Cryptos attempt to steady as Binance-FTX deal chills market
Cryptocurrencies were jittery and groping for a floor on Wednesday, after a sharp and broad drawdown when nerves about the stability of exchange FTX turned to a rush of withdrawals and ultimately a bailout deal from bigger rival Binance.
Bitcoin, the biggest cryptocurrency by market value, was down 1% at $18,400, after a 10% plunge on Tuesday that marked its worst day since mid-August. Ether, the next largest, has lost nearly 18% since early Tuesday.
The market focus was, however, on FTT, the token tied to FTX, whose financials have been the source of investor angst since last week. FTT collapsed by 72% on Tuesday and was down a further 22% at a two-year low of $4.25 on Wednesday.
Pressure on FTX came in part from Binance CEO Changpeng Zhao, who had said on Sunday that Binance would liquidate its holdings of the rival's token due to unspecified "recent revelations."
Market participants were then stunned when Binance signed a nonbinding agreement on Tuesday to buy FTX's non-U.S. unit to help cover what it called a liquidity crunch.
The deal between high-profile rivals Zhao and Sam Bankman-Fried, FTX's CEO, followed week-long speculation about FTX's financial health that snowballed into $6 billion of withdrawals in the 72 hours before Tuesday's deal.
Kami Zeng, head of research at Fore Elite Capital Management, a Hong Kong-based crypto fund manager, termed this another "alarm warning" for the battered cryptocurrency market and said investors should be cautious for a while.
"... the whole thing still looks like a dark hole. We are not sure how contagious this could be, but I believe institutions need to show their proof of reserves asap. Confidence does not recover before that," Zeng said.
Market liquidity had thinned, so the
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