The exchanges are setting prices for the CME Bitcoin futures, and invited extra scrutiny on suspicions of unfair trading.
A new investigation against four exchanges – Bitstamp, Kraken, iBit, and Coinbase, has caused jitters on the markets, sending Bitcoin reeling below $7,000 for a spell. BTC fell by more than 7% overnight, to $6,797.57, in another flash crash just as traders were expecting a rebound.
While the Commodities Futures Trading Commission may have set out a routine investigation, price manipulation is a contentious issue for the crypto market. Fully unregulated, those markets are seeing extremely high price fluctuations, as well as what would be considered illegal trading on traditional markets. Spoofing and wash trading, as well as outright dumping, plus the influence of whales, is all known to crypto traders. But with the CME futures, those practices are spilling into the world of traditional finance, inviting the increased scrutiny.
The CFTC subpoenaed the exchanges for trading data, where dubious activity could be seen. What is curious is that Bitstamp and Kraken are fully compliant with European regulations, at least when it comes to handling funds and their relationship with banks. Coinbase and ItBit are legalized in the USA, with ItBit one of the few exchanges having completed compliance in New York. All of the above exchanges have extensive KYC procedures. But when it comes to trading, the rules may be more lax.
Bitcoin Pressured by Bad News
The alternative bad news were the hacking of the relatively small Coinrail exchange, which may add to the negative mood. But even John McAfee believes the chief reason is the investigation, potentially delaying the bull run:
Over the weekend, Bitcoin’s network also saw discussion that could frighten anyone -the question of changing the proof-of-work has been raised again. If done, this would disable the ASIC for Bitcoin, possibly pointing them at other coins. But questions were raised, if BTC could change so fast, what is the thing that makes it immutable and valuable.
The idea for a radical change for Bitcoin comes after criticism that Bitmain could control a much higher share of the hashrate, with the ability to run miners to their full potential, while selling ASICs with deliberate limitations. With 51% attacks becoming more frequent, the state of Bitcoin’s network has invited extra scrutiny, as an attack could undermine the most credible crypto coin, and its image of being immutable.