7.5 C
New York
Wednesday, March 22, 2023

Bitcoin Falls as Investors Panic Over FTX Failure

New York
CNN Business

The fallout from cryptocurrencies deepened on Wednesday as investors were rattled by the failure of one of the most hyped companies in the sector.

Bitcoin fell more than 10% on Wednesday, hitting a two-year low of around $16,500. The digital asset is down roughly 75% from its all-time high of around $69,000 a year ago. Ether, the second most popular cryptocurrency, fell 13% to $1,166, also down 75% from its all-time high.

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

The losses worsened as questions were raised over whether Binance, the world’s largest cryptocurrency exchange, would actually go through with plans announced Tuesday to acquire smaller rival FTX.

Crypto news site CoinDesk, citing an anonymous source, reported that Binance is now “highly unlikely” to go ahead with the deal. That sparked a further sell-off in cryptocurrencies, which were already taking a hit due to the abrupt FTX crash 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 center of the panic is the proposed bailout of FTX, one of the largest cryptocurrency exchanges, by its biggest rival, Binance.

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

That uncertainty has investors nervous 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 earlier this year invested millions of dollars to rescue distressed digital assets when prices fell.

Bankman-Fried and Zhao had been exchanging criticism 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 about the company’s financial health mounted. In essence, that forced a $580 million call that Bankman-Fried didn’t have the liquidity to meet.

In a note to staff on Wednesday, Zhao emphasized that there was no “master plan” to buy FTX and that he did not see the deal as a win for Binance.

“The fall of FTX is not good for anyone in the industry,” he wrote in the memo, which was later tweeted. “User trust is severely affected. Regulators will scrutinize the exchanges further.”

According to Bloomberg, the collapse of FTX has already drawn 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 customer funds, citing people familiar with the investigation.

An SEC spokesman said the commission does not comment on the existence or non-existence of a possible investigation.

The CFTC did not immediately respond to a request for comment.

—CNN Business’s Matt Egan contributed to this article.

Related Articles


Please enter your comment!
Please enter your name here

Latest Articles