Cryptocurrency prices fell to two-year lows overnight after major cryptocurrency exchange Binance announced late on Wednesday that it was abandoning a proposed merger with ailing competitor FTX, leaving the latter on the verge of collapse.
The failure of the cryptocurrency giant could have a ripple effect on the world of sports and entertainment.
It is reported that a number of companies and celebrities have invested heavily in the company, while FTX has also signed major sponsorship agreements with the Miami Heat basketball team and the Mercedes-AMG Petronas F1 Formula 1 team.
Binance said in a statement that after due diligence, it would not proceed with the transaction, explaining that reports of “improper handling of customer funds and alleged investigations by the US agency” played a role in its decision.
The news that Binance is abandoning the deal led to a drop in the value of the cryptocurrency: the benchmark Bitcoin cryptocurrency fell to a two-year low of $15.71 on Wednesday evening, compared with a record high of $64.86 in November 2021.
It recovered slightly overnight and was trading at $16.29 at 6.10 am ET on Thursday.
However, the FTT token from FTX apparently began trading in free fall at a price of about $2.65 at 10.10 am ET on Thursday, which is about 40% lower than at the same time the previous day, and against its historical high of $77.69 in September 2021.
FTX, which was valued at $32 billion by private investors this year, has experienced a sudden change of fortune in recent weeks due to growing concerns about the state of the company's balance sheet, which, in turn, caused a panic withdrawal of funds by investors.
CEO Sam Bankman-Fried said on Tuesday that his company was facing an $8 billion shortfall due to the sudden “launch” of the exchange.
It is currently unclear how this hole will be filled now, and cryptocurrency experts around the world predict a difficult path for cryptocurrencies in the coming days and weeks.