The Department of Justice and CFTC regulators are converging on two types of illegal trading practices. The first method is “spoofing.” For context, spoofing is a form of market manipulation wherein traders enter a flurry of false orders. In doing so, the cryptocurrency traders deceive the ecosystem of market participants into buying or selling the underlying crypto asset (i.e., Bitcoin). The second illegal trading strategy is known as “wash trading.” Here, market traders rapidly buy and sell the underlying cryptocurrency asset in large volumes, to artificially increase market trading activity. The purpose of wash trading is to increase market confidence, luring potential buyers into the market. Unfortunately, both methods are unethical, illegal, and ultimately provide market participants with a false sense of security.
The cryptocurrency market capitalization is in decline since earlier this month, losing close to $150 million in valuation. In terms of impact since the criminal investigation, bitcoin drops 5% in less than two hours, closing at a low of $7,260.
Need For A Viable Self-Regulatory Solution?
Gemini Trust, the New York-based digital asset exchange led by the Winklevoss twins, has recently hired Nasdaq Inc. to conduct surveillance of cryptocurrency trading on their platform. Cameron and Tyler Winklevoss have called for the creation of a self-regulatory body made up by trading platforms within the industry.
