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CNN Business
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The fallout in cryptocurrencies deepened on Wednesday as investors were rattled by the failure of one of the sector’s most hyped companies.
Bitcoin fell 12% on Wednesday, briefly dipping to a two-year low below $17,000. The digital asset has fallen about 75% from its all-time high near $69,000 a year ago. Ether, the second most popular crypto, fell 20% to $1,178 – also 75% lower than the record.
Virtually all other tokens were down as well, raising concerns about contagion in the notoriously unregulated sector.
The losses have worsened as doubts emerged over whether Binance, the world’s largest crypto exchange, would actually go through with plans announced on Tuesday to buy its smaller rival FTX.
Crypto news site CoinDesk, citing an unnamed source, reported that Binance is now “highly unlikely” to go through with the deal. That triggered a further sell-off in cryptos, which were already dampened by FTX’s sudden failure 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 heart of the panic is the proposed rescue of FTX, one of the largest crypto exchange platforms, by its larger 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 on edge about whether the agreement will go through.
FTX was previously valued at $32 billion and had weighed the idea of going public. The founder, Sam Bankman-Fried, is a celebrity in the crypto scene, having raised millions of dollars to bail out struggling digital assets earlier this year when prices fell.
Bankman-Fried and Zhao had been trading barbs on social media before abruptly announcing a partnership to save FTX. On Sunday, Zhao announced that Binance would liquidate its holdings in FTX as speculation swirled about the company’s financial health. Essentially, it forced a $580 million call that Bankman-Fried didn’t have the liquidity to meet.
In a memo to employees on Wednesday, Zhao emphasized that there was no “master plan” to buy FTX and that he did not consider the deal a win for Binance.
“FTX going down is not good for anyone in the industry,” he wrote in the note, which he later tweeted. “User confidence is seriously shaken. Regulators will scrutinize the exchanges even more.”
According to Bloomberg, the FTX meltdown has already caught 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 handled customer funds properly, citing people familiar with the probe.
CNN Business has reached out to the SEC and CFTC for comment.
