Binance Concerns Coincide with CPI — 5 Key Points to Understand in Bitcoin This Week

Bitcoin (BTC) begins a new week amidst renewed drama in the cryptocurrency sector, as the highest fees in two years exert pressure on price movements.

Traders are facing downside volatility due to a congested mempool, with various factors being implicated.

The largest exchange, Binance, is contributing to the uncertainty by suspending BTC withdrawals multiple times, citing network “congestion.”

In the midst of this chaos, BTC/USD is exhibiting signs of weakness, dropping from $28,000 and threatening to break out of its broader trading range.

This situation marks a tumultuous start to a week already filled with potential catalysts for BTC price volatility, including macroeconomic data releases such as the Consumer Price Index (CPI) and Q1 earnings reports.

As Bitcoin network metrics begin to reflect the effects of current network activity, miners continue to liquidate their holdings, according to data, leading analysts to conclude that the bear market from 2022 remains in effect.

Cointelegraph examines these elements and more in the weekly summary of what is influencing the cryptocurrency markets.

Binance CEO labels BTC withdrawal suspensions as “FUD”

Bitcoin is facing pressure at the week’s outset, but not for the typical reasons.

As BTC/USD declines to $28,000, observers are closely monitoring developments on-chain and at the largest global exchange, Binance.

Binance has paused BTC withdrawals three times since the weekend, attributing the interruptions to “congestion” on the Bitcoin network, while simultaneously transferring a significant amount of funds between wallets.

We’re aware that some data are showing a large volume of outflows from #Binance.
This ‘outflow’ are actually movements between Binance hot and cold wallets due to the BTC address adjustments.

— Binance (@binance) May 8, 2023

Binance’s actions coincided with a surge in transactions entering the Bitcoin mempool, further escalating already high fees to levels not seen in several years.

This inadvertently resulted in Bitcoin’s first-ever block where miners earned more from fees than from the block subsidy itself — 6.75 BTC compared to 6.25 BTC, respectively.

Attention turned to Ordinals and even the crypto investment giant, Digital Currency Group, as potential sources of the transactions. Subsequently, market participants, including researcher and investor Eric Wall, identified a possible source of the on-chain “spamming.”

tl;dr: a hex derivative (xen) that's notable for spamming EVM chains has pivoted to spamming bitcoin via the ordinals brc-20 protocol causing an otherside-like mint event pic.twitter.com/3u2KHNpEyu

— Eric Wall ‍♂️ Taproot Wizard #2 (@ercwl) May 7, 2023

Binance faced criticism from several prominent figures in the industry regarding its policy.

“Bitcoin is not experiencing congestion. It's experiencing high demand,” core developer Peter Todd contended.

“binance can just allow users to specify what fee their willing to pay for withdraw, and pay that fee. It costs ~$5 to get an output in the next block. nbd Good chance @binance has a fractional reserve.”

Binance CEO, Changpeng Zhao, also known as “CZ,” indirectly addressed the “BTC withdrawal issues” at the exchange, labeling them as “FUD.”

“Bitcoin network fees are fluctuating, 18x in a month,” a part of a Twitter post indicated.

As the situation unfolded, BTC price action felt the impact, with a short-term downtrend persisting at the time of writing.

In analyzing trader behavior, monitoring resource Skew noted an increase in bid activity on Binance as Bitcoin returned to the $28,000 level.

$BTC Binance Spot
Update: spot buyers around $28K & likely to sell around $28.5K – $28.7K
Still decent bid depth here https://t.co/F1I9UhJETx pic.twitter.com/DSRTwfb5kK

— Skew Δ (@52kskew) May 8, 2023

Traders focus on critical levels as BTC price reaches 2-week lows

Beyond the immediate developments surrounding Binance and fees, market participants are keeping an eye on significant levels for BTC/USD.

As the pair trends below $28,000, popular trader Captain Faibik is watching $27,300 as a crucial support level.

$BTC Ascending Broadening Wedge Still in Play..!!
If Bulls can Successfully defend the 27.3k Support, it's likely that we'll see a Significant Bounce Back in the Coming days.#Crypto #Bitcoin #BTC #BTCUSDT pic.twitter.com/pwERANhUGE

— Captain Faibik (@CryptoFaibik) May 8, 2023

A subsequent tweet on the day highlighted a tightening wedge structure for Bitcoin, suggesting that a breakout is imminent.

Another trader, Andrew, is betting on the 50-day exponential moving average (EMA) as a potential support area, currently located near $27,950 and already breached on shorter timeframes.

The day’s current low of $27,617 marked Bitcoin’s lowest point since April 26, according to data from Cointelegraph Markets Pro and TradingView.

BTC/USD 1-day candle chart (Bitstamp) with 50EMA. Source: TradingView

“BTC is retesting at .618 after the Binance FUD. This is another Bitcoin vs $BTC moment,” crypto educator Crypto Busy summarized, referencing Fibonacci retracement levels.

“Bitcoin as a network is always stable, but exchanges and wallets need more scalability solutions. $BTC as an asset is retesting due to selling pressure and FUD. Remember, not your keys, not your crypto!”

BTC/USD annotated chart. Source: Crypto Busy/ Twitter

CPI “good candidate” for risk-on rally

Shifting to macroeconomic events, the week is anticipated to be highlighted by the April release of the United States Consumer Price Index (CPI).

Scheduled for May 10, CPI will be closely examined for indications that inflation is continuing to decrease, potentially allowing lawmakers to ease economic policy.

If there is one data release that could sink or ignite a stock rally, CPI would be a good candidate. Coming Wednesday 8:30 am ET.

— Chris Ciovacco (@CiovaccoCapital) May 7, 2023

In April, a slight dip below market expectations coincided with Bitcoin aiming for new ten-month highs.

CPI is just one of several significant U.S. data sets due this week, along with jobless claims and Producer Price Index (PPI) figures set for release.

Four Federal Reserve speakers will also be addressing the public, while this week marks the conclusion of Q1 earnings reports from major corporations.

Key Events This Week:
1. CPI inflation data – Wednesday
2. PPI inflation data – Thursday
3. Jobless claims data – Thursday
4. Consumer sentiment data – Friday
5. Total of 4 Fed speakers this week
6. Last big week of Q1 earnings
RT & LIKE if you enjoy these weekly previews!

— The Kobeissi Letter (@KobeissiLetter) May 7, 2023

“Numbers are expected to be ‘Good looking,’ good numbers are anticipated by the market and are partly priced in,” crypto trading and analysis account Doctor Profit informed Twitter followers regarding CPI as part of weekly updates.

CPI is recognized as a volatility catalyst across crypto; however, this month, not everyone is forecasting continued upside, even with positive figures.

Among them is popular trader Aqua, who indicated a broader correction approaching for BTC/USD due to what he perceives as “distribution” — tactical selling.

$BTC
This we take 24.8K nPOC soon, maybe, we have one more last upside squeeze if CPI data is good, CPI is in 2 days. But this here is looking more and more like a distribution and we are bound to see market correction in the coming weeks. #Bitcoin #BTCUSD #BTCUSDT #memecoin pic.twitter.com/n4Hp3LB97t

— Aqua (@PayneResidence) May 8, 2023

NVT highlights overheated network

The turmoil caused by elevated fees is already affecting long-term Bitcoin metrics.

Among these is the network value to transaction (NVT) ratio, which on May 8 reached its highest levels in four years.

As confirmed by on-chain analytics firm Glassnode, NVT is now at levels not observed since 2019.

Bitcoin NVT ratio chart. Source: Glassnode/ Twitter

Developed by statistician Willy Woo, the NVT ratio assesses the relationship between value transferred on-chain and Bitcoin’s overall market capitalization.

“When Bitcoin’s NVT is high, it signifies that its network valuation is surpassing the value being transmitted on its payment network; this can occur when the network is experiencing high growth and investors are valuing it as a high-return investment, or alternatively when the price is in an unsustainable bubble,” Woo explains on his own data website, Woobull.

Cointelegraph has extensively covered both the NVT ratio and its follow-up NVT signal metric, the latter containing important nuances that influence how NVT data is interpreted.

Bitcoin miners continue to decrease BTC holdings

In a sign that Bitcoin miners are still grappling with the repercussions of the 2022 bear market, BTC reserves they maintain are at two-year lows.

Related: Watch these Bitcoin price levels next as BTC dips 3% in choppy weekend

As reported by on-chain analytics platform CryptoQuant, the quantity of BTC in miners’ wallets is still on a downward trend, despite the recovery in BTC price observed throughout 2023.

“The return of miners’ interest in holding bitcoins for a longer duration will be one of the other valuable factors for the growth of the price counties, which is necessary to be attentive to in the coming days on the market,” contributor Crazzyblockk noted in one of CryptoQuant’s Quicktake market updates on May 1.

Miners currently possess 1,826,695 BTC as of May 8, according to data — the lowest since July 2021.

As Cointelegraph reported, miners faced significant pressure during 2022, as BTC/USD fell, risking their cost basis exceeding any revenue generated from mining.

Last week, separate figures revealed that since 2010, miner revenues have nonetheless totaled over $50 billion.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.