’s actually really going on with Bitcoin price manipulation? Are cryptocurrency markets riskier or more vulnerable than other markets?
The possibility of Bitcoin price manipulation received a lot of attention earlier this summer. U.S. Justice Department is now investigating if the crypto’s value is being artificially inflated.
Much of the concern came in the wake of Bitcoin’s meteoric rise in 2017. Last year, the currency skyrocketed from around $900 all the way to $20,000.
The dramatic increase in value drew attention from around the world. Most immediately, this included investors already in the crypto game. Additionally, it sparked the hopes of people curious about the cryptocurrency market, many of whom saw Bitcoin’s activity as an exciting development.
At the same time, Bitcoin’s massive growth started drawing questions from regulators. And many of these questions had to do with Bitcoin price manipulation.
The DOJ’s probe was the most significant and most publicly-visible investigation. But the possibility of Bitcoin price manipulation has also raised concerns elsewhere. Most notably, this includes the SEC. The agency has repeatedly denied a proposed Bitcoin ETF. Regulators cited concerns about price manipulation.
In making their decisions, the SEC and DOJ have both referenced independent research. The most recent example of these studies is a report by John M. Griffin and Amin Shams. Griffin and Shams are suggesting that Bitcoin prices are influenced another cryptocurrency, Tether.
“Using algorithms to analyze the blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices,” the researchers wrote.
This isn’t the only study to suggest price manipulation. A review of crypto trading activity from as far back as 2013 reached similar conclusions. This study, published in 2017, looked at a period of “suspicious trading activity.”
Ultimately, researchers concluded that “suspicious trading activity caused the unprecedented spike in the USD-BTC exchange rate in late 2013, when the rate jumped from around $150 to more than $1,000 in two months.”
Taking these two studies together, it appears that Bitcoin is susceptible to price manipulation.
In the end, all of this places Bitcoin in a weird position. Most immediately, ongoing investigations and research on Bitcoin price manipulation could justify the fear that cryptocurrencies are vulnerable.
Further, these fears have real-world implications. For example, the SEC continues to reject the idea of a Bitcoin ETF. More pressing, the value of Bitcoin has dramatically dropped off from its $20,000 high point last year. Currently trading around $6,250, the currency has seen rapid drops since the end of 2017.
Despite all this, the currency is still relatively stable. For starters, the currency is going strong and has not shut down by the DOJ. And most importantly, BTC is still the strongest cryptocurrency on the market.
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