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News broke today viaBloombergthat the United States Department of Justice is opening a criminal investigation into price manipulation of bitcoin on major trading platforms. The investigation centers around a few illegal trading practices - namely order spoofing and wash trading.

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Back to today's news; what is the U.S. government so concerned about? The first scheme that regulators are placing a keen eye on is order-spoofing. This involves flooding the market with fake orders to trick other traders into buying or selling because of perceived demand that doesn't actually exist.A trader submits a number of orders and then cancels them once BTC (or any other coin) moves in the desired direction.

Wash trades are when a cheating trader executes trades with himself to give a false impression of market demand that lures other to dive in too. Both schemes are illegal according to SEC regulators, it's just that there has never been a formal investigation when it comes to Bitcoin before now. Bloomberg's sources indicated that its actually Bitcoin and Ethereum derivatives that are under scrutiny, not spot trades.

Bitcoin extended its Thursday declines after the story broke earlier today. Prices briefly dippedto below $7,300 at 9:15 am CST before rallying in the afternoon to over $7,500. BTC is down 20 percent since a May 5 peak of $9,895.