Market News

BY  Suvashree Ghosh and Sidhartha Shukla, Bloomberg News

(Bloomberg) -- Binance restarted withdrawals of Bitcoin after citing congestion on the token’s blockchain for two halts in less than 12 hours, suspensions that weighed on cryptocurrency markets.

The company said higher fees have been applied to pending transactions so they get picked up by Bitcoin miners — the computer rigs that operate the network. Withdrawals had been down for over two hours on Monday in Asia.

“To prevent a similar recurrence in the future, our fees have been adjusted,” it said. “We will continue to monitor on-chain activity and adjust accordingly if needed.”

Binance had also halted Bitcoin withdrawals on Sunday for about 90 minutes, blaming congestion on the token’s blockchain.  

Bitcoin, the biggest cryptocurrency, fell as much as 3.7% and was trading at about $27,950 as of 9:05 a.m. in London on Monday. An index of the biggest 100 digital assets posted a similar decline.

Binance is by far the largest exchange in the digital-asset sector following the collapse of rival FTX last year. Trading volume on the platform exceeded $7 billion in the past 24 hours, five times as much as the next nearest platform OKX, according to data from CoinGecko.

Earlier this year Bitcoin developer Casey Rodarmor released a protocol — called Ordinals — that helped people mint nonfungible tokens on the network for the first time. That boosted transactions on the Bitcoin blockchain.

NFTs or digital collectibles are often based on Ethereum, crypto’s most important commercial highway. Their emergence on the Bitcoin network represents a new application of a blockchain that is better known for its store-of-value and payment functions.

Ordinals led to a “massive run up in network fees and congestion,” said Hayden Hughes, co-founder of social-trading platform Alpha Impact.

Binance in its tweets also used the crypto phrase “rest assured, funds are SAFU” to suggest that customer funds are safe. 

Last year’s crypto crash and bankruptcies like FTX undermined confidence in digital-asset platforms and skepticism continues to linger over the industry. Binance and rivals subsequently redoubled efforts to try and dispel worries about whether they have sufficient reserves.

Fees Mismatch

The withdrawal fees charged by exchanges fell short of the fees charged by miners, said Stefan von Haenisch, head of sales trading at OSL SG Pte in Singapore.

“The queue of transactions pending verification for inclusion in the blockchain has experienced significant growth in recent days, causing an increase in transaction fees and confirmation times,” he said.

Binance on Sunday also moved about $4.4 billion worth of Bitcoin across its digital-asset wallets, based on an analysis from research company CryptoQuant. The exchange said in a tweet that Bitcoin was moved “between Binance hot and cold wallets due to the BTC address adjustments.” 

Cold wallets aren’t connected to the internet, unlike hot ones, and are often viewed as a more secure way of storing digital currency.

(Updates markets in the fifth paragraph.)