Bithumb’s Internal Error Triggers 20% Bitcoin Flash Crash – Technical Glitch or Systemic Warning?
A sudden, sharp plunge on a major exchange sent shockwaves through the crypto market—all thanks to an internal error.
The Glitch That Roared
Bitcoin's price briefly cratered by more than 20% on South Korean exchange Bithumb. The cause wasn't a macro-economic tremor or a regulatory crackdown, but a reported internal system malfunction. The flash crash created a temporary but stark divergence from global prices, offering a stark reminder of the technical fragility that still underpins digital asset trading.
Liquidity on Life Support
When a top-tier platform hiccups, the market convulses. The event highlights how automated systems and thin order books can amplify a technical fault into a market-wide event. It's the kind of volatility that makes traditional finance veterans scoff into their overpriced coffee—proof, they'd say, that the 'future of finance' still trips over its own code.
Beyond the Blip
While prices quickly rebounded, the incident leaves a lingering question about operational resilience. For all the talk of decentralization, traders remain acutely exposed to the integrity of centralized points of failure. One line of faulty code can still wipe millions off the board in seconds. The market absorbed the shock this time, but it's a wake-up call dressed as a glitch.
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.
🚨JUST IN: Bitcoin briefly plunged more than 20% on @BithumbOfficial after an internal reward distribution error reportedly credited hundreds of users with 2,000 $BTC instead of the intended token. Some recipients sold immediately, pushing prices far below other major exchanges. pic.twitter.com/aVJ5YkA2Xz
— SolanaFloor (@SolanaFloor) February 6, 2026
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.
Sharpen your strategy with mentorship + daily ideas - 30 days free access to our trading program
