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Bitcoin (BTC) dropped to its lowest level in two years on Wednesday as crypto traders processed the news that Binance exchange retreated from an earlier plan to buy its once-mighty but suddenly ailing rival FTX.
The CoinDesk Bitcoin Price Index fell to $15,625, the lowest since November 2020, after Binance said that, after conducting due diligence on FTX, it would not go through with the deal. BTC was down 14% on the day, the biggest single daily drop since mid-June.
Binance on Tuesday said it would buy the billionaire Sam Bankman-Fried’s FTX after what appeared to be a severe run on deposits but backed out on Wednesday afternoon citing “mishandled funds and alleged U.S. agency investigations.”
The fear among crypto traders is that the distress at FTX or at Bankman-Fried’s trading firm, Alameda Research, might lead to forced selling, potentially hitting not just the FTX’s own exchange token, FTT, but other cryptocurrencies from bitcoin to ether and Solana’s SOL.
“This is another one of those catalysts,” said Bob Iaccino, Path Trading Partners co-founder and chief market strategist. “I wouldn’t be surprised if bitcoin went as low as $9,000, which for me, as someone who got out of bitcoin and is waiting to get in again, would actually be a positive.”
Read More: Crypto Exchanges Scramble to Compile ‘Proof-of-Reserves’ as FTX Contagion Grips Markets
CoinDesk reported previously that the balance sheet of Alameda Research, also under Bankman-Fried’s control, was heavily weighted toward the FTX exchange’s own token, FTT – signaling billions of dollars of exposure for which there might not be ample buyers, and thus prone to steep losses in the event of a sell-off.
Binance described its initial agreement as a non-binding letter of intent, and executives said the deal would be subject to due diligence.
“I still believe crypto is here to stay but these things need to clean out before you can do serious investments in the space, especially from a traditional finance perspective,” Iaccino said.
Read More: ‘Long’ Crypto Traders Take on $700M in Losses as Markets Falls on FTX Contagion Fears
The downward move in bitcoin reverberated in traditional markets on Wednesday, where at one point the ProShares Bitcoin Strategy ETF (BITO) briefly had to halt transactions 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.
UPDATE (Nov. 9, 21:53 UTC): Updates BTC price and latest Binance news.
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