Tether investigated by US prosecutors over manipulating Bitcoin
A cryptocurrency designed to mimic the price of the dollar is under investigation by US prosecutors for manipulating the price of Bitcoin during last year's price bubble, according to a report.
As the tech stock sell-off continues to hit global markets, the price of Bitcoin and other cryptocurrencies suffered huge one-day falls.
Bitcoin fell 14pc on Monday and a further 8pc on Tuesday, dipping to around $4,700 (£3,660), according to data from Coinmarketcap.com, on news the US Department of Justice launched a criminal probe into whether a little-known cryptocurrency was used to manipulate the Bitcoin market.
Federal prosecutors are investigating Tether, a cryptocurrency which claims to be pegged one-to-one with the US dollar.
Bitcoin is an electronic currency that only exists online, while hundreds of other cryptocurrencies that have sprung up to ride the wave of interest in digital tokens, including Tether.
The cryptocurrency, a so-called “stablecoin”, has been used by Bitcoin exchanges as a way to hold liquidity for cryptocurrency trades, as it is cheaper and quicker than holding large volumes of cash.
However, federal prosecutors are now investigating Tether and Bitfinix, a cryptocurrency exchange which shares the same management team, over whether it was used to inflate the price of Bitcoin, Bloomberg reports.
Academics have alleged that at crucial moments Tether coins are used to buy up Bitcoin. Tether has even claimed that it holds $1 for every Tether it creates, leading to a subpoena from the US Commodities Futures Trading Commission seeking proof.
Tether and Bitfinex have previously denied any wrongdoing.
The falls in Bitcoin are just the latest sign of a global tech slide as regulatory enforcement rises on all sides.
Etoro analyst Mati Greenspan said cryptocurrencies enjoyed the bull market of 2017 even more than tech stocks, leading to such large falls as the bubble bursts. “We are seeing the last of the panicked retail sellers” getting out of Bitcoin, Mr Greenspan said.
The price of Bitcoin and other cryptocurrencies have plummeted this year from highs of nearly $20,000 in December 2017. The whole cryptocurrency market has dropped around 85pc from a high of around $327bn on December 17 to around $81bn today.
