First Mover Asia: Binance Congestion Chaos Weighs Heavy on Bitcoin

Good morning. Here’s what’s happening:Prices: Bitcoin and Ether prices are down due to BRC-20 meme coins congestion, with a potential solution being a shift of profits to altcoins and Ethereum.Insights: Bitcoin's path "is not straight," Paul Eisma, head of trading for XBTO Group, told CoinDesk TV.PricesBitcoin Buckles Under Pressure of Network Congestion ChaosBitcoin Falls

Good morning Asia.

Bitcoin is beginning the East Asia trading day down 2.6% at $27,715, while Ether is down 1.4% to $1,850.

The Bitcoin network’s Ordinal-induced congestion is to blame, which caused Binance to suspend withdrawals twice over the weekend.

"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 and CEO Hany Rashwan said during a recent appearance on CoinDesk TV.

Like others, Rashwan blamed BRC-20 meme coins, but also said that we shouldn’t conflate these with altcoins.

"I wouldn't categorize meme coins in the same league as altcoins like Ethereum or Solana,” he said. “These altcoins are essentially smart contract platforms that facilitate a range of functions, including but not limited to meme coins and NFTs."

Rashwan sees a way out of the congestion which involves meme coin holders taking profits and moving to altcoins and Ethereum, which in turn could lead to those coins increasing in value as well.

But it will take another large macroeconomic event to kick off this move. And for now, we are stuck with Bitcoin NFTs of PEPE.

InsightsBitcoin's Not-So Straight Path

The meme pool-spurred congestion on Binance and bitcoin’s hefty decline are “growing pains,” but the largest cryptocurrency by market capitalization “will be fine in the long run,” Paul Eisma, head of trading for XBTO Group, told CoinDesk’s “All About Bitcoin” program on Monday.

“It's almost like a deer in headlights for the bitcoin protocol,” Eisma said, linking the latest technical problems to the late 2021 Taproot upgrade, which boosted the bitcoin network’s privacy, among other improvements.

But Eisma said optimistically that bitcoin has remained in a range roughly between $25,000 and $30,000 for much of this year. He said that crypto is still in its formative years, so understandably subject to the same headwinds that have afflicted other early-stage technologies throughout history.

“Like any young and growing, nascent technology that gets upgrades and modifications, this is part of it,” Eisma said. “This is part of the growth and evolution of the network, and the path is not straight.

Eisma said that he will be eyeing Wednesday’s release of the May Consumer Price Index (CPI) for a sense of the U.S. central bank’s next privacy move. The Federal Reserve has boosted interest rates 25 basis points (bps) three consecutive times, but observers of monetary policy, particularly those critical of the Fed, are hoping for a cessation of the bank’s hawkishness.

“What asset markets are looking for is something not too strong or too weak because if something comes in and around, like, I don't know, plus, or minus, you know, some decent, low standard deviation of what's expected, then (it’s) still too early for a pause to rate decreases,” he said. But he added warily that the current inflation rate is still above “the 2% level the Fed is seeking. It's still about the core PCE level that they're seeking as well. So, you know, Powell has been clear that he's going to keep rates at this level for longer than the market is implying.”