Some global institutions, like the Bank for International Settlements, have dismissed Bitcoin as nothing more than a Ponzi scheme founded only on the ability to sell at a higher price to ‘a bigger fool’.

Regulators have also drawn attention to the highly concentrated nature of Bitcoin ownership. There are problems with statistics concerning the degree of concentration, but to give an indicative number, top 100 wallets account for a fifth of the circulating coin supply. It should be noted, however, that some of those may be void, and some a shared wallets, belonging to exchanges.

Nevertheless, it seems to be a generally accepted truth that there is an unusually high degree of concentration in the market. And that creates considerable scope for so-called Bitcoin ‘whales’ to manipulate the price to the detriment of naive ‘mom and pop’ investors. The relative immaturity of the asset class and the fairly limited depth of liquidity in many of its markets also leaves them vulnerable to those seeking to move prices unfairly.

This has led to increasingly loud calls for an end to sharp practices in this emerging asset class. Bloomberg reported in May of this year that the US Department of Justice, in conjunction with the Commodity and Futures Trading Commission had launched a probe into price manipulation in the cryptocurrency market.

According to those close to the investigation, it will focus on activities like ‘spoofing’, which involves placing phony orders to influence other market participants, and ‘wash trading’, or artificially boosting volumes by transacting between proprietary accounts of a single person or persons.

Reportedly the probe is restricted to Bitcoin and Ethereum. This is perhaps, unsurprising, given that these are the two largest currencies by market capitalisation and are likely to be the first choice for Main Street investors.

But we at BitBay suspect that the probe will find it difficult to pinpoint such activity in these two big markets. Given the large size and fragmentation of the various venues on which Bitcoin and Ethereum are traded, it would be very difficult for any single investor or group to materially influence the price artificially.

That said, these practices are undoubtedly rife among some of the smaller altcoins. Anyone familiar with this segment of the cryptocurrency market will have observed outsized buy and sell walls, used by big players to get orders on the other side of the book filled at better prices.

And ‘pump and dump’ schemes, whereby groups seek to inflate the price of a coin through coordinated buying and rumour spreading, in order to sell into increased buying are commonplace in the smaller, more easily manipulated cryptos. One only has to search for ‘signals’ or ‘pump group’ on Twitter and dozens will present themselves.