Bitcoin prices fell again Thursday, slumping to a six-week low, following reports that the Department of Justice (DoJ) is investigating price manipulation by some traders of digital currencies.
“Early Thursday, Bloomberg reported that the Justice Department is investigating whether traders are using illegal market moves to trick others into buying or selling cryptocurrencies,” reports CNBC.
Bitcoin, the largest cryptocurrency, has been drubbed in May. With Thursday’s decline, the digital asset is barely clinging to the $7,500 level and its market capitalization has dipped below $130 billion.
Bitcoin does not lack for supporters as there have been plenty of bullish calls on the cryptocurrency in recent weeks. Some crypto market observers have opined bitcoin could reach new highs this year, but those are just projections. In financial markets, price matters and bitcoin’s price has rapidly eroded since the start of May.
More on the Bitcoin Investigation
“The investigation is focused on illegal practices that can influence prices — such as spoofing, or flooding the market with fake orders to trick other traders into buying or selling, said the people, who asked not to be identified because the review is private. Federal prosecutors are working with the Commodity Futures Trading Commission, a financial regulator that oversees derivatives tied to Bitcoin, the people said,” reports Bloomberg.
Bitcoin and other digital currencies have faced an array of regulatory challenges in the U.S. and abroad. Earlier this month, South Korean prosecutors raided the offices of Upbit, a major digital currency exchange operator. Other countries have moved to limit or outright ban transactions in digital currencies.
“Authorities worry that virtual currencies are susceptible to fraud for multiple reasons: skepticism that all exchanges are actively pursuing cheaters, wild price swings that could make it easy to push valuations around and a lack of regulations like the ones that govern stocks and other assets,” according to Bloomberg.
Previously, many crypto market observers have argued that increased regulation of digital assets is a positive factor and one that would facilitate more adoption and use of the decentralized asset class.
For more information on the cryptocurrency market, visit our Bitcoin category.