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- Binance has resumed withdrawals after pausing twice in 24 hours. It mulls using the Lightning Network to prevent such situations in the future.
- Binance also addresses concerns over massive outflows stating that they are such fund transfers between hot and cold wallets.
On Sunday, May 7, Bitcoin (BTC) has once again come under strong selling pressure as the world’s largest crypto exchange Coinbase suspended withdrawals citing high network congestion on the Bitcoin blockchain. BTC is trading 2.21% down at $28,282 as of press time.
Earlier on Sunday, Binance has to temporarily pause Bitcoin withdrawals due to overwhelming pending transactions and gas fees shooting new highs. Although Binance managed to resume withdrawals a few hours later, it faced a similar situation later that day. As per the on-chain data, there are currently 500,000 unconfirmed transactions on the Bitcoin blockchain.
Interestingly, the Bitcoin gas fee has doubled since March 2023, pushing it to a two-year high. Currently, the Bitcoin network gas fee stands over $8, surging by more than 300% a year ago. Binance has assured investors that their funds are SAFU and that the team is working to accelerate the confirmation of all pending transactions.
However, in another update, Binance said that they have once again resumed withdrawals after pausing them twice in just 24 hours. Interestingly, Binance said that its team will work on introducing Lightning Network withdrawals in the future to prevent a similar situation. It noted:
To prevent a similar recurrence in the future, our fees have been adjusted. We will continue to monitor on-chain activity and adjust accordingly if needed. Our team has also been working on enabling BTC Lightning Network withdrawals, which will help in such situations. This is a learning opportunity for us and we’ll do our best to prevent this from happening again.
Bitcoin Ordinals and BRC20 Driving Gas Fee Higher
Earlier this year in 2023, Bitcoin developer Casey Rodarmor released a protocol dubbed Ordinals allowing users to mint non-fungible tokens (NFTs) on the Bitcoin blockchain for the very first time. The Bitcoin ordinals inscription tokens, popular for their BRC-20 standard designator, have a market cap of half a billion dollars across all of their 14,000 tokens.
Speaking to Bloomberg, Hayden Hughes, co-founder of social-trading platform Alpha Impact, said: Ordinals led to a “massive run-up in network fees and congestion”.
On the other hand, investors expressed concerns over the massive outflows of nearly $200K, worth $5.5 billion, from the Bitcoin blockchain over the past two days. On Sunday, May 7, transactions such as 117k and 40k BTC were recorded from Binance to other wallets. However, it turns out that the actual exchange outflow is far lower. Julio Moreno, head of research at CryptoQuant, explained that Binance sent these BTC to new wallets created by themselves.
A lot of people commenting about the huge Bitcoin outflows from Binance today.
Two transactions of 117K and 40K Bitcoin respectively.In reality, these are bitcoin sent to newly created change addresses that belong to Binance.
Effective outflows are most likely just 10,100… pic.twitter.com/c5z8WOshG6
— Julio Moreno (@jjcmoreno) May 7, 2023
The official Twitter handle of Binance has also issued a clarification noting: “We’re aware that some data are showing a large volume of outflows from #Binance. This ‘outflow’ are actually movements between Binance hot and cold wallets due to the BTC address adjustments”.
