Bitcoin Stumbles as Ordinals Minting Surge Strains Network

Network Congestion Leads to High Fees

The Bitcoin network recently encountered significant congestion due to a notable increase in the minting of Ordinals. This activity resulted in heightened transaction fees, reflecting a challenge in the network's scalability.

Bitcoin and Altcoins Face Price Decline

During Asian trading hours, Bitcoin's value witnessed a decline of about 2% to $41,189. This trend mirrors the asset's performance at the start of the previous week. Major cryptocurrencies like Ethereum, Solana, Cardano, and Avalanche also experienced losses ranging from 2% to 5%.

Significant Liquidations in the Crypto Market

Data from Coinglass indicates that the recent dip in cryptocurrency prices led to approximately $166 million in liquidations, impacting about 85,000 traders. Long traders bore the brunt of these losses, particularly in Bitcoin and Ethereum trades. The largest single loss reported was a $10 million long bet on Bitcoin via BitMEX.

Bitcoin's Lower Liquidation Sensitivity Index

Currently, Bitcoin's Liquidation Sensitivity Index (LSI) stands at $15.5 million USD/%, significantly lower than during the 2021 bull run. This suggests a decrease in leverage usage among traders compared to previous periods.

Surge in Ordinals Minting Causes Network Delays

The surge in Ordinals Inscriptions over the weekend led to an overloaded Bitcoin blockchain, with average transaction fees exceeding $37. The blockchain saw over 288,000 unconfirmed transactions at one point.

Community Debates on Ordinals

The rise of Ordinals has sparked debate within the Bitcoin community. Some view it as an exploitation of a Bitcoin Core vulnerability, while others see it as a natural evolution of the blockchain.

Ethereum-Compatible Chains Also Affected

Similar congestion issues were observed in Ethereum virtual machine (EVM)-compatible chains like Avalanche, Polygon, and Arbitrum. Users spent over $10 million in transaction fees on these networks over the same period.

Despite these challenges, Bitcoin's lower LSI score indicates a more cautious approach to leverage among traders. The Ordinals phenomenon highlights ongoing debates within the crypto community about the evolution and scalability of blockchain networks.