Bitcoin decreases after network congestion suggests Binance will suspend withdrawals shortly

May 9, 2023: Bitcoin fell to start the week, extending losses from a sharp drop over the weekend following reports by one of the biggest crypto exchanges in the world about “congestion” on the Bitcoin network.

The price of bitcoin was lower by about 4% at $27,787.05, according to Coin Metrics. It has dropped more than 5% since Saturday. Ether fell more than 3% to $1,856.87 on Monday.

“Reports of a large bitcoin discharge and withdrawals being paused at a major exchange could be factoring into some of the weakness we’re seeing. Ultimately however, there haven’t been any major developments as far as price action goes, with bitcoin still very much confined to a multiday bullish consolidation,” said Joel Kruger, market strategist at LMAX Group.

“Only a break back below $25,000 would give a reason for concern. Until then, we suspect dips will continue to be well supported,” he added.

Monday’s drop came after Binance tweeted Sunday that the Bitcoin network was “experiencing a congestion issue” and temporarily closed Bitcoin withdrawals until the network stabilized.

Some market participants have argued that the Bitcoin network is stable and Binance should have prepared for a high-fee environment on Bitcoin.

The issue has highlighted a long-known setback of the Bitcoin network: It wasn’t designed to handle many transactions at scale. It processes just seven to 10 transactions per second, making it unviable as a potential rival to companies such as Visa and Mastercard — an idea many have explored over the years but primarily put to rest.

This is why projects such as the Lightning Network, which helps speed up transactions without affecting the network, have gained popularity.

Service on Binance resumed, but later on Sunday evening, the exchange again halted withdrawals.

“To prevent similar recurrence in the future, our fees have been adjusted,” the Binance account tweeted. “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.”