Bithumb's Market Share Falls to 24.8% as Gap Widens with Upbit After Zero Fee Promotion Ends

Bithumb’s market share in the South Korean cryptocurrency exchange market declined following an erroneous bitcoin distribution incident on Feb. 6. The exchange mistakenly credited users with 2,000 bitcoins each instead of 2,000 won worth of bitcoin during a promotional event. This error led to a sharp drop in its market share.

In response to the incident, Bithumb introduced a weeklong zero-fee trading promotion. While this temporarily boosted its market share to 31.5 percent, the gains were not sustained. The recovery was short-lived as users shifted to competing platforms.

Coinone and Korbit saw increased trading volumes during this period. Korbit’s trading activity increased 12.5 times due to its recent acquisition by Mirae Asset, further narrowing the gap with Bithumb. The incident highlights a broader challenge in retaining user trust after a major operational error.

Why Did This Happen?

The bitcoin distribution error exposed significant weaknesses in Bithumb’s internal controls and system stability. During the promotional event, the exchange mistakenly credited 620,000 bitcoins—far exceeding its reported holdings. This systemic failure has raised concerns about the reliability of crypto exchanges in South Korea.

Experts say that while fee waivers can temporarily attract traders, they are not a solution for deep-seated operational issues. Structural reforms are needed to restore long-term confidence among investors and users.

How Did Markets Respond?

The immediate fallout included a drop in Bithumb’s trading volume and user activity. Competitors like Coinone and Korbit capitalized on the situation by offering competitive trading conditions. Korbit, in particular, saw a significant increase in trading volumes following its acquisition.

The market’s response underscores the importance of trust and reliability in the crypto space. Users quickly moved to alternative platforms that offered both stability and better service. This shift has long-term implications for Bithumb’s ability to regain market share.

What Are Analysts Watching Next?

Market analysts are closely monitoring regulatory developments in South Korea. The incident has intensified calls for stronger oversight of crypto exchanges. South Korean lawmakers are pushing for tighter regulations to prevent similar incidents.

Regulatory reforms could impact the broader crypto market in South Korea. Analysts are evaluating how increased oversight might influence exchange operations and user behavior. The long-term success of Bithumb will depend on its ability to address these concerns and rebuild trust.