Bitcoin and Ether both experienced drops in their prices. Bitcoin fell 5.3% to $27,420.73 and Ether fell 4.3% to $1,833.72. The price drops were in response to reports from a major crypto exchange highlighting “congestion” on the Bitcoin network.
Bitcoin Network Struggles with Scale
Reports from Binance, one of the biggest crypto exchanges in the world, about a “congestion issue” on the Bitcoin network caused a drop in Bitcoin prices. The Bitcoin network is not designed to handle a large number of transactions at scale and processes only seven to ten transactions per second. This makes it unviable as a potential rival to companies such as Visa and Mastercard. To address this issue, projects such as the Lightning Network have gained in popularity.
BRC-20 Tokens Slow Down Network
The increase in demand for BRC-20 tokens, an experimental token on the Bitcoin blockchain that allows users to create NFTs on Bitcoin, has slowed down the Bitcoin network. Transactions fees on Bitcoin have increased by 297% in the 14 days preceding Friday. This adoption of different types of tokens on the Bitcoin network should be a positive sign long-term, but it has slowed down the network.
In response to the network congestion reports, Binance temporarily closed Bitcoin withdrawals until the network stabilized. The exchange later resumed service, but withdrawals were halted again. Binance has adjusted its fees and is working on enabling BTC Lightning Network withdrawals to prevent a similar recurrence in the future. Despite the recent price drops, market strategist Joel Kruger believes that dips will continue to be well supported unless Bitcoin falls below $25,000.