Cryptocurrency prices plunged for a second straight day after crypto exchange Binance said it was pulling out of a deal to purchase failing rival FTX Trading.

Bitcoin sank to a two-year low after Binance confirmed earlier rumours and news reports that it was ready to back out of the FTX deal, struck between the CEOs of the two exchanges on Tuesday. The deal was pending the ability of Binance to perform due diligence of FTX’s balance sheet.

After an initial review, Binance said in a statement on Wednesday that it had significant concerns that convinced it to back out of the deal.

“In the beginning, our hope was to be able to support FTX’s customers to provide liquidity, but the issues are beyond our control or ability to help,” Binance said.

The price of bitcoin plunged more than 13 per cent to $15,840 US, according to CoinDesk, its lowest level since November 2020. It had been above $20,000 US earlier in the week. The other major cryptocurrency, Ethereum, dropped 13 per cent.

FTX had agreed to sell itself to Binance after experiencing the cryptocurrency equivalent of a bank run. Customers fled the exchange after becoming concerned about whether FTX had sufficient capital.

The sudden sale was a shocking turn of events for FTX CEO and founder Sam Bankman-Fried, who was hailed as somewhat of a saviour earlier this year when he helped shore up a number of cryptocurrency companies that ran into financial trouble.

FTX’s own crypto token, known as FTT, plunged more than 50 per cent on the reports. The token, now worth about $2.50 US, was worth 10 times that amount only a week ago. Much of crypto investors’ concerns centred on whether FTX’s balance sheet was saturated with increasingly worthless FTT tokens, whose total value would not exceed the exchange’s liabilities, effectively making FTX insolvent.

FTX is now apparently under investigation by U.S. authorities for how it handled customers’ deposits, according to Bloomberg News and other media outlets.

Shares of publicly traded exchanges exposed to crypto also plunged on the developments. Robinhood shares closed down roughly 14 per cent, and Coinbase shares lost about 10 per cent.

FTX is the latest cryptocurrency company this year to come under financial pressure, as crypto assets have collapsed in value. Other failures include Celsius, a bank-like company that took in crypto deposits in exchange for yield, as well as an Asia-based hedge fund known as Three Arrows Capital.

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