Market Wrap: Binance/FTX Deal Sends Bitcoin, Other Cryptos Spiraling
Crypto investors couldn’t make up their minds on Tuesday whether they liked Binance’s proposed purchase of rival FTX.
In the immediate aftermath of the announced deal, they sent bitcoin’s price tumbling well below $20,000, its support of the last two weeks. Hours later, prices were bounding above the threshold. But by the afternoon, the largest cryptocurrency by market capitalization had plummeted under $19,000 for the first time since mid September. BTC was recently trading at about $18,500, down more than 10% over the previous 24 hours and its first time under $19,000 since mid October.
Ether and most major altcoins whipsawed similarly. The second largest crypto in market value was recently changing hands just above $1,300, a more than 15% drop from Monday, same time, and its lowest level in more than two weeks.
The carnage swept up tokens from all parts of the crypto spectrum. FTX’s FTT was trading at just over $5, a more than 75% decline during the past 24 hours. Solana's SOL, which had tumbled Monday on speculation that Bankman-Fried's trading firm, Alameda Research, might have to dump some of its holdings in a bid to raise liquidity, was off over 20%. Binance’s BNB token outperformed the market, but was still down about 4%.
The CoinDesk Market Index, a broad-based index designed to measure the market capitalization weighted performance of the digital asset market, was down a whopping 10%.
“The FTT token will find it very hard if not impossible to recover while SOL and ecosystem tokens are likely to suffer losses too as trust appears to be eroded entirely,” wrote Joe DiPasquale, CEO of crypto fund manager BitBull Capital, in an email to CoinDesk, although he noted optimistically that “we don’t “expect bitcoin to face an extreme scenario. In fact, it could see increased inflows as market participants withdraw from riskier assets.”
“Either way, the sooner this gets resolved the better it is for the space, especially as it is likely to draw more attention from regulators,” DiPasquale wrote.
As U.S. voters went to the polls for midterm elections, stocks continued their momentum from Monday as the tech-heavy Nasdaq and S&P 500 rose a few fractions of a percentage point, while the the Dow Jones Industrial Average (DJIA) was up 1%.
Safe haven gold also had another upbeat day, climbing 2.2%.
In an email, Marieke Fament, CEO of the NEAR Foundation, called said that "consolidation is inevitable in crypto's current bear market,” but also saw FTX’s problems and the proposed acquisition as a potential learning experience.
“There's nowhere to hide during crypto winter – and developments such as the acquisition of FTX by Binance underscores the challenges and lack of transparency behind the scenes of some key players –which undermine the reputation of crypto,” Fament said. “Moving forward, the ecosystem is going to learn from these mistakes and hopefully create a stronger sector that puts honesty, transparency and consumer protection at the heart of their businesses."
● CoinDesk Market Index (CMI): 923.69 −10.3%
● Bitcoin (BTC): $18,506 −9.7%
● Ether (ETH): $1,319 −15.2%
● S&P 500 daily close: 3,828.11 +0.6%
● Gold: $1,716 per troy ounce +2.3%
● Ten-year Treasury yield daily close: 4.13% −0.1
Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.
Crypto Markets Take a Wild Ride Following Surprise Binance/FTX Deal
By Glenn Williams Jr
Binance’s mega-deal to buy rival FTX has raised lots of questions among investors, few of them with easy answers. Price fluctuations have been difficult to pinpoint on calm news days, and the blockbuster deal announced Tuesday threatens to roil markets well beyond the volatility of the last few hours.
In a surprising turn of events, Binance is fully acquiring FTX. The two entities entered a non-bonding letter of intent (LOI), to help FTX weather an apparent liquidity crunch.
Because the LOI is non-binding, Binance can withdraw from the deal at any time. The world’s largest cryptocurrency exchange by trading volume will be conducting due diligence on FTX over the coming days.
Crypto prices sank, soared and then sank again.
- FTX Token Falls 80% Despite Binance Bailout as Alameda Contagion Spreads to Bitcoin: CoinDesk reported last week that Alameda Research's balance sheet is loaded with highly illiquid FTX exchange's FTT tokens, and is also a big holder of SOL tokens. FTT token's crash theoretically could wipe out billions from Alameda's balance sheet, deepening its financial woes, according to an analyst. Read more here.
- Alameda Thanked for ‘Prompt Response’ in Transferring $37M of BitDAO Tokens: Alameda Research holds 100 million BIT tokens acquired in November last year by swapping 3.36 million FTX exchange's FTT tokens. The token swap deal required each party to hold tokens for at least three years. The community behind BitDAO earlier feared that Sam Bankman-Fried's crypto trading firm, Alameda Research, might liquidate some of its token holdings as speculation sends prices plunging for the related FTT tokens. Read more here.
- FTX's Bitcoin Balance Plunges to Just One: Roughly 20,000 bitcoin have been pulled from the crypto exchange in the past 24 hours, according to data from Coinglass.
- Coinbase Statement Says No Exposure to FTT Token and Alameda, Minor Deposits at FTX: The publicly traded crypto exchange sought to reassure customers and investors during panicky conditions on Tuesday.
- 'Pharma Bro' Martin Shkreli to LUNA's Do Kwon: 'Jail Is Not That Bad': The crypto villians discussed the impending FTX-Binance deal on the UpOnly podcast on Tuesday.
- Crypto Has Prepared for Divided US Government, Republican Rise: A partisan mess on Capitol Hill may not be a bad thing for the crypto industry, which has friends on both sides of the aisle and legislative efforts that are – so far – bipartisan.
- Crypto Venture Capital Investment Slowed Further in October: JPMorgan: As the bear market persists, the current pace of capital flows has slowed to less than one-third of 2021 levels.
- US Treasury Adds to Tornado Cash Sanctions With North Korea WMD Allegations: The Treasury Department's Office of Foreign Asset Control (OFAC) first added Tornado Cash to its sanctions list in August.
- Japan Mobile-Phone Operator NTT Docomo to Invest $4B Into Web3: The operator will collaborate with Astar Foundation and Accenture to speed up Web 3 adoption in the country.