The crypto industry has been in panic mode since the collapse of Terra-Luna, Voyager Digital, and FTX. In this respect, Binance‘s latest payout problems have caused a panic surge. On Sunday and Monday, Binance had to interrupt the transfer of Bitcoin for about two hours each.
The reason for the breakdowns was colossal transaction volumes and outflows in the cryptocurrency Bitcoin. This is said to have led to a traffic jam in the processing of transactions. Binance is the largest crypto trading platform in the world and has been experiencing clustered problems with asset outflows and regulators since the demise of FTX in November 2022.
To fix the glitch, Binance had to increase the compensation paid to crypto miners, known as the “gas fee.” This has significantly increased in price in recent days. Platforms like Binance have to pay this fee because they rely on crypto miners to provide their computer capacity to process crypto transactions on the blockchain. Binance has additionally enabled trade processing via the Lightning Network – this network allows Bitcoin to be traded off the blockchain.
According to data from CryptoQuant, there were large individual transactions, such as an outflow of 117,359 bitcoin and another over 40,184, equivalent to about $4.5 billion. In a tweet, Binance acknowledged that large flows were recorded. However, these “outflows” were movements between different customer wallets, not asset withdrawals. Binance is in the process of assigning new addresses to the infrastructure for its wallets – a kind of depository for cryptocurrencies – to improve the overall system’s efficiency and security. Market observers tend not to assume that crypto assets have left Binance.
The CEO of Binance, Changpeng Zhao, was not worried on Twitter; on the contrary: the mining fees would change and become more expensive, as a result of which transactions would be blocked. Therefore, people would complain. These are the “problems of a bull market,” he said. On the bright side, he wrote on the short messaging service Monday, cryptocurrencies are still more readily available and cheaper than fiat currencies.
Whether it is indeed a bull market at the moment, as Zhao believes, will be seen in the coming weeks and months. Bitcoin’s price performance has been resilient despite the dislocations at Binance. At times on Monday, it lost about 2 per cent of its value. This could indicate that the problems are primarily technical and limited to Binance.