Bitcoin prices tumbled to their lowest levels in more than six weeks on Thursday after the U.S. Department of Justice launched a criminal investigation into potential price manipulation in the bitcoin market.
Not only does the probe threaten the legitimacy of cryptocurrency prices, it also opens the door for stricter regulations on bitcoin trading down the road.
[See: 7 of the Best Stocks to Buy for 2018.]
According to Bloomberg, sources familiar with the matter say the Justice Department is particularly interested in the practice of spoofing in the bitcoin market. Spoofing involves traders flooding the market with fake orders in an effort to artificially inflate or deflate prices. The report said the Commodity Futures Trading Commission is cooperating with federal prosecutors as part of the probe.
The investigation is the latest government intervention in the cryptocurrency market, which investors have long celebrated for its decentralized and unregulated status. Cryptocurrency trading hubs China and South Korea have also recently implemented new regulations on cryptocurrency trading in an effort to cut down on fraud and money laundering. Earlier this year, a study by the University of Sydney and the University of Technology Sydney found that 25 percent of all bitcoin users and 44 percent of all bitcoin transactions were associated with criminal activity.
Bitcoin prices tumbled 4.8 percent on Thursday, briefly dropping below $7,500 and hitting their lowest levels in six weeks. The value of bitcoin has dropped by 44.4 percent so far in 2018, but some bitcoin bulls are sticking to their guns when it comes to the battered cryptocurrency.
“I think institutional investors have gained a lot of interest, and they haven’t really come into crypto yet because there is still some regulatory uncertainty,” Fundstrat analyst Thomas Lee says. “But that sort of ultimate allocation into crypto as an asset class is going to be a powerful reason why bitcoin rallies.”
[Read: What’s the Best Bitcoin Wallet?]
At the same time, some bitcoin bears, such as Vanguard Group economist Joe Davis, see absolutely no value in the cryptocurrency whatsoever.
“I’m enthusiastic about the blockchain technology that makes bitcoin possible,” Davis wrote earlier this week. “As for bitcoin the currency? I see a decent probability that its price goes to zero.”
Fundstrat has a $25,000 price target for bitcoin.
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Bitcoin Plunges on Price Manipulation Probe originally appeared on usnews.com
