Why Is Bitcoin Down Today? The crypto market gets a new hit
Bitcoin price lost 4.2% this past weekend and fell back to $28,000. The broader crypto market is also consistently in the red. The second largest cryptocurrency by market capitalization, Ethereum, is down 6% since Friday.
Why is bitcoin and crypto down today?
As always, Bitcoin’s recent price movement should be viewed from multiple angles, as there is mostly not just one reason. However, one factor currently stands out: the congestion of the Bitcoin network and the extremely high fees for a BTC transaction.
The reasons for the congestion are Bitcoin Ordinals and the new BRC-20 token standard. With its creation in early March, people can now create fungible tokens in addition to Bitcoin. Embraced by the meme coin community, this new token standard has quickly seen an increase in daily transactions and a market capitalization of over $160 million this week.
Binance, the largest cryptocurrency exchange by trading volume, first announced on Sunday that it had stopped Bitcoin (BTC) withdrawals. According to a statement on Twitter, the exchange has stopped Bitcoin (BTC) withdrawals due to congestion on the Bitcoin network.
A few hours ago, Binance stopped Bitcoin withdrawals again, citing a large backlog of pending withdrawals. Binance tweeted on May 8 that it had “temporarily” closed BTC withdrawals because there was “a large volume of pending transactions.”
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
After two hours, Binance wrote that BTC withdrawals were available again but at higher fees. “To prevent a similar recurrence in the future, our fees have been adjusted,” the exchange explained, adding, “We will continue to monitor activity on the chain and adjust accordingly if necessary. Our team has also been working on activating the BTC Lightning Network -withdrawal, which will help in such situations.”
The blockage of the Bitcoin network, as well as the withdrawal pause at Binance, may have unsettled the market and caused the price drop. Remarkably, it’s not just Binance. At press time, 429,000 transactions in the meme pool were waiting to be included in a block.
On the other hand, it should be noted that the Bitcoin price has been in a consolidation phase for several weeks now after the furious rally at the beginning of the year. With the latest price drop, BTC is stuck in its trading range, but the overall bullish picture for BTC remains unchanged.
Last but not least, the Bitcoin and crypto market is currently struggling with historically low liquidity as a result of Operation Choke Point 2.0, as Bitcoinist reported. Because of this, volatility is expected to be higher as even a few large buy and sell orders can move the market more.
Delta-based trader @Skew52 explained that during the price decline, Coinbase was noticeably leading the market with spot sales to the downside. With BTC stabilizing at $28,200 at press time, the trader wrote:
$BTC Binance Spot. Update: Find buyers around $28K and will likely sell around $28.5K – $28.7K Still decent bidding depth here.
Featured image from iStock, chart from TradingView.com
