People who have been sitting on the fence about getting into crypto-trading may now wish they made their move earlier! The leading crypto exchange Binance just is not accepting new member signups until it sorts out the many technical problems with its website, primarily brought on by too many users stressing the platform.
Binance has joined a growing list of Bitcoin exchanges that suspended new client registrations so they can put their houses in order. Other exchanges like Bitfinex, CEX.IO, and Bittrex that have been receiving up to 100,000 new users daily, reported difficulties dealing with the influx of new entrants until they halted new registrations. While many users may feel like these companies are slamming their doors, and some have suggested that this artificial barrier to entry could have triggered some of the recent price crashes. However, the truth is this is the only responsible action to take when systems aren’t working properly.
Changpeng Zhao, founder, and CEO of Binance, which handles up to $9.5 billion in trading volume daily said they had added over 250,000 new users on one day. The company’s CEO announced this week their priority was servicing their existing members, an exercise that has seen their entire tech and support team work round the clock.
On January 4, Binance stated that they were temporarily disabling new user registration as a result of the overwhelming surge in popularity to create room for an infrastructure upgrade. This problem isn’t limited to Binance since other exchanges like Kraken have had to face similar operational difficulties.
From personal experience, there are several problems with Binance. First, high volume coins like Tron are often impossible to trade during peak hours (tip: if your computer freezes with Binance, try the mobile app instead). Additionally, there appear to be problems with Binance executing stop-loss orders prematurely. While this is a nice feature to force a sale if a coin’s value goes below your palatable threshold, trades appear to go through before the average price of the coin hits the threshold. This may be a bigger problem with lower volume coins, where a single user could bid low during off-peak hours and trigger your stop-loss. The below screenshot indicates a falsely-triggered stop-loss by the long vertical red line.
Binance is arguably the largest cryptocurrency exchange and was launched in July 2017. The company announced it had become the leading crypto trading platform by volume, with 2.9 million users trading $2.8 billion daily according to CoinMarketCap.
Binance, a Hong Kong based crypto exchange has a global outlook offering and supporting multiple languages including English, Russian, German, Spanish, French, Korean, Chinese and Japanese. Binance offers an instant exchange for at least 96 cryptocurrencies including Ethereum, Bitcoin, Tether and the native BNB token.
The high growth rate is no longer sustainable until the company finishes doing an infrastructure upgrade. Imagine trying to put through a time-sensitive trade at just the right moment, and the system freezes up. It’s clear that the company did not expect to be as popular as it has become, given the lack of technical infrastructure. Other exchanges dealing with similar problems have had to overhaul their entire systems or halt the opening is new user accounts.
In December, Coinbase and Kraken spent a significant amount of their resources improving the scalability capacities of their platforms. Kraken was having difficulties processing account verifications and planned to implement a major system upgrade to support new users. Even the second largest cryptocurrency exchange Bithumb of South Korea has also stopped processing new applications, though this could be due to increased regulations in the country. Oddly, but not surprisingly, this increased scrutiny was interpreted as an all-out ban of Bitcoin in South Korea, possibly triggering the recent crashes in Bitcoin and alt-coin prices in recent days.
Despite processing billions of dollars in transactions, Binance is struggling to deal with the exponential demand from potential investors because of the strict Anti-Money Laundering (ALM) and Know Your Customer (KYC) systems leading exchanges have been forced to carry out by regulators. Regulations will only get worse; the action in South Korea is telling of what to expect in the United States and elsewhere.
In addition to tech problems, all user applications must be manually approved and verified and failure to isolate sham accounts from legitimate ones attracts large lawsuits and fines for the exchanges. The vetting process is an arduous task for an exchange like Binance that’s receiving 250,000 users daily besides trading account approvals. As cryptocurrency exchanges make drastic changes in their systems, new users will have a harder time opening approved trading accounts.