Crypto Pumps and Dumps Are Over, but Its Troubles Are Far from Finished
After Tether faced accusations of propping up Bitcoin prices in 2017, it’s becoming increasingly hard to pump amid the dump in the $209 billion cryptocurrency market. However, the potential market stabilization doesn’t mean cryptocurrencies’ troubles are over.
Decline in Cryptocurrency Market Cap a Result of Market Manipulation?
Tether, one of the most-traded digital assets in the world has been accused of manipulating the price of bitcoin. According to Bloomberg, at least half a billion dollars worth of Tether coins were created in August 2018 alone, which lead to Bitcoin’s value declining by a staggering 15 percent.
Tether also created a fresh batch of USDT tokens worth around $300 million back in March 2018, according to data from the Omni blockchain.
And while Tether has been known to regularly release substantial amounts of tokens, some critics have pointed out that its proximity to the crypto market price reversal could point to market manipulation.
A University of Texas study questions how much of bitcoin’s triumph in 2017 was a direct result of the secret practices of its significant stakeholders. John Griffin and co-author, graduate student Amin Shams concluded that “Tether is used to provide price support and manipulate cryptocurrency prices.”
Tether critics have also questioned Bitfinex, one of the world’s largest crypto exchanges. The company, which happens to share the same management team as Tether, continued to operate despite losing banking relationships in 2017. The U.S. Commodity Futures Trading Commission issued a subpoena to both firms in December, asking for proof that Tether is backed by a U.S. dollar reserve.
Concerns over Market Manipulation
The Securities and Exchange Commission rejecting proposals for bitcoin exchange-traded funds is one of the main problems the crypto community is facing today.
The SEC attitude towards crypto has steadily declined since the initial strike-down of the Winklevoss bitcoin ETF proposal in March 2017.
Another nine ETF proposals were rejected on Wednesday, August 23, Forbes reported, and the agency has failed to give any new reasoning for its decision.
“It was largely apparent going into this that few people really expected these proposals to go through anyway,” Mati Greenspan, a senior market analyst at eToro told Forbes. He also pointed out that crypto markets have been expecting this, and have factored the assumed rejections into the price of bitcoin.
The main explanation offered by the SEC is that bitcoin markets are overly un-policied and easy to manipulate and that exposing retail investors to the cryptocurrency is too risky.
James Angel, a finance professor at Georgetown University, said that given the history of fraud and manipulation in the bitcoin market, the rejections made perfect sense.
“Their rationale is that the exchanges have to show that the underlying market for bitcoin is not subject to fraud and manipulation, and the exchanges have not met their burden of proof,” he added.