The cryptocurrency exchange Coinbase is investigating multiple officials for possible insider trading and market manipulation, following a sharp increase in the price of bitcoin cash, just hours before the popular US exchange announced support for the forked digital coin.
In addition, huge trading volumes emerged after Bitcoin Cash’s introduction, which led to a spike in valuation and forced Coinbase to suspend trading of the digital currency that split off from the mainstream bitcoin network.
[status] Monitoring: All BCH markets are now in post-only mode and will remain in post-only for at least 60 minutes… https://t.co/em9E3MKsrU
— GDAX (@GDAX) December 20, 2017
In a blogpost on Wednesday, Coinbase CEO Brian Armstrong has officially confirmed what many have been speculating for several hours. He did not specify names, but confirmed that “All Coinbase employees and contractors were explicitly prohibited from trading Bitcoin Cash and from disclosing our launch plans over a month ago.”
Given the price increase in the hours leading up the announcement, we will be conducting an investigation into this matter. If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately and take appropriate legal action.
The investigation centers on the flow of information ahead of a Coinbase announcement about plans to list the clone of bitcoin, sending its price 30 percent higher, from $2,800 to $3,800 per coin. Bitcoin Cash (BCH) showed briefly a much bigger gain on Coinbase’s exchange GDAX, clearing the $8,500 mark before trading was suspended.
The price swings were seen as indications that people from the San Francisco-based exchange were acquiring Bitcoin cash or forwarding insider information to outside affiliates.
Bitcoin Cash hits around
Aside from the insider claims, Coinbase’s decision to support Bitcoin cash represented a dramatic turnaround from its initial rejection to list the altcoin, which caused many users to stop using its services, raising worries that it could suffer a customer exodus. This development can also be seen as a reaction to several rivals which recently expanded its cryptocurrency coverage to Bitcoin cash.
Also, following the announcement, the price of conventional Bitcoin plunged by 15 percent, dropping below $15,500, but has since regained some ground and is now worth $16,500.
Bitcoin cash emerged earlier in August as a split off from the Bitcoin blockchain. The alternative virtual asset boasts a higher block size and lower fees, as with the fork the developers upped the block size to 8MB from Bitcoin’s 1MB.
Bitcoin cash has been getting more and more adoption recently, as the coin not only allows more transactions to be processed at a faster rate, but also at lower associated fees.
Over the past few month, fees on the Bitcoin network skyrocketed, having averaged $4 to send a transaction with a timely confirmation. During periods of peak use, the currency that once had low fees as a primary incentive to its use saw the cost of a simple transaction goes as high as $20. The main reason was not only more miners/users joined the network, but also as the bitcoin price has been smashing through record after record over the past year.