If Market Manipulation Is Behind The Crypto Price Crash, Is Now The Time To Buy?

The recent crypto price crash has been extreme, even by the sector’s own high-octane standards. On a month-to-date basis, Bitcoin is currently down an eye-watering 33%. Explanations for the selloff range from those based on fundamental analysis to worrying allegations of insider trading and market manipulation.

Fingers are being pointed in all directions. One outcome is that a group of investors are interpreting the current price crash as a managed shake-down – one designed to force prices down to levels where big players can put on sizeable positions at rock-bottom prices. If this is the case, then should smaller players also be looking to put on the trade of a lifetime?

Bitcoin (BTC) – Daily Price Chart –2019 – June 2022

 Source: IG

SEC Clamps Down On Crypto Insider Trading

Blockchain technology allows crypto traders to operate with complete anonymity. Whether you see this as proof that it is the technology of the future, or a murky world open to exploitation depends on your view of the crypto revolution. The SEC falls firmly in the second camp and has recently started a campaign aiming to clamp down on insider dealing, with some of the biggest specialist crypto exchanges being firmly in their sights.

According to Fox News, the regulator has sent a letter to an unnamed major crypto platform that requests information about how the company protects users from insider trading. The view being taken is that the investigation covers a number of other high-profile exchanges as well.

It’s currently unclear whether the wide-ranging enquiry is being led by the SEC’s enforcement division or the Division of Examinations. If it’s the former, then the stakes are being raised and would suggest the SEC is increasingly concerned about potentially serious breaches of the regulatory code.

The SEC has also recently announced it has taken on 20 new staff at its unit, which is responsible for protecting investors in crypto markets and from cyber-related threats. The almost doubling of the workforce gives an indication of how serious the agency is taking the threat. If the current price slump is down to market manipulation and those with inside information driving down prices, then the SEC could soon have enough information to work with.

Insider Trading and Crypto Prices

For investors wondering if this is a dip to buy, part of the question is whether removing the Wild-West element of the industry would result in it losing its appeal. The tech-minded ‘alternative’ investors who kicked off the crypto trend cherish the rebellious nature of blockchain protocols. On the other hand, this could be the last price crash before the industry becomes more regulated and more mainstream and possibly achieves its aim of becoming the global currency of the future.

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About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

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