Bithumb Suspends MERL Deposits Amid Network Upgrade: Liquidity Impact Analysis

VADODARA, January 20, 2026 — South Korean cryptocurrency exchange Bithumb has initiated a temporary suspension of deposits and withdrawals for Merlin Chain (MERL), effective 1:30 p.m. UTC today, to facilitate a network upgrade. This Daily crypto analysis examines the structural implications of this liquidity event within a broader market context of fear and declining Bitcoin dominance. According to the official announcement from Bithumb, the suspension is a procedural measure, but market structure suggests such halts often create temporary order blocks that can be exploited for liquidity grabs.

Market Context & Background

This event mirrors historical patterns where exchange-imposed halts during network upgrades have precipitated short-term volatility spikes. Similar to the 2021 correction when multiple exchanges suspended Solana (SOL) transactions during network congestion, leading to a 15% intraday drawdown, Bithumb's action introduces a controlled supply shock. The current global crypto sentiment, as measured by the Crypto Fear & Greed Index, sits at 32/100 (Fear), with Bitcoin trading at $90,865, down -2.25% over 24 hours. This environment amplifies the impact of any liquidity disruption, as seen in previous cycles where fear-driven sell-offs coincided with technical halts.

Related developments in the market include recent analyses of liquidity events, such as MicroStrategy's large Bitcoin accumulation and Binance's futures listing strategies, which highlight how institutional actions can manipulate order flow.

What Happened?

Bithumb, a major South Korean exchange, announced the suspension of MERL deposits and withdrawals starting at 1:30 p.m. UTC on January 20, 2026. The stated reason is to support an upcoming network upgrade for Merlin Chain. According to the exchange's communication, this is a standard operational procedure to ensure network integrity during the transition. However, on-chain data from Etherscan indicates that MERL transaction volumes on Bithumb have averaged $5.2 million daily over the past week, suggesting the halt could create a significant liquidity vacuum. Market analysts note that such suspensions often lead to temporary price dislocations, as arbitrage opportunities between exchanges are constrained.

Technical Analysis & Price Action

MERL's price action prior to the halt showed consolidation around the $0.92 level, with a volume profile indicating weak support below $0.85. The 4-hour chart reveals a Fair Value Gap (FVG) between $0.88 and $0.90, which may act as a magnet for price retracement once trading resumes. The Relative Strength Index (RSI) is at 42, indicating neutral momentum but leaning bearish in the broader fear context. Moving averages show the 50-day EMA at $0.95 and the 200-day EMA at $1.10, creating a death cross pattern that suggests longer-term bearish pressure.

Bullish Invalidation Level: $0.85. A break below this support, confirmed by a 4-hour close, would invalidate any bullish structure and likely trigger stop-loss orders.

Bearish Invalidation Level: $1.05. A surge above this resistance, coupled with high volume, would negate the current downtrend and signal a potential reversal.

By The Numbers

Why It Matters

For institutional traders, this suspension creates a temporary arbitrage gap between Bithumb and other exchanges like Upbit or Binance, potentially leading to a gamma squeeze if options positions are mismatched. Retail investors face increased risk of slippage and liquidation events, especially if the halt extends beyond expectations. The broader impact ties into regulatory scrutiny, as highlighted by the SEC's ongoing focus on exchange operations and market integrity. Historically, such events have preceded volatility expansions, with the 2023 Ethereum Shanghai upgrade causing similar liquidity shifts that resolved within 48 hours.

Community Sentiment

On social media platform X, market participants express mixed views. Bulls argue the upgrade could enhance Merlin Chain's scalability, citing parallels to Ethereum's EIP-4844 implementation that reduced gas fees. Bears warn of a liquidity grab, with one analyst noting, "Suspensions during fear cycles often mask deeper issues—watch for order block depletion." No official statements from Merlin Chain developers have been released, but on-chain data indicates a slight increase in MERL holdings on decentralized exchanges, suggesting some migration away from centralized platforms.

Price Prediction / Future Outlook

Bullish Case: If the network upgrade completes smoothly and trading resumes within 24 hours, MERL could rebound to fill the FVG at $0.90, with a target of $1.00 if Bitcoin stabilizes above $90,000. Volume profile analysis suggests accumulation near support could fuel a short squeeze.

Bearish Case: A prolonged suspension or technical issues during the upgrade could trigger panic selling, pushing MERL below $0.85 and toward next support at $0.75. Invalidation of the bullish level would likely cascade into broader altcoin weakness, mirroring the 2021 correction where similar events led to 20% declines.