On June 20, Bithumb was hacked for $40 million. The Korean Financial Services Commission (FSC) and the Korea Financial Intelligence Unit (KFIU) investigated the hack and since then, the exchange has reportedly recovered half of the stolen digital assets.
However, for over a month now, Bithumb has disabled deposits and withdrawals, only allowing existing Bithumb users trade cryptocurrencies. The unforeseen prevention of deposits and withdrawals affected both the local market and the global cryptocurrency exchange market. The increased premium on Bithumb was significant: ethos, for example, traded at around $1.07 on Binance on July 28 and around $6.50 on Bithumb on the same day, nearly six times higher than the price on other major exchanges.
The price of cryptocurrencies may have spiked on Bithumb due to a seller/buyer imbalance on the platform, given that no new investment capital could have been injected since June 20.
Throughout July, Bithumb has come under criticism by the local cryptocurrency market for its inability to improve its security measures and internal management in time. An entire month of suspended trading activity was previously unheard of in the crypto market – and so, this controversial move by Bithumb has manipulated the entire global crypto market through the so-called ‘Kimchi Premium’.
Over the last few days, bitcoin has rebounded, but the market’s recovery was not triggered by a rise in bitcoin value but by the inflation of prices by Bithumb.
This does not make Korean lawmakers happy.
Last month, FSC vice chairman Kim Yong-bum said that the Korean government has done everything in its power to eliminate the Kimchi Premium, and has emphasized that the debacle is of the highest priority for local financial authorities.
“The government’s practical policies led the ‘Kimchi Premium’ to disappear in South Korea. At its peak, the ‘Kimchi Premium’ in the local cryptocurrency exchange market reached 50 percent, due to unusual spike in demand and speculation. As of current, the price of cryptocurrencies is nearly identical to other markets, demonstrating stability in the South Korean cryptocurrency market,” said Kim.
However, Bithumb rendered the government’s effort useless within a month by artificially inflating the price of cryptocurrencies in the local market.
The market’s recovery of July 28 does not in fact reflect rising volume nor momentum, but Bithumb’s price manipulation of cryptocurrencies.