Bitcoin briefly declined by over 20% on Bithumb after an internal reward distribution error credited hundreds of users with 2,000 BTC, worth $1.33 million, instead of a small token of 2,000 KRW, equivalent to approximately $1.50.
According to reports, the incident stemmed from an internal operation error during a promotional reward distribution known as a lucky box event. Upon discovering the large balances, several users entered sell mode to liquidate the Bitcoin they had accidentally received.
Concentrated selling triggers a sharp BTC/KRW drop on Bithumb
There was concentrated selling between 19:30 and 19:51 UTC, which overwhelmed the local order book, driving the BTC/KRW price from as high as approximately 97 million KRW to as low as 81 million KRW. This is a level far lower than those observed by global exchanges like Binance and Coinbase.
Bitcoin traded at a discount in Korea for a brief moment before the situation stabilized. This created a rare reverse “Kimchi premium,” where Korean prices fell below global levels rather than trading at the typical premium driven by capital controls and strong local demand.
Meanwhile, Bithumb had not publicly confirmed the details of the alleged transfer error or the exact amount of Bitcoin involved. It also remains unclear whether the funds were successfully withdrawn, frozen, or reversed, or whether affected trades will be rolled back. The price decline, however, proved short-lived, as the price stabilized near 97.15 million won.
This incident follows an investigation by South Korea’s Fair Trade Commission (KFTC) into the exchange. As reported by Cryptopolitan, the market watchdog claims that it offers the highest liquidity among domestic crypto exchanges.
The KFTC is assessing whether Bithumb’s advertising was misleading, given that Upbit had the largest market share. It is also examining a failed promotional giveaway that left over 30,000 users without promised cash rewards.
In addition, in a report by Cryptopolitan published on February 4, it was noted that the Criminal Division of Seoul Southern District Court in South Korea issued a 3-year jail sentence against Lee Jong-hwan. He is the CEO of Bithumb. This is due to his manipulation of prices of virtual assets on the exchange.
Bitcoin whales exit as small wallets add Bitcoin holdings
Data from crypto analytics firm Santiment showed wallets associated with whales and sharks have fallen to their lowest share of Bitcoin supply in nine months.
According to Santiment, the latest downturn is a clear divergence between large holders distributing and smaller investors continuing to buy the dip, a combination it said often defines bearish market cycles.
The firm stated that wallets holding between 10 and 10,000 Bitcoin now control a reduced share of the overall supply. “Whale and shark wallets holding 10-10,000 Bitcoin now hold a 9-month low 68.04% of the entire BTC supply […] a dump of 81,068 BTC in just the past 8 days alone,” it noted.
On the other hand, Santiment said that smaller wallets holding less than 0.01 Bitcoin were still adding to their holdings, indicating that market demand has not fully dropped. “Meanwhile, shrimp wallets holding less than 0.01 Bitcoin now hold a 20-month high of 0.249% of the entire $BTC supply,” Santiment said.
The kingcoin is trading around $66,000, from an October peak above $126,000. The other cryptocurrencies and the stock prices of crypto firms are also down. It is “one of the worst crises in the crypto industry” since the FTX fraud of 2022, the New York Times reported.
Meanwhile, according to JPMorgan, Bitcoin is even more attractive. “The large outperformance of gold vs. Bitcoin since last October, coupled with the sharp rise in gold volatility, has led to Bitcoin looking even more attractive compared to gold over the long term,” JPMorgan analysts said.
Source: https://www.cryptopolitan.com/bitcoin-dips-on-bithumb-internal-error/
