Bitcoin has suffered another blow this week, plunging an additional 10 percent Tuesday to its lowest level in over a year amid a report that the Department of Justice is investigating whether its epic rally last year was fueled, in part, by manipulation.
While federal prosecutors opened a criminal probe into cryptocurrencies months ago, according to Bloomberg, suspicions are looming on whether Tether — another digital token — and the crypto exchange Bitfinex — may have been used by traders to illegally move up prices.
Bloomberg cited sources that have alleged that these Tethers could have been used to buy bitcoin at crucial moments when the value of “more ubiquitous digital token dips.” Both Bitfinex and Tether share the same management team and are Hong Kong-based.
Neither company immediately responded to FOX Business’ request for comment. But in the past, J.L. van der Velde, the chief executive officer of Tether Ltd. and Bitfinex, has rejected such claims.
What’s more, last January both companies did receive subpoenas from the U.S. Commodity Futures Trading Commission as questions mounted over their practices.
One of the focuses of the DOJ’s investigation is determining whether the dramatic rise in prices for digital tokens in recent years was based on actual demand or created by market tricks, including fake orders to deceive other traders into buying or selling, Bloomberg says.
Last December, bitcoin shot to fame when it surged to a record high of about $20,000. As of Tuesday morning, the price had fallen to around $4,500, according to Coindesk.com.
But despite bitcoin’s plunge, some investors are still optimistic about the cryptocurrency’s future.
Billionaire venture capitalist Tim Draper told FOX Business in May that he believes bitcoin is going to hit $250,000 in 2022.