Investors know bitcoin’s violent mood swings well. What they often don’t know is that unscrupulous traders, wielding purpose-built software, can be behind them. Manipulation in cryptocurrencies is a growing concern for regulators—and even for some proponents of the digital coins. The Securities and Exchange Commission cited that risk in August when rejecting several bitcoin-based exchange-traded funds. The office of New York Attorney General Barbara D. Underwood highlighted the issue last month in a report warning that crypto...
Purpose-built, abusive software designed to manipulate the market is running largely unchecked on crypto exchanges, prompting growing concerns from regulators and investors. While established markets such as the New York Stock Exchange have measures in place to identify and prevent unscrupulous trading, crypto exchanges are widely unregulated. Some traders say these practices are hampering cryptocurrencies’ reputation and adoption, with regulators warning that they undermine the market’s integrity. Yet others argue against regulation, and take the view that manipulation tools should be accessible to everyone, in order to level the playing field.