Bitcoin price tanks below $16K as Binance withdraws FTX deal

Crypto and stocks extended losses on Wednesday as investors kept their eyes peeled for pending midterm election results and updates regarding apparently canceled plans for Binance to buy FTX.

A day after its brief comeback above $20,000 on Tuesday, bitcoin plunged below $16,000, trading 14% lower as of 4:45 PM ET. Ether followed suit, sinking to its lowest price since July, barely holding on to the $1,100 level on Wednesday afternoon. Nearly two months after the merger, ether turned deflationary on Wednesday as supply dwindled thanks to increased transaction demand and rising gas taxes.

The decline comes as no surprise to analysts, who said volatility is to be expected given the uncertainty surrounding FTX’s soundness and legal status, plus concerns that Binance’s bailout, which was initially well received, may not come.

The future of FTX is in doubt as Binance gets cold feet

As some predicted, Binance backtracked on its earlier promise, tweeting on Wednesday afternoon that it would not pursue the acquisition of FTX.

Stefan Rust, CEO of immersive web technology agency Laguna Labs, said on Tuesday that he believed it was “highly unlikely” that Binance’s acquisition of FTX would ever come to fruition, adding that Binance CEO Changpeng Zhao is simply “trying to stop blood flow.”

Sam Dibble, a partner at law firm Baker Botts, also had questions about whether the deal would end. He told Blockworks Wednesday — just before Binance said it would no longer pursue the acquisition — that he saw the company’s move as “an effort to build confidence in the market.”

Dibble had said the intended transaction could be more of a financing deal.

“Binance could say, ‘Well, we thought about buying the company, but it turns out that we really want the assets and not the liabilities,'” he said. “These kinds of changes in the structure of a deal happen all the time [mergers and acquisitions] when you have a non-binding term sheet like this.”

“I imagine transparency around the size of the hole in FTX’s balance sheet, and presumably the liquidations and bankruptcies that could follow, will be maximum blood in crypto,” said Matt Fiebach, research analyst at Blockworks.

Shares join crypto down sharply ahead of Thursday’s CPI print

Outside of crypto blood, stocks also fell. The S&P 500 and Nasdaq Composite indices close 2.1% and 2.5% lower, respectively. Uncertainty about the future of Federal Funds rates, which Federal Reserve Chairman Jerome Powell has hinted could reach 5%, combined with election results still trickling in after the conclusion, have left traders worried. Meanwhile, the dollar index ( DXY ) was up 0.75%, reversing Tuesday’s decline.

“The current situation reflects a relative improvement in the outlook as rising global yields no longer pressure equities,” said Tom Essaye, founder of Sevens Report Research. “But that’s about the only positive thing we’ve seen in the last month.”

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