Bitcoin Reaches Its Lowest Point in Over Two Years as Binance Abandons FTX Agreement

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Last Updated on November 11, 2022 by Bitfinsider

Cryptocurrencies continued to decline for a second day on Wednesday, as the market digested the likely collapse of the popular cryptocurrency exchange FTX.

Binance, the largest global exchange by volume, abandoned plans to acquire Sam Bankman-FTX Fried’s after a due diligence examination, recent claims of mismanaged user cash, and purported U.S. government investigations into FTX. This resulted in a precipitous drop in prices by late afternoon.

According to Coin Metrics, Bitcoin dropped 12% before 4:30 p.m. ET to slightly under $16,000, a level not seen since November 2020. It achieved a record high of $68,982.20 on Thursday, one year ago. Meanwhile, the price of ether fell 14% to $1,128.87.

The Bankman-Fried empire disintegrated rapidly after a revelation last week revealed that a significant portion of the balance sheet of Alameda Research, the trading company where Bankman-Fried was also CEO, was invested in FTX Token (FTT), the native token of the FTX trading platform.

Following a light Twitter debate with Bankman-Fried, the CEO of Binance, Changpeng Zhao, claimed his company was dumping the FTT on its books, causing a run on the popular FTX exchange and a liquidity problem.

FTX’s investors include some of the most prominent names in finance, including SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia, and Paradigm.

FTT fell by an additional 63% on Wednesday, after falling by more than 75% on Tuesday.

Additionally, the Solana token continued to plummet. Tuesday, it fell more than 26%, resulting in a loss of 45%. Sam Bankman-Fried’s trading firm Alameda Research, which also operates FTX, was an early supporter of the Solana project.

“Market considerations such as offering SOL token liquidity and support for Solana ecosystem initiatives on the FTX exchange have been crucial to Solana’s development,” Bernstein’s Gautam Chhugani wrote in a note published on Wednesday. This is a short-term negative occurrence for the Solana environment. In addition, given FTX/balance Alameda’s sheet situation, there could be near-term impact on its Solana holdings as the matter is resolved.”

The revelation will set back the cryptocurrency industry. Analysts anticipate increased regulatory monitoring of offshore exchanges, where the vast majority of crypto derivatives are traded. Also unknown is the extent to which financial contagion will spread to the rest of the market.

In addition, Bankman-Fried, also known as SBF, was recently lauded as an industry “white knight” for rescuing crypto service firms like as BlockFi and Voyager that fell victim to the crypto epidemic this spring.

For newbies to the crypto market, SBF and FTX have become the industry’s faces, acquiring the naming rights to the Miami Heat’s basketball stadium last year, hiring Tom Brady and Gisele B√ľndchen as brand spokespeople, and becoming a megadonor to Democratic politics.

“Given the public-facing character of FTX CEO Sam Bankman-Fried and the magnitude of FTX, we feel that the week’s events might trigger a loss of consumer confidence in the crypto business,” KBW analysts wrote in a note on Tuesday. This is especially true if panic spreads and crypto values continue to fall. “It may take some time for clients to rebuild faith in the industry (and we believe that regulation could help)”

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