SINGAPORE On Wednesday, cryptocurrencies were shaky and looking for a bottom after a sharp and wide drop caused by worries about the stability of exchange FTX, which led to a rush of withdrawals and then a bailout deal from bigger rival Binance.
Bitcoin, which has the most market value, was down 2% to $18,250. On Tuesday, it fell 10%, which was its worst day since mid-August. The next-biggest cryptocurrency, Ether, has lost nearly 18% since Tuesday morning.
The market’s attention, though, was on FTT, the token tied to FTX. Since last week, the market has been worried about FTX’s finances. FTT fell by 72% on Tuesday, and it fell another 5% on Wednesday to a two-year low of $4.61.
Part of the pressure on FTX came from Binance CEO Changpeng Zhao, who said on Sunday that Binance would sell all of the rival’s tokens because of “recent revelations” that he did not explain.
Then, people in the market were shocked when Binance signed a nonbinding agreement on Tuesday to buy FTX’s non-U.S. unit to help with what it called a liquidity crunch.
The deal between Zhao and Sam Bankman-Fried, the CEO of FTX, came after a week of rumours about FTX’s financial health, which led to $6 billion in withdrawals in the three days before the deal on Tuesday.
“The spread will end in the next few days and weeks,” said Zann Kwan, a board advisor at Raffles Family Office and a member of the Singapore group ACCESS. This group is made up of people who work with cryptocurrency and blockchain, which together are called “decentralised finance” (defi).
“Alameda is a big market maker in the defi market. There will be more to come. She was talking about Alameda Research, a trading company that Bankman-Fried started and that works closely with FTX.
Bankman-Fried said that his teams were working to clear up the withdrawal backlog. However, traders were nervous because they didn’t know how the bailout was going or how bad the problems were.
Mads Eberhardt, a crypto analyst at Saxo, said, “This could cause the crypto market to spread even more.”