In brief: It’s not been a good week for cryptocurrencies, especially Bitcoin. The popular coin fell 25 percent to $4051, a new low for this year, and US regulators are investigating whether the near $20,000 peak it reached in 2017 was the result of market manipulation.
Bitcoin had held steady above the $6000 mark for months before last week, but this changed when it dropped under $5600 on Wednesday (14 November)—a decline that was partly blamed on Bitcoin Cash’s hard fork and the uncertainty surrounding the move.
Yesterday saw Bitcoin fall even lower, just managing to avoid hitting $4000. The decline has seen the value of other cryptocurrencies plummet, but that’s not the only bad news.
According to a Bloomberg report, the US Justice Department is investigating whether Bitcoin’s famous surge last year, in which it came close to reaching $20,000, was the result of traders using Tether to drive up its price. Tether, created by crypto exchange Bitfinix, is a token that’s directly linked to the US dollar. Each one is worth $1 and is (supposedly) backed by physical dollar holdings.
Prosecutors began a criminal probe into cryptocurrencies months ago, but have only recently started to focus on the Bitcoin/Tether/Bitfinix link. Back in June, a paper published by University of Texas professor John Griffin, who is famed for identifying fraud in financial markets, suggested that Bitfinix may have used Tether to buy up Bitcoin and increase demand, which in turn boosted the price.
The Commodity Futures Trading Commission (CFTC) subpoenaed Tether and Bitfinex—the companies are run by the same management and share executives—in December, partly because the CFTC wanted them to prove their claims that Tether was tied to the dollar.
Bitcoin has rallied slightly but is still down at $4,505. Tether, which often falls below the price of the dollar that it’s supposedly tied to, is at 98 cents.