Bitcoin plunging as questions raised about manipulation
Bitcoin extended its losses Wednesday, bringing its four-session slide to as much as 20 percent, as questions mount about whether the world’s biggest cryptocurrency was manipulated during last year’s record price surge.
After rallying more than 1,400 percent in 2017 amid an investor frenzy for digital assets, bitcoin was down almost 70 percent to around $6,238 Wednesday afternoon, from its record high of $19,511 set in December. It traded at a few cents after being launched in 2009.
“Things have changed for bitcoin and the crypto space,” said Craig Erlam, senior market analyst at online trading firm Oanda Corp. in London. “There doesn’t seem to be as much hype, or positive news. Every time we get a negative news story now — after a period of consolidation — we don’t see bullish sentiment come in to support it. It’s almost as if people are waiting to sell it.”
The virtual currency has struggled to reverse a sell-off that coincides with negative news, most recently a study of possible price manipulation using the Tether coiNews reported in May that the Justice Department opened up a criminal probe into illegal trading practices that can manipulate the price of bitcoin and other cryptocurrencies.
Tether, one of the mosttraded cryptocurrencies, shows a pattern of being spent on bitcoin at pivotal moments, helping to drive the world’s first digital asset to a record price in December, according to research by a University of Texas professor known for flagging suspicious activity in the VIX benchmark. The paper by John Griffin, a finance professor at UT, and Amin Shams, a graduate student, is likely to stoke a debate about how much of bitcoin’s gain last year was caused by the covert actions of a few big players, rather than real demand from investors.
Questions about Tether and Bitfinex have dogged the cryptocurrency world since last year when Bitfinex lost banking relationships yet continued to operate. The U.S. Commodity Futures Trading Commission subpoenaed both firms in December, seeking proof that Tether is backed by a reserve of U.S. dollars, as it claims. Tether and Bitfinex haven’t been accused of wrongdoing.
Many of bitcoin’s closest peers also tumbled. Ethereum, the No. 2 coin by market value, and No. 3 Ripple fell about 20 percent this week.
This bitcoin ATM is in Hong Kong. Bitcoin has fallen sharply in recent days.