FTX crisis weighs on Bitcoin as BTC falls to new 2022 low

World’s largest cryptocurrency falls to $16,472, its lowest level since November 2020

Representation of a bitcoin surrounded by other cryptos                                 
The price of Bitcoin has slumped in the wake of the FTX crypto exchange crisis – Photo: Shutterstock
                                

Bitcoin fell to its lowest level in almost exactly two years on Thursday, as the cryptocurrency market reacted to the liquidity crisis engulfing FTX. 

The fall in the price of BTC came after Binance announced on Sunday 6 November that it would liquidate its $530m (£463m) FTX Token (FTT) holdings after “recent revelations” about its rival cryptocurrency exchange. 

This fuelled mounting concerns about the relationship between FTX and crypto trading firm Alameda Research, both companies being founded by FTX CEO Sam Bankman-Fried. 

In a digital equivalent to a bank run, FTX users rushed at once to withdraw funds. Unable to cope with the liquidity pressure, FTX requested assistance from Binance, which then agreed to acquire its rival subject to due diligence. The deal did not include FTX’s separate US unit. 

At the time of writing on 10 November, FTX was trading at $2.76, down by 88% on the past seven days. 

Bitcoin sinks by 10.5%

The collapse of one of the world’s best-known cryptocurrency exchanges impacted wider investor sentiment. The total cryptocurrency market capitalisation suffered a 22% decline since Sunday, falling to $826bn as of earlier on 10 November. 

Bitcoin was no exception sinking to $16,472 as of 10 November, down 7.4% on the previous 24 hours. This price was the lowest level since 17 November 2020 when BTC hit a daily low of $16,564.54. At the time of writing, the cryptocurrency stood 65% below the level at which it began the year and 76% below the $68,789 all-time high it reached in November 2021.

Having started 2022 at $876bn, Bitcoin’s market capitalisation stood at $317bn at the time of writing. 

Bitcoin critics and advocates to recent slump

Bitcoin’s most vocal critics and advocates have drawn substantially different conclusions from the cryptocurrency market’s latest drop. 

Bestselling author Saifedean Ammous, whose book The Bitcoin Standard made the case for the cryptocurrency as a potential global reserve currency, described the collapse of FTX Token as a vindication of his Bitcoin maximalism and distrust of other digital assets. 

Arguing that Ethereum (ETH) would eventually suffer the same fate as FTX Token, Ammous stated: “Everyone eventually ends up with 100% Bitcoin. Some take the easy road and some take painful detours.” 

Others were less enthusiastic. Bestselling writer and trader Nassim Nicholas Taleb, observed: “So far, the crypto plunge is like a slow train wreck, since the cryptidiots are too green, naive, and financially unsophisticated to realise that they are effectively bust.”

He added: “There is no such thing as a ‘liquidity’ crisis with cryptos. A liquidity crisis is for something that has some hard intrinsic value. This is just a crisis.”

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