Binance Halts Bitcoin Withdrawals Amid Fee Spikes
Changpeng Zhao, co-founder and CEO of Binance. Ben McShane—Getty Images
On Sunday, the Twitter account for Binance announced on two separate occasions that it temporarily closed Bitcoin withdrawals, citing a high volume of pending transactions and a “recent increase in $BTC network gas fees.” The first break lasted an hour and the second break three hourswith the exchange sharing on Monday morning that it had processed all pending withdrawals.
Despite the quick response, fear rippled through Crypto Twitter as users speculated over the underlying reasons for the pause and expressed broader anxiety about Binance’s stability. Although the company led by Changpeng “CZ” Zhao remains the undisputed leader in the crypto ecosystem, with an estimated market share of over 60% among centralized exchanges, it has come under increasing pressure from global regulators.
We are temporarily closed #BTC withdrawals due to the large volume of pending transactions.
Our team is currently working on a solution and will reopen $BTC withdrawal as soon as possible.
Rest assured, funds are SAFU.
— Binance (@binance) 8 May 2023
Concerns centered around the fact that other exchanges had not paused withdrawals, with crypto critic Bennett Tomlin notes that “network congestion” on Binance is not something that can be resolved by the company. Meanwhile, spectators on Twitter noticed large outflows of Bitcoin from Binance totaling over $3 billion.
On Twitter, Zhao described the concerns as “FUD”, a popular crypto term for “fear, uncertainty and doubt”. He mentioned fluctuations in Bitcoin network fees, or the cost of processing transactions.
Patrick Hillmann, Binance’s chief strategy officer, shared one Twitter posts which attributed the apparent outflows to Bitcoin being sent to new addresses on Binance, although withdrawals from the exchange still likely totaled nearly $300 million. The Binance Twitter account described the outflows as movements between Binance wallets.
“This is why it’s important for traditional media outlets to keep writing stories based solely on groupthink and the FUD accounts they see on Twitter,” Hillmann wrote.
4. There is some FUD about BTC withdrawal problems. Here’s why. Bitcoin network fees fluctuate, 18 times in a month. 🤷♂️🙏
(the screenshot is a google translate version) pic.twitter.com/iYcEx22xMJ
— CZ 🔶 Binance (@cz_binance) 8 May 2023
Although Binance’s announcements took center stage on Sunday, the turbulence reflected a hectic time for Bitcoin, the largest cryptocurrency by market capitalization. Fees have risen to two-year highs, driven largely by demand for “memecoins,” or crypto tokens created for speculation and humor, as well as the growing popularity of ordinals — non-fungible tokens embedded in Bitcoin transactions.
An analyst told CoinDesk that Bitcoin users are increasingly using the blockchain for smaller transactions rather than larger trades, leading to congestion and higher fees.
As John Reed Stark, a former enforcement attorney at the Securities and Exchange Commission, noted, the episode reflects the risk of regulatory uncertainty. Without clear supervision, he wrote on Twitter, it is impossible to verify the reasons for the withdrawal pause.
“If Binance was SEC or FDIC registered, a US team of auditors would be on site and in Binance’s face, demanding to speak to everyone, demanding documents, demanding trading information, immediately investigating and referring any suspicious behavior to the US DOJ,” he so. “Trust is non-existent in the crypto ecosystem.”
Binance has apparently/reportedly stopped withdrawals citing network congestion. Now, I just read an, albeit 100% unconfirmed, report that the shutdown occurred right after $3.3 billion $BTC in aggregate account withdrawals from several stock exchanges.
No way for me to confirm anything… pic.twitter.com/qLQ1VQBlE1
— John Reed Stark (@JohnReedStark) 7 May 2023
The Binance Twitter account described the events as a “learning opportunity”.
Bitcoin fell about 3.8% from Sunday to Monday, with the price at $27,900 at the time of publication. Over the past seven days, it has fallen just over 2%.
