I withdrew BTC from Bitsquare on May 12 and the transaction remains unconfirmed.
What happens now?? Will the funds eventually be returned to my Bitsquare wallet?
Thanks in advance.
Technically funds never left your Bitsquare wallet since the transaction didn’t happen yet. The problem is probably low miner fees set in that transaction as the fees grew in last couple of weeks rapidly, as the bitcoin network is mining full blocks and is awaiting a block size increase (and segwit).
Don’t worry, the BTC are still there, the transaction just needs to get confirmed or you need to make another one with a higher fee (double-spend). You can try https://www.viabtc.com/tools/txaccelerator/ (use TOR for privacy if you wish) to speed up the transaction or wait for @ManfredKarrer to instruct you how to do a double-spend (he is a busy man, our only developer, you might want to try to accelerate the transactions first). You can also wait until this block size crisis gets resolved 
But you might die of old age before that.
The tx fee was probably too low. The best option is to make a Child Pay For Parent tx. So the if you spend the funds from the receiving address with a high fee (check the fee of the stuck tx and add up enough to get a high enough fee the miners get motivated to add the whole chain of tx).
If you PM me the stuck tx I can suggest what fee u need.
300-400 sat/byte is needed atm.
What happens in a case like this if I do nothing? Is the transaction eventually canceled?
Bitcoin transactions are never really canceled. It is being relayed between Bitcoin full nodes right now and will so until they become either invalid (spent) or the number of unconfirmed transactions grow so high that nodes need to start increasing the minimum fee required for replaying the transactions at all (unlikely).