Bitcoin crashes below $16K, crypto in freefall as Binance-FTX deal fails

By Ambar Warrick

Investing.com-- Bitcoin slumped to a new two-year low on Thursday, with the broader crypto market in freefall after major exchange Binance withdrew a bailout offer for beleaguered peer FTX, raising doubts over its future and souring sentiment.

The world’s largest cryptocurrency tumbled over 10%, falling as low as $15,603.3- its weakest level since mid-2020. The token traded around $16,138.5 by 21:52 ET (02:52 GMT), and has lost over 20% of its value this week.

Ethereum slumped nearly 12% to $1,143.81- its weakest level in four months, with most other altcoins logging double-digit losses. Dogecoin slid 5% to $0.78150, while Solana slumped 33% to $14.656.

Crypto markets faced renewed losses on Wednesday after Binance CEO Changpeng Zhao said that the exchange pulled out of a non-binding deal to acquire FTX, which recently suspended withdrawals due to a liquidity crisis.

Binance cited concerns about corporate due diligence and reports that the world’s third-largest crypto exchange mishandled customer funds.

U.S. regulators are also reportedly investigating FTX. CEO Sam Bankman-Fried told employees that he is exploring all options for the firm after the Binance deal collapsed, although the move leaves FTX with few options beyond declaring bankruptcy.

The prospect of a FTX bankruptcy caused widespread losses across crypto markets, as the exchange liquidated a bulk of its holdings to meet customer withdrawals. Alameda Capital, the crypto trading desk owned by Bankman-Fried and also allegedly involved in boosting the value of FTX, was also seen liquidating its holding on chain.

Losses in crypto prices could expose the space to a “cascade of margin calls,” investment bank JPMorgan (NYSE:JPM) said, an event that could spur even more selling. The bank also sees Bitcoin falling as low as $13,000.

FTX’s crash marks another blow to crypto markets, which were already reeling from a slew of high-profile bankruptcies this year. Rising interest rates and a record number of hacks have also soured investor sentiment towards crypto.

FTT, FTX’s native token, is now down 90% this week, and was last trading around $2.