Bitcoin plummets as investors panic over FTX failure

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New York
CNN Business

The fallout from cryptocurrencies deepened on Wednesday as investors were reeling from the bankruptcy of one of the industry’s most high-profile companies.

Bitcoin fell 12% on Wednesday, briefly dipping to a two-year low below $17,000. The digital asset is down around 75% from its all-time high of nearly $69,000 a year ago. Ether, the second most popular crypto, fell 20% to $1,178 – also down 75% from its all-time high.

Virtually every other token was down as well, fueling concerns of contagion in the notoriously unregulated sector.

The losses deepened as doubts emerged over whether Binance, the world’s largest crypto exchange, would actually follow through on plans announced Tuesday to acquire its smaller rival FTX.

Crypto news site CoinDesk, citing an unnamed source, reported that Binance is now “highly unlikely” to complete the deal. This sparked a fresh selloff in cryptos, which were already battered by FTX’s abrupt failure on Tuesday.

Representatives for Binance and FTX did not immediately respond to requests for comment on Wednesday.

Even for assets known for their volatility, it’s been a brutal week.

At the heart of the panic is the proposed bailout of FTX, one of the biggest crypto exchanges, by its biggest rival Binance.

On Tuesday, FTX faced a sudden liquidity crisis and agreed to be taken over by Binance – an earthquake in the crypto world. But the deal is far from secure, as Binance CEO Changpeng Zhao tweeted that his company has the right to unplug at any time.

This uncertainty has investors worried about whether the deal will go through.

FTX was previously valued at $32 billion and had weighed the idea of ​​going public. Its founder, Sam Bankman-Fried, is a celebrity on the crypto scene, having raised millions of dollars to bail out struggling digital assets earlier this year as prices plummeted.

Bankman-Fried and Zhao had traded barbs on social media before abruptly announcing a partnership to bail out FTX. On Sunday, Zhao announced that Binance would liquidate its holdings in FTX as speculation swirled around the company’s financial health. Essentially, it forced a $580 million call that Bankman-Fried didn’t have the cash.

In a memo to staff on Wednesday, Zhao stressed that there was no “blueprint” to buy FTX and that he did not view the deal as a win for Binance.

“FTX’s drop isn’t good for anyone in the industry,” he wrote in the memo, which he later posted. tweeted. “User confidence is badly shaken. Regulators will scrutinize exchanges even more.

According to Bloomberg, the collapse of FTX has already caught the attention of US financial regulators. The news site reported that the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating whether FTX properly handled client funds, citing people familiar with the investigation.

CNN Business has contacted the SEC and CFTC for comment.


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