U.S. Launches Criminal Probe into Bitcoin Price Manipulation

For anyone who hasn&#x27;t been following, the prevailing theory is that the largest Cryptocoin exchange &quot;Bitfinex&quot; also runs an altcoin called &quot;Teather&quot; which was marketed as being backed 1:1 by USD. So far they&#x27;ve created 2.8 BILLION USDT and coincidently the times they create millions of these happens to be in the middle of extreme market crashes.<p>See this chart: <a href="https:&#x2F;&#x2F;i.imgur.com&#x2F;Uo07d1d.jpg" rel="nofollow">https:&#x2F;&#x2F;i.imgur.com&#x2F;Uo07d1d.jpg</a><p>More details here:<p><a href="https:&#x2F;&#x2F;medium.com&#x2F;cryptomedication&#x2F;uncovering-the-real-cartel-in-bitcoin-65b56a7a00a2" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;cryptomedication&#x2F;uncovering-the-real-cart...</a><p><a href="https:&#x2F;&#x2F;medium.com&#x2F;@bitfinexed&#x2F;latest" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;@bitfinexed&#x2F;latest</a><p><a href="https:&#x2F;&#x2F;medium.com&#x2F;@mattcollburner&#x2F;bitmex-insiders-caught-in-a-web-of-lies-6d9b90baa693" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;@mattcollburner&#x2F;bitmex-insiders-caught-in...</a>

&gt;&quot;The Justice Department has opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies, dramatically ratcheting up U.S. scrutiny of red-hot markets that critics say are rife with misconduct, <i>according to four people familiar with the matter.</i> [...] Federal prosecutors are working with the Commodity Futures Trading Commission, a financial regulator that oversees derivatives tied to Bitcoin, <i>the people</i> said.&quot;<p>Why isn&#x27;t there a better source for this than &quot;four people&quot;? I didn&#x27;t see anything on the DOJ site. Perhaps they are talking about this: <a href="https:&#x2F;&#x2F;www.cftc.gov&#x2F;PressRoom&#x2F;PressReleases&#x2F;7731-18" rel="nofollow">https:&#x2F;&#x2F;www.cftc.gov&#x2F;PressRoom&#x2F;PressReleases&#x2F;7731-18</a><p>However, that doesn&#x27;t mention the DOJ so maybe not. Is it normal for the DOJ to anonymously report its activities to journalists like this?

This going to be interesting. They will ask all the US based exchanges - Coinbase, Circle etc for their trade and order data for analysis. Coinbase has already fought and lost a case when it came to sharing the data for tax purposes. And one of the touted features of cryptocurrency has always been anonymity.

The mechanics of manipulating price are just too easy not to do it. The wash trading is clearly so bad on many exchanges that I bet there are agreements with the miners to recuperate losses to trading fees. It is in all parties interest to prop the price up this way so why wouldn&#x27;t they do it. So many sketchy things get ignored because they prop the price up.<p>The USDT situation will get interesting eventually. Somebody made a spreadsheet of non-fiat volume of cryptocurrencies.<p><a href="https:&#x2F;&#x2F;docs.google.com&#x2F;spreadsheets&#x2F;d&#x2F;1pIrTYpJZrGbeI9QTIWGwYdRmz9FFY_KRpXOcZbjwYu8&#x2F;edit#gid=0" rel="nofollow">https:&#x2F;&#x2F;docs.google.com&#x2F;spreadsheets&#x2F;d&#x2F;1pIrTYpJZrGbeI9QTIWGw...</a><p>Basically the fate of many shitcoins are tied together. My thought is that when USDT finally gets revealed as totally fraudulent the whole crypto house of cards crashes.

Funny how the cryptocurrency values were crashing in advance of this news...

Here <a href="https:&#x2F;&#x2F;drive.google.com&#x2F;file&#x2F;d&#x2F;0Bzu6iGPza2s9amFURTFzenRWVGgxbzNWMUVsQ2pTLTUzc1Nv&#x2F;view?usp=sharing" rel="nofollow">https:&#x2F;&#x2F;drive.google.com&#x2F;file&#x2F;d&#x2F;0Bzu6iGPza2s9amFURTFzenRWVGg...</a> are some slides from a talk I gave last year at Strata about what spoofing and layering is, and how a trading firm or exchange might detect or prevent them.

Despite all predictions to the contrary, the US government is doing quite a lot to legitimize Bitcoin.

What grates my nerves isn&#x27;t primarily Bitfinex&#x2F;Tether, it&#x27;s the other exchanges. Why did they accept Tether? Of all the &#x27;altcoins&#x27;, one backed by an asset like cash is the easiest to verify (or be skeptical of if verification requests are dismissed or ignored). When I signed onto Bittrex, USDT was one of the prominent trading pairs. It was a useful trading pair, because instead of seeing numbers like &quot;.000000314121 : 1 BTC&quot;, you&#x27;d get a dollar figure you could mentally parse. Of course, the damned software could have done that automatically with a currency of the user&#x27;s choice. That&#x27;s kind of a tangent, though. Why weren&#x27;t the other exchanges more critical of Tether and kept it after months of controversy and skepticism?

Some context from a non-expert.<p>From what I understand, things like spoofing in financial markets (where you submit orders which you don&#x27;t plan to have filled for the purpose that the market sees &quot;interest&quot; in a certain direction and in hope that moves the market), are regulated but still a grey area. The reason for this is that it&#x27;s an activity that involves intent. Placing certain orders is perfectly ok if you&#x27;re hoping that they get filled and you take a position, but placing the same orders could be spoofing if your goal is to cancel them once the market starts moving as a consequence.

What is the track on Winklevoss&#x27; proposal to a self regulation org for crypto currency exchanges?

Man I wish I could understand only 5% of the economics behind this. It seems so interesting.

Why? I like the wild west landscape that is Bitcoin! If anything it&#x27;s going to turn it to be an interesting experiment in macroeconomics!

I was surprised to read that the US regulators feel they have jurisdiction to regulate bitcoin transactions. How can this be - is it just because there are BTC futures now?

This is so strange to me because I was unaware bitcoin was a real financial instrument any country would care about. I&#x27;ve had three financial advisors, from Edward Jones, Stifel Nicolas and a little guy around the corner, all tell me to stay away from bitcoins. One even told me that, in two years, bitcoin would be dead.<p>So this is all strange to me.

Markets are constantly manipulated and what we consider acceptable or not seems at times quite arbitrary. For instance quantitative easing is a practice we engage in whose entire purpose is to artificially inflate the value of markets to help spur &#x27;growth.&#x27;<p>Is the problem that people may be trying to manipulate the price of decentralized commodity or that people are investing in a decentralized commodity without realizing that there may be people trying to manipulate it? I think there is a place for &#x27;hard regulations&#x27; but I think there is also a time when the focus should be more on information than trying to enforce national rules on a global scale. Even more so when those rules are likely to fall subject to all the failings of political systems including graft, corruption, and the like.