A sharp, short-lived decline in Bitcoin prices continues The South Korean Bithumb change on February 6y has raised new concerns.
Although the price drop briefly resembled a broader market collapse, available evidence suggests that the episode was caused by a local system failure rather than a systemic liquidity failure.
Bitcoin in Bithumb’s won-denominated market fell more than 17% within minutes, briefly touch around ₩81.5 million before it rebounds.
Prices on global exchanges remained relatively stable, indicating that the disruption was largely confined to one trading platform.
What went wrong at Bithumb
According to industry reports, the incident was the result of a computer error during an internal event compensation or payout process.
About 2,000 BTC was wrongly credited to the accounts of hundreds of users. Each bill briefly reflected the value of the balance hundreds of billions won at current market prices.
The error appears to have been a classic ‘fat finger’ or system input error rather than an intentional transfer.
Crucially, the credited balances only existed within Bithumb’s internal ledger and were not fully backed by immediately withdrawable reserves on-chain.
Why Users Couldn’t Withdraw the Credited Bitcoin
Despite the size of the incorrect balances, there was no complete bank run. Industry sources estimate that Bithumb’s actual Bitcoin holdings are around 50,000 BTCwell below the notional amount implied by the erroneous credits.
Bithumb’s limited available reserves prevented users from removing the majority of incorrectly credited Bitcoin from the platform, even though internal balances temporarily showed much higher numbers.
Forced sales cause a local flash crash
While mass withdrawals were blocked, sales were not. Some users who recognized the error quickly sold their credited Bitcoin on Bithumb’s order books. Estimates indicate that this is over 500 Bitcoin was dumped within a short period of time.
That sudden selling pressure overwhelmed local liquidity, sending Bitcoin prices on Bithumb sharply lower compared to other exchanges.
Source: TradingView
The result was a classic sudden crash: a steep, rapid decline followed by a partial recovery once selling pressure subsided and trading was halted.
Bithumb subsequently suspended deposits and withdrawals and initiated an internal system review, with the aim of preventing further disorderly trading.
On-chain data confirms abnormal exchange flows
Exchange mains power data shows a sharp spike in Bitcoin outflows from Bithumb during the incident period, consistent with panic selling and internal settlement activity.
However, these flows did not meaningfully spread across other major exchanges. At the time of writing, the net flow was negative or approx 3,000 BTC.
Source: CryptoQuant
Importantly, there was no corresponding increase in global currency inflows or sustained selling pressure elsewhere, reinforcing the view that the disruption was exchange-specific and not market-wide.
A local disruption, not a systemic Bitcoin event
Price charts tell the same story. While Bitcoin on Bithumb’s KRW pair saw extreme volatility, the USD-denominated markets showed only routine moves in comparison.
The broader market did not register the kind of synchronized sell-off that typically accompanies macro shocks or liquidity crises.
This difference underlines an important distinction: price distortions caused by internal exchange rate mechanisms can appear dramatic even if they do not reflect broader market sentiment or fundamentals.
Final thoughts
- The Bithumb incident was caused by an internal equilibrium error that led to forced selling, and not by a collapse of Bitcoin’s broader market structure.
- Although the sudden crash was contained, it underlines how operational failures on centralized exchanges can still cause sharp, localized market shocks.