Bitcoin (BTC) dropped to a new 23-month low on Wednesday as crypto traders processed the news that the Binance exchange might demur on an earlier plan to buy its once-mighty but suddenly ailing rival FTX.
The price of bitcoin hit $16,936 on crypto exchange Bitstamp on Wednesday, after Binance is leaning toward scrapping the deal after a first glance at FTX’s books. As of press time the BTC price had popped back up to $17,254, but still down 14% over the past 24 hours.
On Monday night, facing a liquidity crunch, Bankman-Fried was scrambling to raise money from venture capitalists and other investors before he went to Binance, according to sources with knowledge of the matter. Zhao initially agreed to step in, but his company quickly changed course, citing reports of “mishandled customer funds and alleged U.S. agency investigations.”
It’s unclear who is next in line to buy the beleaguered crypto exchange. Bankman-Fried told investors that the company is facing a shortfall of up to $8 billion from withdrawal requests and needs Here’s the company’s full statement:
“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.
In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help.
Every time a major player in an industry fails, retail consumers will suffer. We have seen over the last several years that the crypto ecosystem is becoming more resilient and we believe in time that outliers that misuse user funds will be weeded out by the free market.
As regulatory frameworks are developed and as the industry continues to evolve toward greater decentralization, the ecosystem will grow stronger.”emergency funding, according to a person familiar with the matter.
The swift downward move in bitcoin quickly reverberated in traditional markets, where the ProShares Bitcoin Strategy ETF (BITO) briefly halted transactions on Wednesday as the underlying BTC futures on the Chicago Mercantile Exchange (CME) plunged, in turn triggering a stock-exchange circuit breaker on the ETF.
Trading quickly resumed but the incident showed the sudden viciousness that has reappeared in crypto markets following months of seemingly rangebound trading in bitcoin around $20,000.
There is a growing list of cryptocurrency businesses that have failed because of a lack of cash reserves.
Adding to the pressure, the SEC and other regulators have been ratcheting up scrutiny of the industry as concerns grow about how crypto platforms are trading.
Earlier this year, a subsidiary of crypto firm BlockFi agreed to pay a record penalty to settle charges related to its retail lending product.