Bitcoin slips amid liquidity, network congestion concerns

The biggest crypto currency dropped to $26,781 at one time on Thursday, the lowest level since March 28

Bitcoin prices slipped on Friday morning in Asia to below $27k amid concerns about decreasing liquidity and congestion on the network that are raising transaction costs. Ether dropped below support at $1,800 as leading non-stablecoin crypto currencies declined. Polygon’s Matic led the decliners. U.S. equity futures were marginally higher as economic data on Thursday suggested inflation is slowing, increasing optimism the Federal Reserve may stop its interest rate hikes in June.

Bitcoin slipped 2.13 per cent to $26,974 in the 24 hours to 08:30 a.m. in Hong Kong, as per CoinMarketCap data, shedding 6.63 per cent for the week. The biggest crypto currency dropped to $26,781 at one time on Thursday, the lowest level since March 28.

Congestion on the Bitcoin blockchain is contributing to the decline, with an accumulation of stand by transactions hitting nearly 300k on Friday morning, more than six times higher than the number on May 9. That was when the BRC-20 token standard was brought in to permit the minting of fungible tokens on the Bitcoin network and resulted in a jump in activity, as per data from blockchain researcher Jochen Hoenicke.

The climb in transaction volumes has raised concerns among Bitcoin developers. Luke Dashjr, a Bitcoin code contributor, contacted the Bitcoin developer community on Monday to propose blocking the BRC-20 tokens transactions, which threaten the smooth and normal use of the Bitcoin network as a P2P digital currency.

Bitcoin’s decline also comes amid growing liquidity worries. Jane Street Group and Jump Crypto, two of the world’s top market makers, are reportedly quitting digital asset trading in the U.S., as per a Bloomberg report on Wednesday.

Ether dropped 2.34 per cent to $1,795, posting a weekly loss of 4.45 per cent. The token declined to $1,774 on early Friday, the lowest price since April 3.

Ethereum Network’s Beacon Chain briefly ceased validating transactions on early Friday morning, with Ethereum developers tweeting later that the outage had been resolved and the cause still under probe.

Other leading non-stablecoin crypto currencies traded lower. Polygon’s Matic token led the decliners, losing 3.75 per cent to $0.8406 and pulling back 14.45 per cent for the week. The token saw a low of $0.8332 earlier today, the lowest price since January 8, 2023.

The total crypto market capitalization shed 2.11 per cent during the last 24 hours to $1.12trln. The total trading volume lost 17.87 per cent to $37.67bln.