On Wednesday, Bitcoin (BTC) slid to a two-year trough, tumbling beneath $16,000, as crypto investors grappled with Binance’s unexpected reversal on acquiring the once-prominent but rapidly deteriorating rival, FTX.

Following Binance’s announcement of halting the purchase after a meticulous examination of FTX’s books, the CoinDesk Bitcoin Price Index sank to $15,625 — a level unseen since November 2020. This 14% nosedive marked BTC’s steepest single-day plunge since mid-June.

Binance’s Retreat: From Deal Sealed to Abrupt Exit

Just the previous day, Binance declared intentions to acquire billionaire Sam Bankman-Fried’s FTX amid intense withdrawal pressure. However, by Wednesday afternoon, the exchange retracted, citing “mismanaged funds and ongoing investigations by U.S. authorities” as critical deal-breakers.

Market Jitters Ripple Through Crypto Ecosystem

Crypto traders now fear that distress at FTX or Bankman-Fried’s Alameda Research trading firm could incite forced liquidations, potentially hammering not only FTX’s native token, FTT, but also sending shockwaves through other digital assets, including bitcoin, ether, and Solana’s SOL.

“This event acts as yet another trigger,” commented Bob Iaccino, co-founder and chief market strategist at Path Trading Partners. “Bitcoin plunging toward $9,000 wouldn’t shock me. For someone like me who’s exited BTC and waits to re-enter, that’s a constructive scenario.”

Embedded Risks in Alameda’s Balance Sheet

Earlier reporting by CoinDesk revealed Alameda Research’s books are heavily laden with FTT tokens — FTX’s proprietary asset — exposing it to billions in potential losses if liquidation occurs amid a shallow buyer pool.

Binance characterized its initial intent as a “non-binding letter of intent,” emphasizing that any agreement hinged on thorough due diligence.

Long-Term Outlook: Crypto’s Resilience Amid Chaos

“Crypto’s future remains intact,” Iaccino asserted, “but the sector requires a cleansing phase before it attracts serious investments, especially from traditional financial players.”

Shockwaves Extend to Traditional Markets

The bitcoin sell-off reverberated beyond crypto circles, rattling traditional markets on Wednesday. At one point, the ProShares Bitcoin Strategy ETF (BITO) halted trading briefly due to a plunge in underlying BTC futures contracts on the Chicago Mercantile Exchange (CME), which also triggered a circuit breaker in stock exchange trading.

Trading resumed swiftly, yet the incident underscored the sudden ferocity that has resurfaced in crypto trading dynamics after months of steady consolidation around $20,000.