Why Is Bitcoin Down Today? – Forbes Advisor
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Crypto markets are in chaos once again, and the price of Bitcoin (BTC) has fallen more than 13% this week.
The cause of this week’s seismic disruption: FTX, the world’s fourth-largest crypto exchange, which used to be an industry stalwart.
Facing a rapidly worsening liquidity crunch, FTX is hunting for a solution to save the business. At the heart of the issue is FTX’s native token, FTT, which has been eviscerated in a huge sell-off, plunging more than 80% in the past few days.
FTX’s liquidity woes have spread contagion across the sector, as crypto investors fear another shoe will drop. Bitcoin (BTC) is weathering the storm but is still down more than 17% over the past five days. But the big “B” has been in the “green” for the last 24 hours, gaining 3%.
The slump has been much tougher on altcoins, with Ethereum (ETH) down nearly 18% over the past five days. Solana (SOL), a crypto backed by FTX’s CEO Sam Bankman-Fried, is all in freefall, having shed more than 40% of its value in the past seven days. In the last 24 hours, FTT is down 22%.
The Trouble with FTX and Alameda
Withdrawals from FTX kicked off on Sunday morning thanks to a series of tweets from Binance CEO Changpeng Zhao, who disclosed that his company would sell its holdings of FTX’s native token due to “revelations” concerning the company.
Bankman-Fried responded to Zhao’s tweets, stating that Binance was “trying to go after us with false rumors.” Bankman-Fried insisted that FTX’s “assets are fine.”
The revelations cited by Zhao were most likely a reference to a CoinDesk article published earlier in November that made claims regarding Bankman-Fried’s other business, trading firm Alameda Research.
FTX and Alameda are separate businesses. The CoinDesk report asserted it had viewed a “private financial document” that suggested that much of Alameda’s balance sheet was held in FTX’s native FTT token, issued by the exchange to give users a discount on trading fees.
If CoinDesk’s information is correct, it suggests that more than a third of Alameda’s $14.6 billion in assets are held in a crypto coin created by FTX. If true, FTX and Alameda are hardly independent of each other—and both companies would have very shaky foundations.
Bankman-Fried Is in Trouble
The New York Times reported on Tuesday that Bankman-Fried apologized in a note to FTX staff for not being communicative. He disclosed that the company had seen around $6 billion in withdrawals over the prior three days, orders of magnitude greater than the usual level.
“I’m sorry,” he wrote.
Bankman Fried continued his apologies in a Nov. 10 tweet: “At the end of the day, I was CEO, which means that *I* was responsible for making sure that things went well. *I*, ultimately, should have been on top of everything. I clearly failed in that. I’m sorry.”
Crypto markets have been slammed by multiple crises throughout 2022, not to mention funding stresses, thanks to rising interest rates and a broader market downturn that has seen investors move away from riskier assets.
FTX’s struggles come in the wake of the TerraUSD fiasco, the meltdown of crypto hedge fund Three Arrows Capital and the failure of crypto lender Celsius Network.