DOJ’s Bitcoin Price Manipulation Probe a ‘Good Thing’: Mike Novogratz
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Billionaire investor and former hedge fund manager Mike Novogratz said that he is optimistic that the US Department of Justice’s (DOJ) recently-launched probe into allegations of bitcoin price manipulation will contribute to the long-term health of the cryptocurrency market.
Speaking in an interview with , Novogratz — the founder of $250 million cryptocurrency merchant bank — said that this increased oversight will help weed out bad actors from the nascent ecosystem.
“Weeding out the bad actors is a good thing, not a bad thing for the health of the market,” Novogratz said. “Plenty of exchanges have these inflated volume numbers to create some sense of excitement around coins.”
As CCN , the DOJ is scrutinizing whether cryptocurrency traders and other market actors have engaged in illegal activities to manipulate the bitcoin price, as well as the value of other prominent cryptocurrencies.
Novogratz’s optimistic comments on the probe are not unique among Wall Street’s cryptocurrency bulls.
Cameron Winklevoss, who co-founded cryptocurrency exchange Gemini, told the publication that the company welcomes “any inquiry that serves to foster rules-based marketplaces and deter bad actors.” Gemini, incidentally, recently with Nasdaq to use the stock exchange operator’s surveillance technology to flag unusual trading patterns in real time.
Similarly, Tom Lee — founder of Fundstrat Global Advisors — said that the investigation was “really welcome news” because it will bring “adult supervision” to the cryptocurrency markets. Fundstrat has that the bitcoin price will reach $25,000 before the end of the year, an outlook it has not wavered from despite the recent downturn.
The bitcoin price traded sideways in the 24 hours before this article was written, despite significant intraday volatility that caused the flagship cryptocurrency to plunge from $7,738 to $7,331 in a span of just four hours. bitcoin has since stabilized at a present value of $7,554 on Bitfinex.
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Blockchain technologies like the one that underpins bitcoin are gaining wide acceptance across industry sectors from finance to healthcare to real estate. bitcoin itself, however, is still struggling with legitimacy and regulation issues. Just this week, the fact that bitcoin was chosen as the payment method for the latest round of global data , WanaCrypt0r 2.0 malware, has underscored the negative perception that still swirls around the cryptocurrency.
, co-hosts and interviewed , Director of Research of , a nonprofit research and advocacy center focused on the public policy issues facing decentralized financial networks like bitcoin and Ethereum. During the interview, Van Valkenburgh explained how bitcoin is currently dealing with its branding issue; how Coin Center is laying the groundwork for future discussions about bitcoin regulation; and how more mainstream uses of the technology would be helpful for discussions around regulation.
Van Valkenburgh noted how Coin Center has struggled with the issues around bitcoin as a brand, as many in the mainstream associate the digital currency with the collapse of Mt. Gox and drug sales on darknet markets.
“We take a lot of meetings with congressional staff, we take meetings with regulators at [the United States] Treasury, and oftentimes we can’t take credit for those meetings because a congressman doesn’t want it, necessarily, to immediately hit the news that he’s meeting with the bitcoin people,” said Van Valkenburgh.
From Van Valkenburgh’s viewpoint, networks like bitcoin are used to “decentralize power” and push security to end users’ devices. “That means you lose the choke point for regulation because the choke point for regulation is the bank, the choke point for regulation is the centralized intermediary,” he explained.
Van Valkenburgh went on to note that, since control over these networks is pushed to the edges, the technology can potentially be used for illicit activities.
Laying the Groundwork for a Future Debate
One of the illicit activities that regulators and journalists sometimes associate with bitcoin is terrorism. Although there haven’t been any major terrorist attacks funded through bitcoin or any other cryptocurrency up to this point, that we know of, Van Valkenburgh pointed out that it’s “possible that one day somebody will use these networks in a meaningful way” to finance that sort of activity.
According to Van Valkenburgh, one of Coin Center’s main goals is to prepare for the potential conversation that would take place within government in the aftermath of such an event.
“What will be the government response when this tool is used in a way that a lot of people get upset about?” asked Van Valkenburgh. “Our metric of success, I think truly, would be a reasonable response to clear evidence of illicit uses of the technology — like dangerous, illicit uses of the technology.”
For Van Valkenburgh, success for Coin Center in such a scenario would mean the prevention of a push for an instant ban of bitcoin and other related technologies, along with software developers not getting arrested as part of the process. Coin Center is effectively laying the groundwork to make sure these future conversations remain reasonable.
“This is a technology and, just like all technologies, it can be used for good and for evil,” said Van Valkenburgh. “We are not, as Americans, in the business of banning technologies. We’re not in the business of banning speech.”
More “Legitimate” Use Cases Needed
Going back to the aforementioned branding issue, one possible way to improve the outlook on bitcoin from a regulatory perspective is to create more mainstream use cases for the technology. This point was originally brought up by Crain.
“If you have stuff where there is 50 million users and they are like, ‘This thing is great. It really makes something possible that I couldn’t do before. It’s a totally legitimate thing, and this is amazing.’ It would be so much harder if it’s still this kind of fringe thing,” said Crain.
Van Valkenburgh agreed with Crain’s assessment and continued, “You need the legitimate use cases to emerge. You need to show that you’re making a positive impact on the world — that it’s not just a bunch of people getting rich off of token sales or people using underground drug markets.”
Van Valkenburgh added that Coin Center hopes to clear the way, at least from a regulatory perspective, for these sort of mainstream applications to appear. “The longer we go without more mainstream, legitimate uses, the more danger we’re in,” he added.
As far as mainstream uses of bitcoin today, Van Valkenburgh pointed to the financial autonomy enabled by the technology, and he identified as a specific example. However, Van Valkenburgh also added that this example has become more politically charged since allegations of WikiLeaks working directly with Russia have appeared.
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