Bitcoin dipped below $4,500. Just when everyone thought that there was stability in Bitcoin as it was swaying around $6,200 to $6,500 for the past months, it slumped once again to its new low for the year. Since January, the crypto market has lost around $700 billion already.
In 2017, Bitcoin started only at around $1,000 only to drive all the way to near $20,000 by mid-December. By 2018, regulatory changes may have caused a bearish market for cryptocurrencies. And it is still continuing today. In fact, last Friday, the US Securities and Exchange Commission penalized two crypto companies for their ICOs. According to the agency, both were selling unregistered securities.
And also, on Tuesday, the US Justice Department is investigating the participation of Tether in the possibility of manipulating the price of Bitcoin. Recently, federal officials are narrowing their target on Tether and the cryptocurrency exchange Bitfinex.
Bitfinex and Tether
For starters, both Bitfinex and Tether both has the same management. Whenever there are new coins that were released in the market, it is going to be released mostly on Bitfinex. According to crypto experts, Tethers were used in order to buy Bitcoin whenever the price dips. However, JL van der Velde who works as the chief executive officer of Tether and the cryptocurrency has already denied these accusations.
The critics including the researchers at the University of Texas believe that Tether operates a fractional reserve bank. What it does is pumps unbacked tethers into circulation in order to stabilize the price of Bitcoin and then sell Bitcoin in order to correct its reserves. The company denied these allegations and a research that came from the University of Queensland Business School mentioned that Tether grants really has no impact whatsoever on Bitcoin’s price.
The Justice Department is now looking to increase the scrutiny if there really is something fishy about Tether and Bitfinex. Last year, the US Commodity Futures Trading Commission sent subpoenas towards Tether and Bitfinex. And now, both the Justice Department and the agency are working together to examine what CFTC discovered.
Suspected Illegal Behavior?
Now, there really is no clear reason why the government all of a sudden gained interest looking closely at Bitfinex and Tether. Whether or not there is suspected illegal behavior or not, it is too early to tell. Also, neither the Justice Department nor the CFTC filed any complaint against anyone. The spokeswomen for both the Justice Department and the CFTC didn’t offer any additional comment after this.
Bitcoin started 2017 at around $1,000. By mid-December, it was able to hit $20,000. Now, many believe that it was Tether that may have influenced this. And also, the reason behind the rejection of the Bitcoin ETF is price manipulation. The US Securities and Exchange Commission thought that the market is prone to such a problem.
To what extent is the Justice Department going to look closely at Bitfinex and Tether? Will they be charging people involved in case there really is price manipulation that happened? And also, how does this impact the industry now that Bitcoin is down?