Cryptocurrencies plummet for second consecutive day amid fallout on Binance wreck and FTX merger

Cryptocurrency prices plummeted for a second consecutive day after cryptocurrency exchange Binance said it was withdrawing from a deal to buy failed rival FTX Trading.

Bitcoin fell to a two-year low after Binance confirmed earlier rumors and news that it was ready to withdraw from the FTX deal, reached between the two exchanges’ CEOs on Tuesday. The deal was pending Binance’s ability to perform due diligence on FTX’s financial statements.

After an initial review, Binance said in a statement Wednesday that it had significant concerns that convinced it to withdraw from the deal.

“In the beginning, our hope was to be able to support FTX clients to provide liquidity, but the problems are beyond our control or our ability to help,” Binance said.

Bitcoin’s price plunged more than 13% to $ 15,840, according to CoinDesk, the lowest level since November 2020. It had been above $ 20,000 earlier in the week. The other major cryptocurrency, Ethereum, fell 13%.

An advertisement for the bitcoin cryptocurrency is displayed on a street in Hong Kong on February 17. (Kin Cheung / Associated Press)

FTX had agreed to sell itself to Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after worrying that FTX had sufficient capital.

The sudden sale was a shocking turn for events for FTX CEO and founder Sam Bankman-Fried, who was hailed as something of a savior earlier this year when he helped support a number of companies of cryptocurrencies that have had financial problems.

FTX’s crypto token, known as FTT, has plummeted more than 50% in reports. The token, now worth around US $ 2.50, was worth 10 times the amount just a week ago. Much of the concerns of cryptocurrency investors centered on FTX’s balance sheet being saturated with increasingly useless FTT tokens, the total value of which would not exceed the exchange’s liabilities, effectively rendering FTX insolvent.

FTX is apparently now under investigation by US authorities for how it handled customer deposits, according to Bloomberg News and other media.

Shares of publicly traded exchanges exposed to cryptocurrencies also plummeted on developments. Robinhood shares closed down about 14% and Coinbase shares lost about 10%.

FTX is the latest cryptocurrency company this year to come under financial pressure as crypto assets have plummeted in value. Other failures include Celsius, a bank-like company that accepted cryptocurrency deposits in exchange for yield, as well as an Asia-based hedge fund known as Three Arrows Capital.

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