Cryptocurrency prices fall as Binance opts out of buying rival FTX

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

Bitcoin and other cryptocurrencies were broadly lower shortly after investors heard rumors that the Binance-FTX deal was in trouble. The CEOs of both exchanges – Sam Bankman-Fried of FTX and Changpeng Zhao of Binance – had publicly accepted a merger Tuesdaypending Binance’s ability to perform due diligence on FTX’s balance sheet.

That due diligence led to significant concerns that convinced Binance to pull out of the deal, the company said in a statement on Wednesday.

“Initially, our hope was to support FTX’s customers in providing liquidity, but the issues are beyond our control or ability to help,” said Binance, the world’s largest cryptocurrency exchange.

The price of Bitcoin plunged more than 12% to $16,084, according to CoinDesk, its lowest level since December 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.

Zhao, who goes by “CZ” in the crypto world, posted a lengthy statement on Twitter addressing rumors of the Binance-FTX deal falling apart.

“One, we didn’t have the master plan this or anything related to that. It was less than 24 hours ago that SBF called me,” Zhao said, referring to Bankman-Fried. “And before that I had very little knowledge of the internal state of things at FTX. I could do some mental calculations with our income to guess theirs, but it would never be very accurate.”

Shares on publicly traded exchanges exposed to crypto also fell on the news. Robinhood shares closed down about 14%, and Coinbase’s stock lost about 10%.

FTX is the latest cryptocurrency company this year to come under financial pressure as crypto assets have fallen 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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