Brits returning from their Coronation celebrations have been met with a noticeably weaker cryptocurrency scene, with bitcoin (BTC) nearly 7% lower since Friday’s close, hovering around US$27,500 on the BTC/USDT pair at the time of writing.
Long-bitcoin liquidations clocked in at US$45mln yesterday compared to less than US$10mln in shorts.
Monday was a particularly bearish trading session that saw bitcoin dragged lower when Binance temporarily paused bitcoin transactions due to a dramatic surge in transaction fees.
Congestion hits bitcoin prices – Source: currency.com
The bitcoin network is coming under increasing stress due to a large volume of transactions, many in relation to new NFT and token protocols cropping up on the network since the novel introduction of Ordinals.
Created by developer Casey Rodarmor, Ordinals essentially retrofits the bitcoin network to make it NFT compatible, something it was never designed to facilitate.
Ordinals is a source of much disdain among the bitcoin community from both a logistical (higher fees, more congestion) and fundamental (NFTs run against the core bitcoin principles) point of view.
Evidently, these congestion issues are beginning to impact the price of the world’s largest cryptocurrency, creating a unique situation where network activity is increasing, but the value of the network is decreasing.
"What's going on right now in bitcoin is, is quite unprecedented. And we haven't really seen this for many, many years," 21Co co-founder Hany Rashwan told CoinDesk TV.
This represents a huge problem for the bitcoin community: As a decentralised ecosystem without a governing body, there is no immediate fix to the congestion problem, nor any centralised authority to carry out the fix.
Time for an altcoin pivot?
One short-term option for cryptocurrency investors is to rebalance their portfolios to altcoins, but that strategy has yet to find much appeal.
Ethereum (ETH) did make some substantial gains on bitcoin last Friday and this Monday, though the ETH/BTC pair’s performance has been choppy at best, with around 1.4% in gains clocked up over the seven-day period.
Bitcoin continues to outpace the majority of the blue-chip altcoins. Ripple (XRP), Cardano (ADA), Dogecoin (DOGE), Polygon (MATIC), Solana (SOL) and Polkadot (DOT) have all amassed over 5% in losses in the past week against bitcoin’s 1.6% in losses.
Congestion issues aside, crypto traders will be awaiting tomorrow’s US inflation read, with hopes that a higher-than-expected ramp down on consumer prices will lead to risk-asset tailwinds.
For now, global cryptocurrency market capitalisation stands at US$1.14tn after dipping 1.4% overnight, with total value locked in the decentralised finance space falling 2.8% to US$47.2bn.
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