The second crypto crash of 2022 is currently happening, plummeting the prices of numerous virtual currencies. Amid the chaos, thousands of investors are attempting to withdraw their Bitcoin from the largest crypto exchange: Binance.
Why did Binance halt Bitcoin withdrawals?
With the price of cryptocrypto plummeting again, many investors became infuriated when Binance restricted the withdrawal of Bitcoin — the largest cryptocurrency — in the midst of the crash. As thousands attempted to jump ship during the $200 billion crash, Binance refused to allow any withdrawals.
Binance CEO Changpeng Zhao took to Twitter to explain the situation. In a series of tweets, Zhao announced that withdrawals were on a “temporary pause” that would be fixed in 30 minutes. This pause was allegedly due to a “stuck transaction causing a backlog”.
However, even after 30 minutes, Bitcoin owners were still unable to withdraw their funds. Furthermore, many noticed a trend as rival crypto exchange Celsius also restricted withdrawals of the plummeting token to an even worse degree.
While Binance only limited withdrawals for just a few hours, still enough to do damage, Celsius' limits were far more severe. Due to the restrictions, fans of crypto exchanges have claimed that the company's trust has been shattered completely.
At the time of writing, Bitcoin withdrawals are available again and the price of the cryptocurrency is vaguely stabilising. However, the fact that exchanges can halt withdrawals amid a crash is very worrisome.
So, it’s not decentralised, is it?
One of the main reasons cryptocurrency was backed in the early days was because it was decentralised. Created after the 2008 recession, Bitcoin was supposed to be a way to fight banks by providing an alternative currency that can be freely traded.
For example, halting withdrawals is a tactic that banks use, punishing users to keep themselves afloat if a recession hits. One of the biggest examples of this was The Great Depression.
Crypto exchanges are essentially banks, spitting in the face of the entire purpose of cryptocurrency. By creating a crypto exchange that limits when tokens can be traded, you’ve engaged in a centralised method of trading.
While there are many issues with cryptocurrency, it’s design was ultimately created to protect users. However, as something gets popular and the rich get involved, it very quickly becomes about protecting them; that’s how a design fails.
Bitcoin and cryptocurrency isn’t decentralised anymore. In fact, it’s very centralised with “exchanges” and “marketplaces” popping up frequently. The only difference is that these places won’t act if someone steals your money.