Cryptocurrencies have felt some of the worst pain from the Fed’s whiplash move away from the record-low interest rates instituted during the pandemic’s recession. Bitcoin fell even further Wednesday, below $US15,900 from its record of nearly $US69,000 set last year. It’s down more than 14 per cent over the last day.
This latest plunge for crypto, including a 17 per cent drop for ethereum, comes amid worries about the financial strength of one of the industry’s biggest trading exchanges, FTX. A mega player in the industry, Binance, said late Wednesday it was walking away from a deal to buy its troubled rival, which needed a rescue after users began scrambling to pull their money out.
Binance said it made the move after doing its due diligence and looking at FTX’s accounting books, while also citing reports about how FTX handled its customers’ funds.
Earlier in the day, before Binance said it was nixing the deal, its CEO said that “FTX going down is not good for anyone in the industry.”
“Do not view it as a ‘win for us,’” Changpeng Zhao, who goes by his initials CZ, said in a letter to Binance employees that he posted on Twitter. “User confidence is severely shaken. Regulators will scrutinise exchanges even more.”
Stocks of companies embedded in the crypto economy also continued to sink. Robinhood Markets lost another 13.8 per cent and is down 31.6 per cent so far this week. Coinbase Global fell 9.5 per cent to bring its drop for the week to 21.8 per cent
Elsewhere on Wall Street, Disney sank 13.2 per cent for the largest loss in the S&P 500 after reporting results for the latest quarter that fell well short of analysts’ expectations.
Facebook parent Meta Platforms was one of Wednesday’s rare bright spots for investors. It rose 5.2 per cent after saying it will cut costs by laying off 11,000, or about 13 per cent of its workforce, as it contends with faltering revenue and broader tech industry woes. It nevertheless is still down nearly 70 per cent for the year so far.
The yield on the 10-year Treasury, which helps dictate rates for mortgages and other loans, fell to 4.08 per cent from 4.13 per cent late Tuesday. The two-year yield, which tends to more closely track expectations for Fed action, dropped to 4.60 per cent from 4.66 per cent.