Bitcoin (BTC/USD) Drops 13% as Binance Back Out of FTX Acquisition

Bitcoin (BTC/USD) Fundamental Outlook

The cryptocurrency space as a whole has experienced a tumultuous couple of days kicked off by fears around liquidity and solvency at FTX, one of the largest players in the space. The resulting impact has seen Bitcoin and a host of altcoins post significant losses as more information came to light including a letter of intent by Binance to acquire FTX. Bitcoin dropped as low as $15650 (November 2020 price) before rallying in Asian trade back above the $16000 handle. The largest crypto by market cap currently trades around the $16400.

Rumors began filtering through early Wednesday that Binance were reluctant to go through with the rescue deal given the size of the hole in the books of FTX. Late on Wednesday afternoon Binance confirmed in a statement that it would not be proceeding with the deal due to corporate due diligence, news reports regarding the alleged mishandling of client funds and alleged US agency investigations.

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According to reports FTX CEO Sam Bankman-Fried told investors in a call on Wednesday that the crypto exchange faced a shortfall of up to $8 billion dollars with $4 billion needed to remain solvent. The embattled CEO is attempting to raise further financing in the form of equity or debt as the potential of a bankruptcy filing looms. Risk assets and market sentiment suffered due to the FTX rescue deal falling through as concerns grew regarding the potential knock-on effect to other assets.

BTC/USD Daily Chart – November 10, 2022

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From a technical perspective, BTC/USD had been rangebound since June trading between the $18000 and $25000 levels. The moving averages are all beginning to point to the downside which doesn’t bode well for the pair with the next key support area resting down at $12300.

Given the momentum behind the decline should the pair push higher toward the $18000 level sellers could reignite their interest with $12300 becoming a realistic target.

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