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Bitcoin has dropped dramatically over the last 24 hours to its lowest level for the year after fears were sparked that major player FTX faced a liquidity crisis. In the last two years cryptocurrency has become available to large institutions and funds which has increased the overall size of the market. However, at the same time it has made it vulnerable to large liquidity events such as the one that is occurring now.
The reason for the large drop-off was the news that exchange FTX was facing serious liquidity issues after a large drop in the price of Bitcoin and other cryptocurrencies this year. Subsequently almost as an act of mercy, Binance the world’s largest cryptocurrency exchange has proposed that it will buy out FTX and its subsidiaries to stabilise the market.
In addition, fears over customers’ ability to withdraw their funds from accounts were abounds on Tuesday. This is not the first-time withdrawal issues have hurt the sector with frozen accounts being an issue when Celsius was facing difficulties.
This run has seen the price of Bitcoin fall sharply to its lowest levels since November 2020. The price dumped about USD 2000 as the news hit the market. The price then bounced of the USD 17,000 level to where it now rests near in the mid USD 18,000’s. The volume sold was the highest level since June 2022. Importantly, the price continues to hold its longer term range indicating some level of strength at the USD 18,000 level. There is still a fair bit to play out regarding this potential merger. A failed deal or an accelerated acquisition could either help or hinder the price of Bitcoin and other cryptocurrencies.
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