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It has not been a good week for Bitcoin and crypto in general as contagion fears, fed by the fall of FTX, swept across the industry.
Another bad day for Crypto as FTX crisis deepens
Bitcoin dropped 11% to $16,500, hitting the lowest level since late 2020, as market participants raced to determine who is exposed to Sam Bankman-Fried’s FTX empire.
Other tokens also sustained severe selling pressure, while crypto-related entities trading on traditional markets dropped.
The fresh bout of selling came amid mounting concerns that Binance will abandon its deal to buy the crypto exchange FTX, just a day after agreeing a pact to bail out its smaller rival.
Coindesk reported, citing an unnamed source, that Binance might back out of the tie-up, but the exchange told the Financial Times that it was still early in the process and it had not made a decision.
Crypto investors also turned their focus to Alameda Research, a proprietary trading firm controlled by Bankman-Fried that has been at the centre of the storm that has engulfed FTX.
Market worries over Alameda’s financial health accelerated on Tuesday, triggering a wave of withdrawals from customers at FTX, and pushing Bankman-Fried to seek a rescue from Binance.
As the impact of the shock deal set in, traders worried that the collapse of Alameda, one of the biggest traders on FTX, could resound through the markets at rapid speed.
Binance has declined to say whether its takeover plans for FTX include the trading firm. A bailout could help to insulate the digital assets industry and the exchange’s customers from further fallout but would add to the risks of the transaction.
Crypto traders have widely assumed that Binance will leave Alameda to fend for itself, and that the unwinding of its positions will inflict further pain on a market already reeling from the near collapse of FTX and a two-thirds fall in asset values this year.
Most at risk will be companies that lent assets to Alameda and crypto projects in which the trading firm heavily invested, stakes it may now be forced to sell in order to balance its books.
The firm was a major backer of the blockchain Solana, whose native token lost more than 40% of its value against the dollar.
“I don’t see a situation where [Alameda] comes back from this . . . I think they were staking a lot on the value of that FTT token,” said one person familiar with the matter. “Alameda should have been able to fix this if they actually had what they said they had, and this is a clear signal they don’t.”
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