Crypto Prices Volatile, Binance and FTX deal chills the Market. On Wednesday, cryptocurrencies were volatile and scrambling for stability.
This came after a sharp downturn when investors expressed concern about the FTX exchange. As a result, many people withdrew their funds from this platform, and it was eventually saved by the larger Binance exchange.
Bitcoin, the most popular cryptocurrency, had a slight dip to $17,400 after plummeting by 13% on Tuesday. Ether, the second-largest cryptocurrency, has been in a constant decline since early Tuesday.
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The focus was on FTT, the token tied to FTX. Investors were concerned with the company’s financials last week, and this resulted in a 72% drop for FTT tokens. On Wednesday, it reached a new 2-year low of $4.25.
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FTX has been under pressure recently, and that pressure came in part from Changpeng Zhao, who said on Sunday that Binance would liquidate its holdings of rival tokens due to undisclosed revelations. However, that relief came quickly as Binance signed a non-binding agreement on Tuesday to buy FTX’s subsidiary in order to help cover an alleged liquidity crunch.
Changpeng Zhao and Sam Bankman-Fried’s deal followed weeks of speculation about FTX’s financial health that snowballed into $6 billion in withdrawals over the 72 hours before the agreement.
“The recent drop in the bitcoin price reflects investors’ fear that cryptocurrencies might follow the dotcom bubble and burst,” said Kami Zeng, head of research at Fore Elite Capital Management, a Hong Kong-based crypto fund manager. “Investors should hold off for now.”
When the market is less liquid, all the assets are at risk because it’s more difficult for investors to trade them.
Binance coin, which is used on Binance, was also not spared. With a market value of $52 billion, it was worth $317.11, down 6% since Tuesday.
Binance, the world’s largest exchange for digital currencies, will conduct due diligence in the coming days as the next step toward the acquisition of FTX.com. Binance US, located in California, and FTX are not part of the deal, according to Bankman-Fried who is from California and lives in the Bahamas.
Many people are wondering how regulators will react to a potential merger between the two crypto exchanges. Experts say regulators could insist on reviewing the merger, which would mean a drawn-out regulatory review process.
