Bitcoin price hits six-week-low as US DOJ launches cryptocurrency trading investigation

A major investigation aims to uncover criminal traders

Anthony Cuthbertson
Friday 25 May 2018 13:30 BST
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What is Bitcoin and why is its price so high?

Bitcoin has fallen in value by more than $1,000 over the last week, as an investigation by the US Department of Justice launches into cryptocurrency price manipulation.

The criminal probe surrounds the practice of spoofing, whereby traders attempt to artificially influence prices by placing fake orders designed to trick investors into buying or selling. It is not clear if the market-wide price falls are related to the DOJ investigation.

The price drop is the latest in a downward trend that has seen bitcoin fall in value by more than $2,000 since the beginning of May.

Some of the most significant losses over the past week have come from bitcoin cash, which saw its price fall from $1,300 to below $1,000 – and by almost a half since 6 May.

“The bitcoin cash network has been displaying some erratic behaviour over the past few weeks, which has contributed to the downwards pressure on prices,” Iqbal Gandham, the UK managing director of trading platform eToro, told The Independent.

Bitcoin cash has yet to reassure the crypto community that it can provide a more stable framework for transactions and that it really is ‘bitcoin’... This lack of clarity has repeatedly called into question the authenticity of bitcoin cash, and until that is resolved the direction of price movement will always carry an air of uncertainty.”

The latest investigation comes two months after the US Securities and Exchange Commision (SEC) launched its own probe into firms raising funds through initial coin offerings (ICO) – a crowdfunding process that raises money by selling tokens of a cryptocurrency ahead of its launch.

More than $6 billion was raised through ICOs in 2017 but a lack of rules and understanding has made them a magnet for criminals. Recent research found that an estimated 81 per cent of all ICOs were scams, yet they continue to prove popular to investors.

Last month, the New York Attorney General also launched its own cryptocurrency investigation, choosing 13 major exchanges as its subject.

“With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money,” Attorney General Eric Schneiderman said at the time.

"Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms. Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve.”

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