Binance and Bitcoin have met on a new-found crypto problem. The crypto market has been hit with a double whammy as of late, with both the consumer price index (CPI) and Bitcoin prices experiencing volatility. The situation has sparked a wave of fear, uncertainty, and doubt (FUD) among traders and investors alike.
In the midst of this turbulence, Binance, one of the largest crypto exchanges in the world, is fighting to quell FUD and assure traders that the market will recover. Since the weekend, Binance has suspended BTC withdrawals three times, citing “congestion” on the Bitcoin network, while simultaneously transferring a massive amount of funds between wallets.
Binance comes to the spotlight once again
Bitcoin begins the new week at the epicenter of a new crypto industry crisis, as the highest fees in two years exert pressure on the cryptocurrency’s price action. Binance’s shifts came as huge volume of transactions entered the Bitcoin mempool, driving already high fees into territory not seen in some years.
This had the unforeseen consequence of generating Bitcoin’s first-ever block in which miners received more from fees than the block subsidy itself – 6.75 BTC against 6.25 BTC, respectively.
Meanwhile, some of the industry’s most recognizable personalities criticized Binance for its policy. Changpeng “CZ” Zhao, CEO of Binance, indirectly referred to “BTC withdrawal issues” at the exchange as “FUD.”
BTC hits 2-week lows
Bitcoin fell below US$28,000 on Tuesday morning in Asia due to the rise of the Ordinal protocol and Bitcoin-based memecoins, which drove up transaction fees and caused network congestion, causing Bitcoin’s price to drop below US$28,000.
Litecoin led the decline among the top 10 non-stablecoin cryptocurrencies, which included Ether. Futures on U.S. equities traded flat to lower after Wall Street ended Monday with a divided performance ahead of Wednesday’s inflation report.
Ether fell 2.04% to $1,843 but gained 0.50% on the week. The second-largest crypto fell to a low of $1,818 on Tuesday, but managed to hold the $1,800 resistance level.
Pepe and Floki, two memecoins that skyrocketed after being listed on Binance last week, have dropped 32.88% and 12.36% in the last 24 hours, respectively. In the last 24 hours, the overall crypto market capitalization fell 3.26% to $1.14 trillion. Total trading volume increased by 56.84% to US$45.38 billion.
CPI data set to affect the crypto market
In terms of macroeconomic developments, the week will be highlighted by the April release of the United States Consumer Price Index (CPI). The CPI, which is due on May 10, will be closely analyzed for signals that inflation is continuing to fall, perhaps enhancing the space for politicians to loosen economic policy.In April, Bitcoin shot for fresh ten-month highs despite a modest drop below market forecasts.
However, the CPI is only one of three major U.S. data releases due this week, including jobless claims and the Producer Price Index. Four Federal Reserve speakers will take the stage this week, while big firms will release their first-quarter earnings reports.
The CPI is renowned as a volatility driver in crypto, but even if the data are positive, not everyone expects the rally to continue this month.
NVT highlights saturated network
The disruption caused by elevated fees is already having an effect on Bitcoin’s long-term metrics. On May 8, the network value to transaction ratio (NVT) reached its greatest level in four years.
According to on-chain analytics company Glassnode, NVT is currently trading at levels not seen since 2019. The NVT ratio was developed by statistician Willy Woo and examines the relationship between value moved on-chain and Bitcoin’s total market capitalization.
BTC miners suffer crypto winter troubles
As a sign that Bitcoin miners are still dealing with the effects of the bear market of 2022, their BTC reserves are at a two-year low. According to the on-chain analytics platform CryptoQuant, the quantity of BTC in miners’ wallets continues to decline through 2023, despite the price recovery expected for BTC.
As of May 8, miners hold 1,826,695 BTC, the lowest amount since July 2021. According to reports, miners faced significant pressure in 2022 as the BTC/USD exchange rate declined, putting their cost basis at risk of exceeding their mining revenue. Separate data disclosed last week that since 2010, miner revenues have exceeded $50 billion.
The intersection of FUD and CPI has brought a wave of uncertainty to the crypto market, with Binance at the center of the storm. However, with the increasing adoption of Bitcoin and the ongoing innovation in the industry, it is important to stay informed and remain focused on the long-term potential of this exciting technology.
