Binance has had to pause Bitcoin ($BTC) withdrawals twice in a span of 12 hours this Sunday May 7. The exchange has moved a some $4.4 billion worth of Bitcoin (188,000 BTC) between its hot and cold wallets over the weekend. The move took place while the exchange halted BTC withdrawals twice due to network congestion as well as a large volume of pending transactions.
The exchange has since resumed Bitcoin withdrawals and made adjustments to its fees to prevent future occurrences. Reports indicate that Binance is working on enabling BTC Lightning Network withdrawals to help mitigate such issues in the future.
According to official information from Binance, the first pause occurred at about 8pm BST. In a tweet, the exchange explained the pause was due to “congestion issues” which was then promptly resolved about an hour-and-a-half later.
Six hours later, the exchange paused Bitcoin withdrawals for a second time, this time citing a “large volume of pending transactions.” They further explained that “our set fees did not anticipate the recent surge in $BTC network gas fees.” About two hours later, withdrawals were resumed and as of writing, there seem to be no more hiccups in the exchange’s operations.
The temporary halt of BTC withdrawals can be partly attributed to the increasing adoption of Ordinal inscriptions, which function similarly to NFTs on the Bitcoin network. These inscriptions have contributed to a surge in transaction fees and a significant increase in the daily number of Bitcoin transactions. On April 30, the number of daily Bitcoin transactions reached a new all-time high of over 568,300, surpassing the previous peak during the 2017 bull run by nearly 78,000 transactions. This increase was also likely influenced by JPMorgan Chase's acquisition of First Republic.
Binance's 24-hour trading volume has reached over $7.6 billion, according to blockchain analytics from CoinMarketCap, a figure which is which is more than eight times the volume of the next-largest crypto exchange, Coinbase. As a result of the weekend's events and the broader market conditions, Bitcoin's price has dropped by 3.4% over the past 24 hours, currently trading at $27,913.64.
The recent events surrounding Binance and the Bitcoin network highlight the challenges faced by major cryptocurrency exchanges in handling large volumes of transactions and maintaining smooth operations. Binance's decision to halt BTC withdrawals temporarily drew attention to the network's congestion and increased fees, prompting concerns among users and traders.
However, Binance has taken steps to address these issues by adjusting its fees and exploring the implementation of BTC Lightning Network withdrawals. The Lightning Network is a layer-2 solution that allows for faster and cheaper transactions by creating off-chain payment channels, which can help alleviate network congestion and reduce fees.
Exchanges like Binance will need to adapt and innovate to maintain their competitive edge and ensure a more seamless trading experience for their users. Implementing solutions like the Lightning Network and adjusting fees in response to market conditions are key to this.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
