Binance, a major centralized cryptocurrency exchange, announced that it had temporarily suspended Bitcoin withdrawals on Sunday due to a surge in pending transactions. The move came as the exchange experienced a record outflow of $187 million on May 7, according to data from CryptoQuant.
The Bitcoin mempool, which serves as a holding area for incoming transactions before they are verified, was clogged with over 400,000 unprocessed transactions at the time of the announcement.
Binance tweeted that the issue had been resolved after one hour of halting BTC withdrawals. The exchange assured its customers that their funds were safe and that its team was working to fix the problem.
“We’ve temporarily closed #BTC withdrawals due to the large volume of pending transactions. Our team is currently working on a fix and will reopen $BTC withdrawals as soon as possible. Rest assured, funds are SAFU,” said Binance on Twitter.
We've temporarily closed #BTC withdrawals due to the large volume of pending transactions.
Our team is currently working on a fix and will reopen $BTC withdrawals as soon as possible.
Rest assured, funds are SAFU.
— Binance (@binance) May 8, 2023
This is not the first time Binance has experienced technical issues with its platform. The exchange also suspended deposits and withdrawals in March due to similar technical difficulties.
Speculation surrounding Bitcoin outage
The outage prompted rampant speculation on Crypto Twitter about the cause, with some suggesting technical theories and others promoting international political conspiracies. Regardless, the outage happened just days after the total fees on the Bitcoin blockchain reached $3.5 million, marking a 400 percent increase from late April.
Reports suggest that the congestion is linked to a surge in BRC-20 transactions, which have been driven by the popularity of meme coins like PEPE. According to CoinMarketCap, PEPE’s price skyrocketed by more than 263 percent over the past week, triggering a flurry of trading activity that pushed Bitcoin transaction fees to their highest level in two years.
Centralized exchanges such as MEXC Global, Bitget, Gate.io and Huobi have also listed PEPE trading pairs.
BRC-20 is an experimental token standard that allows users to create and transfer fungible tokens on the Bitcoin blockchain and has emerged as a popular platform for trading meme coins. Unfortunately, this has led to a significant increase in the number of transactions, which overwhelmed the network’s capacity.
While meme coins have become a major part of the cryptocurrency world since the introduction of Dogecoin in 2013, they are known for their volatility and can lead to significant losses for investors.
Bitcoin fees reach two-year high
Bitcoin experienced a surge in transaction fees, reaching their highest levels in nearly two years on Friday, with an average of $9.62 per transaction based on data from YCharts.
The high transaction fees coincided with a significant rise in the number of inscriptions made through Ordinals — a mechanism on Bitcoin that enables the creation and trading of fungible BRC-20 tokens, similar to NFTs.
The market cap of these tokens, which mirror ERC-20 tokens, has grown to $446 million, according to brc-20.io. The total number of digital assets inscribed on a Satoshi, the lowest denomination of Bitcoin, surpassed 2.5 million a week ago and reached 4.3 million on Sunday.
As a result, transaction fees averaged around $8.84 on Saturday, suggesting a trend back down. But this still marked over a 500 percent increase compared to six months ago when Bitcoin transactions averaged around $1.45.
Despite the network congestion and high transaction fees, some exchanges like OKX still had smooth Bitcoin deposit and withdrawal services. At the time of Binance’s withdrawal halt, its price was slightly up, gaining less than 1 percent to around $29,000.