Bitcoin hits two-year low following FTX-Alameda controversy

The price of Bitcoin briefly hit a two-year low on Tuesday as the FTX-Alameda Research controversy brought the entire crypto market down.

After Wall Street opened for the day, Bitcoin lost $2,000 in two hours, reaching $17,120 per unit on Bitstamp. Its lowest price this year was recorded in June at $17,600.

According to Binance's order book, the price drop had broken Bitcoin’s price support of $18,000. At the time of writing, the Bitcoin hovered around $18,400.

Data revealed that the total liquidation of Bitcoin on November 8 was $915 million. The token’s long liquidation was $214 million, while the liquidation of cross-crypto long positions was $670 million.

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Bitcoin was not the only token experiencing losses on Tuesday. FTX’s native token, FTT, experienced a 70 percent loss in total market value as its price dropped below $7. Solana traded below $25 or lost 18 percent. BNB also lost 2.6 percent, trading at $328 per unit.

The crypto market will likely head into another volatile day on November 10 as the October consumer price index (CPI) goes public. The inflation data offers insight into whether the Federal Reserve will maintain its hawkish monetary policy.

Investors grew concerned about the crypto market after FTX’s balance sheet revealed a liquidity issue. Binance CEO Changpeng Zhao announced that it would acquire FTX’s non-U.S businesses, which account for most of its revenue.

However, other reports suggested that FTX was also seeking to raise $6 billion to close the gap in its balance sheet, which could jeopardize the agreement with Binance.

Analysts compared the FTX bank run with the case of Terra and LUNA earlier this year. Terra collapsed and brought along its sister token, LUNA, because their assets were closely tied.

The collapse eventually led to multiple bankruptcy cases, including that of Three Arrows Digital and Celsius. The same thing happened to FTX and its sister company, Alameda Research, which was also under scrutiny following a leaked balance sheet.

In response to FTX’s financial situation, investors pulled out funds from their accounts. Data showed that FTX’s liquidity reached $6 billion in several days. On Tuesday, FTX halted fund withdrawals from its platform.

FTX CEO Sam Bankman-Fried attempted to reassure investors, saying that the exchange was trying to clear its backlog. Investors can still withdraw funds through fiat, but the process will take days to complete.

Crypto regulation

In the future, analysts predicted that the crypto market would fluctuate due to pressures from regulators. At the moment, each country or state implements policies that may conflict with one another.

According to analysts, after the FTX case, regulators might start to enforce a strict policy to control the industry. Germany, for example, announced that it would closely monitor Coinbase's operations in the country.

In the U.S., several government agencies, including the Securities and Exchange Commission (SEC), are also dealing with crypto-related cases. These agencies want to extend existing regulations and apply them to crypto cases. For example, SEC chief Gary Gensler said that crypto tokens were comparable to security assets and, thus, should be treated the same.

Crypto regulation would eventually influence sentiment toward the risk asset. Analysts said it might improve confidence in the market by offering a clear guideline in the event of a liquidity issue like FTX.