Why Is Bitcoin Down Today? Crypto Market Takes Another Hit

The Bitcoin price lost 4.2% over the past weekend and slid again to $28,000. The broader crypto market is also consistently in the red. The second largest cryptocurrency by market cap, Ethereum, is down 6% since Friday.

As always, Bitcoin’s recent price movement should be viewed from multiple angles, as for most of the time there is not just one reason. However, one factor stands out at the moment: the congestion of the Bitcoin network and the extremely high fees for a BTC transaction.

The reasons for the congestion are the 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 a surge in daily transactions and a market cap of over $160 million this week.

Binance, the largest cryptocurrency exchange by trading volume, first announced on Sunday that it had halted 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 halted Bitcoin withdrawals again, citing a large backlog of pending withdrawals. Binance tweeted on May 8 that it had “temporarily” shut down BTC withdrawals because there was “a large volume of pending transactions.”

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

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 on-chain activity and adjust accordingly if needed. Our team has also been working on enabling BTC Lightning Network withdrawals, which will help in such situations.”

The clogging 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 were waiting in the meme pool 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 recent 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. Due to 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 slump, it was noticeable that Coinbase led the market with spot sales to the downside. As BTC stabilized at $28,200 at press time, the trader wrote:

$BTC Binance Spot. Update: spot buyers around $28K & likely to sell around $28.5K – $28.7K Still decent bid depth here.