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A sharp rise in bitcoin prices has pushed the cryptocurrency above $30,000 (£24,118) for the first time since 10 June last year, just before the Celsius crypto lending company froze withdrawals in the run-up to its collapse.
Even given that recovery, the token is still well below its all-time high of $68,000 in November 2021, and far below where it was before the failure of the Terra stablecoin caused the “crypto winter”.
Nevertheless, bitcoin’s recent steady increase in value has sparked discussion of another cryptocurrency boom – and reignited fears of widespread manipulation in the market.
The collapse of Silicon Valley Bank last month and the broader contagion it has sparked across financial markets led some cryptocurrency fans to turn to bitcoin, the original and most valuable token in the sector, as a way of protecting against fears that the entire traditional “fiat” economy would crumble.
That attitude was typified by the US venture capitalist Balaji Srinivasan, who in March bet $1m that the price of a single bitcoin would top $1m by June this year. His claim was that the US dollar would shortly experience hyperinflation, causing the dollar value of a bitcoin to soar.
“This is the moment that the world redenominates on bitcoin as digital gold, returning to a model much like before the 20th century,” he tweeted, explaining the bet. “Everything will happen very fast once people check what I’m saying and see that the Federal Reserve has lied about how much money there is in the banks. All dollar holders get destroyed.”
Alex Adelman, the chief executive of the bitcoin rewards app Lolli, said Monday’s rally “did not have a clear catalyst”, but that it was “a bellwether of bitcoin’s newly bullish market conditions and strong investor confidence. Bitcoin’s ongoing strength suggests that bitcoin is emerging from so-called ‘crypto winter’ into a new phase of strength and renewed interest from retail and institutional investors.”
But the recovery, after bitcoin prices hovered at $28,000 for almost a month before leaping the final $2,000 in a day, has also led to concern about market manipulation.
A 2022 report published by the US National Bureau of Economic Research found that “wash trading”, the practice of selling cryptocurrencies between related parties to influence the reported price, averaged “over 70% of the reported volume” on 29 unregulated exchanges.
In June 2022, the US Securities and Exchange Commission (SEC) refused permission to launch a bitcoin-linked exchange traded fund, which would allow investors to buy exposure to the cryptocurrency on the public stock markets, after concluding that it was impossible to prevent fraud and manipulation in the market from affecting the price.
As well as wash trading, the SEC said the market could be influenced by individuals with a “dominant position” in bitcoin manipulating its pricing, through fraud and manipulation at trading platforms, and through manipulative activity involving stablecoins “including tether”.