Bitcoin sank to a two-year low after Binance confirmed earlier rumors and news reports that it was ready to pull out of the FTX deal, reached between the CEOs of the two exchanges on Tuesday. The deal was contingent on Binance’s ability to perform 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 be able to support FTX customers in providing liquidity, but the issues are beyond our control or ability to assist,” Binance said. The price of bitcoin fell more than 13 percent to US$15,840, according to CoinDesk, its lowest level since November 2020. It was above US$20,000 earlier in the week. The other major cryptocurrency, Ethereum, fell 13%. An advertisement for the cryptocurrency bitcoin is displayed on a street in Hong Kong on February 17. (Kin Cheung/The Associated Press) FTX had agreed to sell itself to Binance after experiencing the cryptocurrency equivalent of a bank. Customers left the exchange after being concerned about whether FTX had sufficient capital. The sudden sale was a shocking turn of events for FTX CEO and founder Sam Bankman-Fried, who was hailed as something of a savior earlier this year when he helped prop up a number of crypto companies that ran into financial trouble. FTX’s crypto token, known as FTT, fell more than 50 percent on reports. The coupon, now worth about US$2.50, was worth 10 times that amount just a week ago. Many of the concerns of crypto investors centered on whether FTX’s balance sheet was saturated with increasingly worthless FTT tokens, the total value of which would not exceed the exchange’s liabilities, effectively rendering FTX insolvent. FTX is now apparently under investigation by US authorities for how it handled customer deposits, according to Bloomberg News and other media outlets. Shares of publicly traded exchanges with exposure to crypto also fell on the developments. Shares of Robinhood closed down about 14 percent and shares of Coinbase lost about 10 percent. FTX is the latest cryptocurrency company this year to come under financial pressure as cryptocurrency assets have collapsed in value. Other failures include Celsius, a bank-like company that received crypto deposits in exchange for performance, as well as an Asia-based hedge fund known as Three Arrows Capital.
