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Bitcoin has experienced a volatile history, and particularly in the last year. Bitcoin reached new heights in 2017, before falling rapidly in a matter of hours, and continued falling. Fast forward to 2018, and just recently hit its new low for 2018. Cryptocurrency has always been considered volatile, it can increase in value and decrease in value significantly in a matter of hours. For this reason, many potential investors have been stung and put off investing in Bitcoin or cryptocurrency in general.
But what if something else was at play here? What if Bitcoin’s dramatic fall in 2017 wasn’t due to natural market forces. This is what the US Justice Department is investigating.
The US Justice Department has launched an investigation into whether last year’s volatility was due to manipulation, with traders driving Bitcoin up with the controversial digital token, the stablecoin Tether. The suspicion is that the cryptocurrency exchange, Bitfinex might have used Tether to illegally alter prices. This assertion comes from three people close to the matter and hasn’t been confirmed by officials according to Bloomberg.
Adding some weight to the claim is the fact that Bitfinex and Tether have the same management team, a Hong-Kong based company that created Tether. The assertion by traders is that Tether coins were being used to by Bitcoin at well timed moments when the value of other tokens dipped. The CEO of Tether, JL van der Velde denounces these claims.
It will take some time for the US Justice Department to conduct their investigations, and it will subsequently be a while before we hear the official results, but the notion is intriguing. Tether is often used by traders to bet on other cryptocurrencies and their moves within the market because it is considered more stable than other coins (although it’s not always the case).
If the claims are true, it may be both worrying and somewhat encouraging. Worrying in the sense that criminals are targeting cryptocurrency in order to disrupt the market and potentially damage the reputation of crypto in general. It can also be considered encouraging in the sense that perhaps cryptocurrency isn’t as volatile as the public has been lead to believe. Cryptocurrency is still in its infancy, and some teething problems are to be expected on its road to the mainstream.
Governments around the world are trying to figure out where crypto sits within the existing world, and how to protect it as it grows. Adding to this, the market and the public are trying to figure out where crypto fits in, and as a consequence of this, some people are testing its limits.