The DOJ announced that they would be investigating cryptocurrency trading yesterday, specifically related to manipulation.
The official release from bloomberg can be seen here:
"Bitcoin", "manipulation", and "investigation" all mentioned in the same sentence?
On first thought, that sounds bad!
However, it may not be as bad as it sounds...
Here are some of my thoughts:
First, how exactly is the DOJ going to police something that trades on global markets?
Last time I checked they were a US based agency and these things are traded globally.
Perhaps they can police the local US based exchanges and make sure that nothing nefarious (at least in their eyes) is going on there, but what happens when the biggest exchanges are overseas and prices are being artificially run up or suppressed there?
In most cases prices gravitate to wherever the most volume is.
Which means, that if they run prices up on say one of the largest Asian exchanges, prices on US exchanges would likely soon follow.
How is the DOJ or the SEC going to police that?
Also, lets say there was some "manipulation" taking place, what rule exactly is being broken?
Bitcoin is not registered with the SEC, or with the CFTC, or any other regulatory body.
There are no rules and regulations in place to regulate the bitcoin market which means what "rules" would price manipulation technically be breaking?
How can you punish someone for breaking a rule that technically doesn't even exist for that market?
To me, it sounds like something along the lines of this is the end goal:
"The goal is to replace illegal manipulators with legal ones."
But now, it's legal!
Is news of regulation even bad in the first place?
All that being said, lets say that they do find a way to police US based markets in a way that prevents much of the undesired trading activities from taking place, perhaps with the help of coordinated efforts globally...
Is that really such a bad thing?
On the whole, many in the finance industry are saying that is one of, if not, the biggest reasons institutional money is not investing in the space currently.
They don't want to be investing in a space that is said to be gamed or rigged.
Which means, if regulators "clean up the space" that could remove one of the major hurdles for a whole host of new money to come flooding in.
All that being said, there may be some major growing pains as the industry gets "cleaned up" and becomes seen as more a legitimate asset class by institutional investors, which is what we are likely seeing right now.
To recap:
It's going to be very difficult to police a globally traded asset like bitcoin.
However, if they do succeed, it will likely open the floodgates to institutional investors.
There may be some growing pains in the process, which we are likely going through now.
On the whole, this news is likely a net positive.
Stay informed my friends.
Image Source:
https://www.ccn.com/dojs-bitcoin-price-manipulation-probe-a-good-thing-mike-novogratz/
Follow me: @jrcornel
Nice summation! A little regulation could go a long way in legitimizing BTC as an asset class. Steem On! 👍💰👍
I kinda like watching those BART charts lol Leave those whales alone lol
Great points @jcornel.
They aren't concerned about crypto being rigged, they are concerned that they aren't the ones rigging it! If they don't like market manipulation, there is plenty work here to do in the markets we have...but hedgies already benefit from manipulating those markets and have used a fraction of their profits to buy themselves the US Congress. So our oligarchs can sleep safe and sound knowing nothing will threaten them in the US securities market.
But that's not good enough. Now they want the crypto markets tipped and rigged in their favor as well. But, as you say, that's going to be harder when it is a global market, located in myriad countries and subject to other competing corrupt governments.
What a world we have were the little guy's best chance at a level playing field is competing corrupt governments...
Haha well said!
Did someone mention something about manipulation?? That would be so strange to hear about in financial markets ...
Seriously. Every market is manipulated. That is why they are after the illegal manipulators, looking to replace them with legal ones.
News scares people off but each big news article is going to allow crypto go mainstream
That is the hope.
This is important and I think necessary. Market manipulation it is happening, and it is not new, but used to be from crypto players into pumping crypto, not manipulation comes from outsiders, with bigger capitals and probably with a negative agenda fro crypto. Wall Street trading Bitcoin Futures is not something that actually benefits crypto, it is just a tool to make a already speculative market even more speculative, with the right tools for big financial enemies to short on whatever crypto means just attacking what we thought is our gold standard, the Bitcoin. The crypto market has evolve much beyond Bitcoin but still we all depend on it. We are at a fragile stage of market evolution. Yes, the crypto community is global, but the US based financial institutions are the ones that can short and make prices drops with "legal" tools. So it is important to address this kind of issues.
This article was definitely posted as a scare tactic. They are definitely having trouble regulating the markets due the technology being too complex. If they threaten any us exchanges, then they can take the same action as Binance and leave to another country.
I believe this would then hurt the government due to the lack of control and tax cuts they could be receiving from the exchanges.
What’s crazy is this I was telling people about this months ago. I happen to have caught wind of the 440k bitcoin purchase they made at $5600 a unit.
They literally have the power to control the market as they see fit. If you thought you seen manipulation before. Wait until you see what comes next.
What comes next?
Awesome bro....excellent post
Great analysis bro, I completely agree!
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They will try everything to either shut it down or take "their" piece.
So far everyone wants their slice. Though shutting it down has been thrown on the table a few times too...
It's another foot in the door to investigate things like the tether/bitfinex relationship and prices there. This is why exchanges don't want US customers.
Correct, then they fall under the rules of the US regulators...
Eventually manipulating the top crypto currency’s will be impossible due to size of the market.
GOO:D
All the major players just fighting for control and everyone else is along for the ride
Exactly my sentiment. Very little information is available on the extent of the investigation, mainly what exchanges are they looking at. If they are only looking at US exchanges, then the impact may be limited. Second can they achieve anything? Traditional are also allegedly manipulated to a large degree, specially ones that are relatively less liquid or are OTC. So i wonder how much can they achieve.
The good thing is that this may cause other legal authorities in other jurisdictions to also investigate and may be it reduces the extent of manipulation. I think exchanges based in tax havens should be targetted the most since those jurisdictions are incentivised little to investigate as their primary benefit is presence of an exchange on their land to create employment etc and lead to indirect tax revenue.
Its a good thing nonetheless. Lets wait and see.