Bitcoin tumbles to its lowest in nearly 2 years; Solana drops another 30%

Cryptocurrencies extended their slide for a second day Wednesday as the market digested the fallout of Binance’s planned bailout of FTX.

Bitcoin was last down by 6%, trading at $17,019.12, according to Coin Metrics. Earlier in the day it hit a new bear market low of $16,924.68. It hit its all-time high of $17,585.25 one year ago Thursday. Meanwhile, ether fell 11% to $1,162.46.

The Solana token continued to fall. It was last down 30%, after plunging 26.4% on Tuesday. Alameda Research, the trading firm owned by Sam Bankman-Fried, who also runs FTX, was a big and early backer of the Solana project.

“Market factors such as providing SOL token liquidity as well as support for Solana ecosystem projects on FTX exchange has been an important driver for Solana’s success,” Bernstein’s Gautam Chhugani said in a note Wednesday. “This is an adverse event for the Solana ecosystem in the short run. Further, given FTX/Alameda’s balance sheet situation, there may be near term pressure on its Solana holdings, as the situation resolves.”

Prices were under pressure to start the day but dropped further mid-morning following a report that Binance is unlikely to go through with its planned acquisition upon review of FTX’s financials.

“We’re just 36 hours into the due diligence process. Once we have completed that, we will make a decision based on what’s in the best interest of Binance’s users across the globe,” the company said in a statement shared with CNBC. “We’ll share more information when we have a more substantive update to provide.”

The Bankman-Fried empire unraveled quickly after a report last week showed a large portion of Alameda’s balance sheet was concentrated in FTX Token (FTT), the native token of the FTX trading platform. After some sparring on Twitter with SBF, Binance CEO Changpeng Zhao announced his company was offloading the FTT on its books, leading to a run on the popular FTX exchange and a liquidity crisis.

FTT was down 21% Wednesday, after tumbling more than 75% the day before.

The bombshell is likely to set the crypto industry back, but to what extent remains to be seen. Analysts foresee further regulatory scrutiny of offshore exchanges, where the majority of crypto derivatives trading takes place. It’s also unclear how much financial contagion will spill into the rest of the market.

Additionally, Bankman-Fried had recently been lauded as a “white knight” in the industry as he came to the rescue of crypto services firms like BlockFi and Voyager that almost didn’t survive the crypto contagion of this spring.

For newcomers to the crypto market, he and FTX became the faces of the industry, securing the naming rights to the Miami Heat basketball team’s stadium last year, bringing Tom Brady and Giselle Bündchen on as ambassadors of the company, and becoming a megadonor to Democratic politics.

“Given the public-facing nature of FTX CEO Sam Bankman-Fried and the size of FTX, we believe that the week’s events could cause some loss of consumer confidence in the crypto industry, beyond that seen in the aftermath of the 3AC, Celsius, and Voyager events that took place earlier this year,” especially if contagion takes hold and crypto prices keep dropping, KBW analysts said in a note Tuesday. “It may take time for customers to regain trust in the industry, broadly speaking (and we think regulation could help this).”