The impact of cryptocurrencies deepened on Wednesday as investors were rocked by the failure of one of the industry’s most hyped companies.
Bitcoin plunged 12% on Wednesday, briefly falling to a two-year low below $17,000. The digital asset is down about 75% from its all-time high of nearly $69,000 a year ago. Ether, the second most popular cryptocurrency, plunged 20% to $1,178 – also down 75% from its record high.
Virtually all other tokens were also in the red, raising concerns about contagion in the notoriously unregulated sector.
Losses have worsened amid doubts over whether Binance, the world’s largest crypto exchange, would actually go through with plans to acquire its smaller rival FTX announced on Tuesday.
Crypto news site CoinDesk, citing an unnamed source, reported that Binance is now “highly unlikely” to go through with the deal. That sparked another sell-off in cryptos, which had already come under pressure from Tuesday’s abrupt failure of FTX.
Binance and FTX officials did not immediately respond to requests for comment on Wednesday.
Even for assets known for their volatility, it’s been a brutal week.
At the heart of the panic is the planned bailout of FTX, one of the largest crypto exchange platforms, by its larger rival, Binance.
On Tuesday, FTX faced a sudden liquidity crisis and agreed to be acquired by Binance, an earthquake in the crypto world. But the deal is far from secure as Binance CEO Changpeng Zhao tweeted that his company has the right to pull the plug at any time.
This uncertainty is making investors nervous about whether the deal will go through.
FTX was previously valued at $32 billion and had weighed the idea of an IPO. Its founder, Sam Bankman-Fried, is a celebrity on the crypto scene who earlier this year raised millions of dollars to salvage ailing digital assets as prices fell.
Bankman-Fried and Zhao had exchanged barbs on social media before abruptly announcing a partnership to save FTX. On Sunday, Zhao announced that Binance would liquidate its holdings in FTX amid speculation about the company’s financial health. Essentially, this forced a $580 million call that Bankman-Fried didn’t have the liquidity for.
In a note to employees on Wednesday, Zhao stressed that there was no “master plan” to buy FTX and that he did not see the deal as a win for Binance.
“FTX’s failure is not good for anyone in the industry,” he later wrote in the memo tweeted. “User confidence has been badly shaken. Regulators will scrutinize the exchange even more.”
According to Bloomberg, the FTX meltdown has already drawn the attention of US financial regulators. The news site reported that the Securities and Exchange Commission and Commodity Futures Trading Commission are investigating whether FTX properly handled client funds, citing people familiar with the investigation.
CNN Business has reached out to the SEC and CFTC for comment.