Bitcoin Price Plummets Amid Reports of Regulatory Scrutiny and Market Manipulation

Bitcoin’s price has decreased 60% since reaching its record high last year.  This can be attributed to at least two factors: regulatory scrutiny and market manipulation.

Regulatory Scrutiny: This past August, the Securities and Exchange Commission (the “SEC”) rejected nine applications for cryptocurrency exchange traded funds.  These funds, which are baskets of cryptocurrencies bundled together, are seen as critical to mainstreaming cryptocurrency because they decrease investment risk and increase market accessibility.  The SEC’s decision is indicative of a larger trend of government action against cryptocurrencies.  For example, a federal court in the Eastern District of New York recently upheld a criminal securities fraud indictment against the promoter of the initial coin offerings of REecoin and Diamond.

Market Manipulation: Abusive software bots are also depressing the price of cryptocurrencies because they degrade investor confidence.  The New York Attorney General’s Office recently released a report that warned about these practices.  This report found that, “virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading.” It went on to explain that, “few platforms seriously restrict, or even monitor, the operation of ‘bots’ or automated algorithmic trading on their venue.”  This allows various pump and dump schemes, whereby “traders talk up the price of a cryptocurrency before dumping it for a profit”, to flourish.

Attorneys at Faruqi and Faruqi will continue to monitor this space to ensure that investors are protected.

About Faruqi & Faruqi, LLP

Faruqi & Faruqi focuses on complex civil litigation, including securities, shareholder derivative actions, merger litigation, antitrust, employment law, wage and hour, and consumer class actions.  The firm is headquartered in New York, and maintains offices in Delaware, Pennsylvania, California, and Georgia.

Since its founding in 1995, Faruqi & Faruqi has served as lead or co-lead counsel in numerous high-profile cases which ultimately provided significant recoveries to investors, consumers and employees.

To contact the author of this blog or the offices of Faruqi & Faruqi, please call us at (877) 476-7797.

About Dillon Hagius

Dillon Hagius’s practice is focused on securities litigation.  Dillon is an associate in the firm’s New York office.

Posted by Dillon Hagius

Associate at Faruqi & Faruqi, LLP
New York Office
Tel: (212) 983-9330
Fax: (212) 983-9331

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