Bitcoin Price Plunge; Mempool Backlog Stalls Trading
Bitcoin’s price plunged overnight Sunday into early Monday as a trading network saw an overloaded transaction reserve and high transaction fees. Binance, the world’s largest cryptocurrency exchange, temporarily halted withdrawals several times before resuming operations around 8:30 a.m. ET.
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As of 9 a.m. ET Monday, there were 444,990 unconfirmed bitcoin transactions in the network’s mempool, or memory pool, according to bitcoin data site mempool.space. The mempool stores unconfirmed transactions before adding them to the blockchain. When a user initiates a transaction, it is stored in the mempool until it is selected by a bitcoin miner. It is then inserted into the next block, validated and added to the chain.
Miners can prioritize smaller transactions that are easier to process or those with higher fees. This can lead to lower fees and larger transactions being stranded for longer periods.
There were more than 200 blocks waiting for validation at 9:50, showed mempool.space data.
During the backlog, bitcoin transaction fees increased above $23 for high-priority transactions. Transaction fees averaged around $4 for high-priority transactions on May 6.
One reason could be the increase in bitcoin Ordinals. These are inscriptions on digital assets to create content similar to non-fungible tokens (NFT). The total number of Ordinals inscriptions rocketed to 4.69 million as of Monday from 3.06 million on May 1, data from Dune Analytics shows.
Binance pauses withdrawals
Meanwhile, Binance stopped bitcoin withdrawals on its platform twice in the last 24 hours. The trading platform cited the “congestion problem” with the network.
“There is a large volume of withdrawal transactions from Binance still pending as our set fees did not anticipate the recent increase in BTC network gas fees,” Binance tweeted late Sunday night. The exchange raised miner fees for pending withdrawals to get them picked up by mining pools.
Binance noted that it will monitor on-chain activity and says it will explore the use of the Bitcoin Lightning Network to increase withdrawal times. The Bitcoin Lightning Network is a layer 2 protocol built on top of bitcoin that helps speed and scale transactions.
Binance noted that all pending transactions were processed around 8:30 a.m. ET.
Bitcoin price
BTC retreated by more than 5% in the last 24 hours, plunging as low as $27,294 on Monday from Sunday night’s level around $29,100 as the network backed up. Bitcoin climbed back around $27,500 on Monday afternoon after Binance transactions were processed.
Ethereum and other cryptocurrency prices followed bitcoin lower overnight. Ethereum fell just over 4% in price, falling near $1,840 on Monday from an overnight high of $1,936. ETH fell as low as $1,813 on Monday.
Bitcoin miners Digital Marathon (MARA) and Cabin 8 Mining (HUT) also retreated as the price fell. Binance’s publicly traded rival Coin base ( COIN ) fell 0.24% Monday after shares weakened 5.5% in early trading. COIN stock rose last week after Coinbase beat earnings estimates. And ARK Invest CEO Cathie Wood uploaded shares ahead of the report.
Bitcoin’s price is up nearly 66% so far this year, while ethereum is up around 54%.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison
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