On Sunday, the Twitter account for Binance announced on two separate occasions that it was temporarily closing Bitcoin withdrawals, citing a large volume of pending transactions and a “recent surge in $BTC network gas fees.” The first pause lasted one hour and the second pause three hours, with the exchange sharing on Monday morning that it had processed all pending withdrawals.
Despite the speedy response, fears rippled through Crypto Twitter as users speculated over the underlying reasons for the pause and expressed a broader anxiety for Binance’s stability. Although the company helmed by Changpeng “CZ” Zhao remains the undisputed leader in the crypto ecosystem, with an estimated market share of over 60% amid centralized exchanges, it has come under increasing pressure from global regulators.
We’ve temporarily closed #BTC withdrawals due to the large volume of pending transactions.— Binance (@binance) May 8, 2023
Our team is currently working on a fix and will reopen $BTC withdrawals as soon as possible.
Rest assured, funds are SAFU.
Concerns centered around the fact that other exchanges had not paused withdrawals, with the crypto critic Bennett Tomlin noting that “network congestion” on Binance is not something that could be solved by the company. Meanwhile, onlookers 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 cited fluctuations in Bitcoin network fees, or the costs for processing transactions.
Patrick Hillmann, Binance’s chief strategy officer, shared a Twitter post that 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 to hold on writing stories based solely on group think and FUD accounts they see on Twitter,” Hillmann wrote.
4. There are some FUD about BTC withdrawal issues. Here is why. Bitcoin network fees are fluctuating, 18x in a month. 🤷♂️🙏— CZ 🔶 Binance (@cz_binance) May 8, 2023
(the screenshot is a google translate version) pic.twitter.com/iYcEx22xMJ
Although Binance’s announcements took center stage on Sunday, the turbulence reflected a hectic time for Bitcoin, the largest cryptocurrency by market cap. Fees have risen to two-year highs, largely driven 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.
One analyst told CoinDesk that Bitcoin users are increasingly using the blockchain for smaller transactions rather than larger trades, which is 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 risks of regulatory uncertainty. Without clear oversight, he wrote on Twitter, it is impossible to verify the causes for the withdrawal pause.
“If Binance was SEC or FDIC registered, a U.S. team of auditors would be on site and in Binance’s face, demanding to speak to everyone, demanding documents, demanding trading info, immediately investigating and referring any suspicious conduct to the U.S. DOJ,” he said. “Trust is nonexistent in the crypto ecosystem.”
Binance has apparently/reportedly halted withdrawals citing network congestion. Now, I just read an, albeit 100% unconfirmed, report that the halt occurred right after $3.3 billion $BTC in aggregated account withdrawals from multiple exchanges.— John Reed Stark (@JohnReedStark) May 7, 2023
No way for me to confirm any… https://t.co/No51nkuwTE pic.twitter.com/qLQ1VQBlE1
The Binance Twitter account described the events as a “learning opportunity.”
Bitcoin dropped around 3.8% from Sunday to Monday, with the price hovering around $27,900 at the time of publication. Over the last seven days, it’s down a little over 2%.