When Bitcoin was released in 2009, cryptocurrency was meant to become a decentralized form of currency, one where banks and governments could not influence the price to suit their own needs.
For the first time ever, individuals around the world were not reliant on a gigantic corporation, monitoring their every move and essentially punishing them if they made any overly bold decisions with their finances.
Instead, anyone who invested in crypto had freedom. The freedom to invest in whatever they wanted with the use of their cryptocurrency. Not to mention, the ability to make huge amounts of money thanks to the ever-changing volatility of coins on the market.
However, in recent years, the so-called top dogs in the crypto universe like Bitcoin and Ethereum have been out of form, both possessing prices a far cry away from the all-time highs they achieved in 2021.
Therefore, there is now speculation that the overall decrease in total market cap for the crypto industry is not a coincidence. Is it possible the government is secretly manipulating the price of Bitcoin and other cryptocurrencies?
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Do governments invest in cryptocurrency?
Until this day, Bitcoin and cryptocurrency is not a mainstream form of payment. You can’t go into a Costa in the UK and buy a cappuccino with a fraction of Ethereum in your Metamask wallet or do your shopping at Walmart in the US with some Dogecoin.
In fact, the US has previously connected cryptocurrency to criminal investigations. This includes the FBI who have been known to confiscate Bitcoin.
Nevertheless, it’s no secret that many governments across the globe hold cryptocurrency to a certain extent. But it’s difficult to identify how much exactly because of the anonymous element of crypto investments.
Regardless, even though the more developed countries don’t recognize crypto as legal tender, that doesn’t mean it’s not the case with less developed nations. After all, Bitcoin can be used for the majority of purposes in El Salvador.
The truth is, there is an incentive for governments to hold crypto. Do these mirky corporations really want to miss out on all the potential earnings from cryptocurrency? Or risk their own financial situations by keeping all of their eggs in the fiat basket?
Furthermore, by getting involved with crypto, governments can track rogue transactions conducted by rogue individuals in the community. Crypto is more anonymous than fiat-based currency so it makes sense for criminals to use it.
Then, of course, there is the possibility that governments are the ones that created cryptocurrency in the first place which means they must hold all kinds of coins.
The world is always changing and maybe the plan all along was for cryptocurrency to replace fiat. We have gone from coins to notes, to cards, to paying with your phone; non-tangible crypto could be the next step.
How could the government manipulate crypto prices?
Now that we have established that it’s possible the government is secretly in charge of crypto, it’s time to identify how and why they would manipulate the prices of various coins on the market.
The manipulation of crypto prices relates to deliberate actions conducted by the government to influence the market conditions, volume, or price of coins for some sort of gain.
It goes without saying that these deliberate actions can artificially bolster or lower the prices of cryptocurrency, something which is less easy to do with a fiat-based currency like US dollars or Great British Pounds.
Some examples of manipulation include shady tactics such as artificially inflating the liquidity and trading volume of a specific cryptocurrency or artificially increasing the price, possibly leading to a greater return from corporate investment.
Not to mention spoofing, which involves placing massive orders to falsely create an impression that crypto is popular or profitable before canceling.
The worst part of this manipulation is that the average crypto enthusiast or crypto beginner are the ones who suffer.
Crypto geeks are always investing and looking for the next best deal. However, they can lose large amounts of money by basically staking their hold in a compromised crypto.
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As for beginners, they are not even experienced enough to decipher the difference between a good and bad investment. Hence, they are even more prone to aimlessly splashing their cash.
Indeed, these underhand strategies are possible when you have as much intel and power as a government. There is no doubt they have access to insider trading where they can make investments before any critical information goes public.
Technically, market manipulation should be illegal. However, the decentralized and barely regulated nature of the crypto universe makes it much easier for such immoral practices to occur.
Despite attempts to clean up the crypto space and make it a more trusted online environment, the sheer amount of monetary potential means it is a struggle to achieve a good level of integrity.
Obviously, there is no guarantee that governments are involved in influencing the crypto market for their own benefit. But this is a growing theory based on the unpredictability and never-ending volatility that exists in this space.
An example of corruption in crypto
Theories and conspiracies aside, there are examples of blatant corruption in the crypto industry and one of the most well-known cases in recent times is Alexander Mashinsky, the founder of Celsius Network.
Mashinsky is not part of any government but his recent conviction is the perfect example of how common manipulation is in the realm of cryptocurrency.
Back on June 12, 2022, Celsius made a public announcement that it was stopping all customers from making withdrawals, despite there being still around $4.7 billion worth of crypto holdings on the platform.
One month later Mashinsky filed for bankruptcy and basically tried to run away with all the crypto that users had kept in his platform.
He lied to customers, stating they would be able to withdraw what belonged to them, while he removed around $8 million of his own non-crypto assets.
To put into context how big of a scandal this was, the Celsius platform, at its peak in 2021, was one of the biggest crypto platforms in the world with around $25 billion in assets.
At that point, no one could ever imagine that a company with so many customers, including numerous retail investors, would turn out to be one big scam. And yet, two years later Mashinsky is in the process of being prosecuted for his crimes.
Final Thoughts
No one knows for sure whether the government dabbles in cryptocurrency or manipulates prices to suit their own needs.
Nonetheless, it’s fair to say that the crypto space has not covered itself in glory since its inception in 2009 with the number of fake coins, hackers, and other villainous organizations.
And the reality is, there is much to gain for the government by controlling cryptocurrency. There is the financial aspect with digital currency becoming more and more popular, but also the ability to track supposedly anonymous transactions.
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