Bit­coin plung­ing as ques­tions raised about ma­nip­u­la­tion

Houston Chronicle - - WEATHER - By Todd White

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.

Kin Che­ung / As­so­ci­ated Press

This bit­coin ATM is in Hong Kong. Bit­coin has fallen sharply in re­cent days.

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