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Crypto Traders in Panic after Binance Temporarily Freezes Bitcoin Withdrawals

Crypto Traders in Panic after Binance Temporarily Freezes Bitcoin Withdrawals

Binance sent crypto traders and investors into a panic after temporarily pausing Bitcoin withdrawals for several hours on June 13.
Dalmas

June 14, 2022

Introduction​

Binance, the largest cryptocurrency exchange by client base and trading volumes, sent crypto traders and investors into a panic after temporarily pausing Bitcoin withdrawals for several hours on June 13.

Their decision to, without warning, freeze BTC withdrawals caused jitters to traders at a time when crypto-assets were free-falling and most jostling to exit.

Changpeng Zhao explained that the pause was due to stuck on-chain transactions. This on-chain development forced the exchange to maintenance mode, uncharacteristically freezing BTC withdrawals in a high-pressure period when prices were dumping.

Binance CZ

While Changpeng Zhao said, the issue was to be resolved in a few minutes. However, he backtracked, updating the community that the Binance’s technical team would require more time to patch the error.

Reports earlier on observed that the freeze was a response to the sudden 13 percent drop in BTC prices on Monday. There were reports that the development in the Celsius Network was heaping pressure on traders, causing panic.

On their part, the Celcius Network issued a statement saying it was freezing all client crypto withdrawals, citing harsh market conditions. Following this news, the Celcius Network’s native token, CEL, crashed, falling by over 50 percent, causing a domino effect that spilled over to Bitcoin.

What Caused the Bitcoin Withdrawal Freeze?

In a post-mortem, Binance said the temporary pause was pinned to a “minor failure” on their wallet consolidation node.

We were repairing several minor hardware failures on wallet consolidation nodes earlier today, which caused the earlier pending transactions to be broadcast to the network after the nodes were repaired.

Adding,

These pending consolidation transactions had a low gas fee, which resulted in the later withdrawal transactions – which were pointing to the pending consolidation UTXO – getting stuck and unable to be processed successfully.

Although the withdrawal was experienced on the Bitcoin mainnet, wrapped versions of Bitcoin (wBTC) in Ethereum and the BNB Chain could still be broadcasted. All wBTC are smart contracts-reliant, circulating as ERC-20 or BEP-20 tokens in their respective networks. Even though using wBTC can be an option for traders or investors wishing to exit the market faster, they are with higher trading fees.

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Introduction

Dalmas

Dalmas is an active cryptocurrency content creator and highly regarded technical analyst. He’s passionate about blockchain technology and the futuristic potential of cryptocurrencies.

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