Bitcoin plunges to $16,000 for the first time since November 2020 as fears of FTX contagion spread
Yesterday, Binance announced it was acquiring the distressed crypto exchange FTX after a significant liquidity crunch. The news quickly sent shockwaves across the entire crypto sector causing major cryptocurrencies to lose about 10 percent of their values.
The FTX-Binance deal contagion also spread to Bitcoin, the world’s most popular cryptocurrency. Bitcoin plunged to a two-year low of $17,289.60 at about 2 AM EST. It has since come back up and now trading at $17,685.30 as of the time of writing.
It all started over the weekend after the CEO of the largest crypto exchange Binance Changpeng “CZ” Zhao tweeted that his exchange would reduce its exposure to FTX and slowly withdraw billions of its holdings in FTX’s native token, FTT, “due to recent revelations that have come to light.”
Then in an unexpected twist, Binance said it was buying the smaller rival FTX after the Sam Bankman-Fried-owned crypto exchange faced a liquidity crisis that rattled digital assets and sparked contagion fears.
“This afternoon, FTX asked for our help,” tweeted Zhao “CZ” Changpeng on Tuesday. “There is a significant liquidity crunch. To protect users, we signed a non-binding [letter of intent] intending to fully acquire http://FTX.com and help cover the liquidity crunch.”
Before the deal, Bitcoin was trading at over $20,000 before tumbling 12.6% to $18,203, according to data from Coin Metrics. Earlier in the day, it fell to $17,300.80, its lowest level since November 2020. Bitcoin is not alone. Ether, the second most popular cryptocurrency also plunged by 18.2% to $1,311.50, after falling as low as $1,228.89.
Meanwhile, In a tweet, Bankman-Fried said in a tweet the tie-up between FTX and Binance will only affect FTX.com (the non-U.S. businesses of FTX) and Binance. The U.S. subsidiaries of each company, FTX US and Binance US, are unaffected.
Update 2:15 PM: Bitcoin falls under $17,000 for the first time since November 2020.
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— Bitcoin Magazine (@BitcoinMagazine) November 9, 2022