Bitcoin price falls below $16,000 as Binance pulls FTX deal

Bitcoin price falls below $16,000 as Binance pulls FTX deal

Crypto and stocks extended their declines on Wednesday as investors looked for pending midterm election results and updates regarding apparently canceled plans for Binance to buy FTX.

A day after its short-lived comeback above $20,000 on Tuesday, Bitcoin plunged below $16,000, trading 14% lower as of 4:45 p.m. ET. Ether followed suit, falling to its lowest price since July, barely holding on to the $1,100 level on Wednesday afternoon. Nearly two months after the merger, Ether turned deflationary on Wednesday as supply fell thanks to increased transaction demand and rising gas fees.

The decline comes as no surprise to analysts, who said volatility is to be expected given uncertainty surrounding FTX's solvency and legal status, as well as concerns that Binance's initially well-received rescue may not come.

Future of FTX in doubt as Binance gets cold feet

As some predicted, Binance backed away from its earlier promise, tweeting on Wednesday afternoon that it would not pursue its acquisition of FTX.

Stefan Rust, CEO of immersive web tech agency Laguna Labs, said on Tuesday that he thought it was “highly unlikely” that Binance’s acquisition of FTX would ever come to fruition, adding that Binance CEO Changpeng Zhao was simply “trying to stem the flow of blood.”

Sam Dibble, a partner at law firm Baker Botts, also had questions about whether the deal would go through. He told Blockworks on Wednesday - shortly before Binance said it would not pursue the acquisition - that he viewed the company's move as "an attempt to build trust in the market."

Dibble had said the proposed transaction could become more of a financing deal.

“Binance might say, ‘Well, we thought about acquiring the company, but it turns out we want the assets, not the liabilities,’” he said. “These kinds of changes in the structure of a deal happen all the time [mergers and acquisitions] when you have such a non-binding term sheet.”

“I imagine that transparency about the size of the hole in FTX's balance sheet and presumably the liquidations and bankruptcies that could follow will be the maximum bloodshed within crypto,” said Matt Fiebach. Research analyst at Blockworks said.

Stocks are heading lower ahead of Thursday's CPI print

Outside of the crypto carnage, stocks also plummeted. The S&P 500 and Nasdaq Composite indexes closed 2.1% and 2.5% lower, respectively. Uncertainty over the future of federal funds rates, which Federal Reserve Chair Jerome Powell has hinted could reach 5%, coupled with election results still coming in after markets closed, has alarmed traders. Meanwhile, the dollar index (DXY) rose 0.75%, reversing Tuesday's slide.

“The current situation reflects the relative improvement in the outlook as rising global yields no longer put pressure on stocks,” said Tom Essaye, founder of Sevens Report Research. “But that’s about the only positive thing we’ve seen in the last month.”

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The post “Bitcoin Price Falls Below $16,000 as Binance Pulls FTX Deal” is not financial advice.