Coinbase sees Bitcoin withdrawal surge, causing withdrawal service delay of 12+ hours

Coinbase users are moving their funds to wallets and exchanges that support Bitcoin Cash (BCC), causing delays in Bitcoin withdrawals from exchanges.

Coinbase, one of the world’s largest Bitcoin exchanges, has made it clear that they will not support the BCC token created by the Bitcoin blockchain split on August 1. Coinbase’s policy is to support only one version of Bitcoin, as stated in its announcement on July 27:

“Our policy is to support only one version of Bitcoin. In determining which fork to support, we will look at a variety of factors, such as network size, market capitalization, and consumer demand. We take this decision seriously because safely supporting a new digital currency requires a lot of work across many teams.

However, many other exchanges and wallets have already announced support for the new blockchain and its token. When the User Activated Hard Fork (UAHF) is activated at 12:20pm UTC on August 1, users of exchanges like Kraken, Bitfinex, and ViaBTC will receive an equal amount of BCC.

Coinbase sees massive Bitcoin outflow

The final result is also predictable: users who hope to get "free BCC candy" are leaving Coinbase en masse, causing delays in Coinbase's Bitcoin services. Coinbase's status page indicates that due to transaction backlogs, Bitcoin transactions transferred out of Coinbase may be delayed for up to 12+ hours.

Coinbase also advises users who want to withdraw their Bitcoin before the hard fork to do so before 10am on July 31.

“If you want to withdraw your funds before the Bitcoin hard fork, we recommend that you do so before 10am on July 31st due to possible network congestion.”

There is no such thing as a free lunch

Given that many still view BCC as essentially “free candy” for Bitcoin holders, it makes sense that users would leave Coinbase to join the hard fork. However, many have warned that nothing is free — the value embedded in BCC comes from somewhere, in this case from the Bitcoin price itself.

Speculation will run rampant as BTC and BCC prices change. BTC supporters predict that BCC recipients will quickly sell BCC to buy more BTC, polishing off the new coin and driving BTC prices back up as buyers rush to acquire “free” Bitcoins.

Others will be wary of all price volatility, especially in the aftermath of the fork. Kraken has warned users in a July 27 notice that “margin traders should be extra cautious about this fork” and “plan for extreme price volatility.”

“Margin traders are advised to be extra vigilant about this fork, either by reducing position size or liquidating positions before the fork. In addition to the special preparations mentioned above, margin traders should plan for extreme price volatility and adverse liquidations surrounding the fork.”