Bitcoin’s price fell by more than 3% on Thursday morning following the news of a U.S. Justice Department probe into price manipulation in cryptocurrency markets.
The investigation was revealed in a Bloomberg piece that said federal prosecutors were working with the Commodity Futures Trading Commission on the private review.
The investigation is reportedly focused on the possibility that some may be employing tactics such as flooding markets with fake orders, in order to manipulate prices.
It is certainly the case that cryptocurrencies such as Bitcoin are frequently subject to wild swings that are not easily explained, so this might be why. It may also be true that not all exchanges implement strict controls to spot and stop this sort of cheating.
Bitcoin, currently at a price of just $7,380 (down 6.4% in the last 24 hours’ trading), almost hit $20,000 late last year. The subsequent tumbles in its price were largely precipitated by crackdowns on exchanges.
China took the most drastic steps, first by banning initial coin offerings—a form of fund-raising involving the issuance of cryptocurrency tokens—and then by banning exchanges outright. New exchange regulations in South Korea and Japan also caused drops in Bitcoin’s price.
The New York attorney general last month launched an initial probe into the measures that exchanges are taking to protect customers and provide transparency in their operations.