The world’s largest cryptocurrency exchange, Binance, has recently halted Bitcoin withdrawals for the second time in 24 hours, attributing the cause to a sudden increase in the Bitcoin network gas fee. With nearly half a million pending transactions on the network, Binance claims to be working diligently to resume BTC withdrawals as soon as possible.
This pause has led to some selling pressure on Bitcoin, with its price dropping more than 2% in the last day, currently trading at $28,228 and a market cap of $546 billion. It’s worth noting that Binance previously halted BTC withdrawals on May 7 for about 90 minutes, citing Bitcoin blockchain congestion as the reason. As a result, volumes on the Binance exchange have skyrocketed to over $6 billion in the past day, which is five times higher than the next platform, OKX.
To address this issue, Binance has assured investors that their funds are safe and that they are replacing pending BTC withdrawal transactions with higher fees to expedite their processing by the mining pool. The exchange also mentioned that they are considering enabling Bitcoin Lightning Network to aid in such situations.
One possible explanation for the network congestion is the release of a protocol called Ordinals by Bitcoin developer Casey Rodarmor earlier in 2023. Ordinals facilitated the minting of non-fungible tokens (NFTs) on the Bitcoin blockchain for the first time, thereby boosting its transactions. According to Hayden Hughes, co-founder of social-trading platform Alpha Impact, Ordinals have led to a “massive run-up in network fees and congestion.”
Another significant development is the increased adoption of Bitcoin Taproot, which anonymizes transactions. On May 7, a record 75.77% of Bitcoin on-chain transactions utilized Taproot, compared to a mere 1.536% at the beginning of the year. Crypto journalist Colin Wu suggests that “the increase in Taproot adoption means that block sizes are increasing, resulting in an increase in transaction costs.”
While the current congestion and increased fees present challenges for Bitcoin users, the overall growth in adoption and development of newer technologies such as Ordinals and Taproot demonstrate continued innovation within the cryptocurrency space. As Binance and other exchanges work to address these issues, it remains crucial for investors and users to stay informed and conduct their market research before making any investment decisions.