Binance pulls out of FTX merger, sending cryptocurrency prices into a dive | Cryptocurrencies

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Cryptocurrency prices fell for a second straight day on Wednesday after crypto exchange platform Binance announced it was pulling out of its deal to buy failed rival FTX Trading.

Bitcoin sank to a two-year low after Binance confirmed earlier rumors and news reports that it was ready to back out of the FTX deal struck between the CEOs of the two exchanges on Tuesday. The deal was pending Binance’s due diligence on FTX’s balance sheet.

After an initial review, Binance said in a statement on Wednesday that it had significant concerns that convinced it to pull out of the deal.

“Initially, our hope was to support FTX’s customers in providing liquidity, but the issues are beyond our control or ability to assist,” Binance said in a statement.

The price of bitcoin plunged more than 13% to $15,840, according to CoinDesk, its lowest level since November 2020. It had been above $20,000 earlier this week. The other major cryptocurrency, Ethereum, fell 13%.

FTX had agreed to sell itself to Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital. The sudden sale was a shocking turnaround for Bankman-Fried, who earlier this year was hailed as something of a savior when he helped prop up a number of cryptocurrency companies that ran into financial trouble.

FTX’s own crypto token, known as FTT, fell more than 50% on the reports. The token, now worth around $2.50, was worth 10 times just a week ago.

Many of the crypto-investors’ concerns centered on whether the balance sheet of an affiliated FTX company known as Alameda Research was saturated with increasingly worthless FTT tokens whose total value would not exceed the exchange’s liabilities, effectively rendering FTX insolvent.

To further illustrate FTX’s financial difficulties, Bankman-Fried on Wednesday asked its investors for $8 billion. to cover withdrawal requests, according to the Wall Street Journal, citing unnamed sources.

FTX is now reportedly under investigation by US authorities for how it handled customer deposits, according to Bloomberg News and other media outlets.

Shares on exchanges exposed to crypto also fell on the news. Robinhood shares closed down about 14% and Coinbase shares lost about 10%.

FTX is the latest cryptocurrency company this year to come under financial pressure as crypto assets have collapsed in value. Other failures include Celsius, a bank-like company that took crypto deposits in exchange for dividends, as well as an Asia-based hedge fund known as Three Arrows Capital.

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