South Korea’s Bithumb, the world’s largest cryptocurrency exchange by trading volume, is currently dealing with a lawsuit filed by over 3,000 Bithumb clients, who experienced massive losses during a server outage which disabled Bitcoin Cash trading for several hours.
Investors Left Empty-Handed
During that period, the price of bitcoin cash plunged from $2,900 to $1,100, and the majority of bitcoin and bitcoin cash traders on the Bithumb trading platform blamed the exchange for their losses. At the time, many bitcoin investors sold their holdings as the price of bitcoin dropped from $7,000 to $5,600, while the price of bitcoin cash surged from $800 to $2,900.
Currently, the price of bitcoin remains above $8,200, while the price of bitcoin cash remains stable at the $1,200 mark.
As Bithumb struggled to recover its server and platform from its outage on November 12, most of the clients who filed a lawsuit against the company last week accused the company of closing down its servers intentionally to temporarily halt bitcoin cash trading.
In an interview with Chosun, a major finance and business news publication in South Korea, a Bithumb representative directly refuted the claims made by some of the company’s clients. A representative of the exchange claimed that the server outage was triggered by a massive traffic surge and that the cause of the server outage was already verified by several third-party investigations and cloud service providers. The representative continued with,
“It has been verified by third-party investigators and cloud service providers that the server outage was caused by a massive surge in traffic within a brief period. Whether the traffic surge was caused by a DDoS attack targeted at the Bithumb platform remains uncertain, and the company will continue its investigation into a potential DDoS attack.”
Bithumb Exchanges Greater than KOSDAQ
As the largest cryptocurrency exchange in the global market, Bithumb offers significant liquidity to many of the leading cryptocurrencies such as ether and bitcoin cash. On a daily basis, Bithumb processes around $300 million on average, accounting for nearly 40 percent of global Bitcoin Cash trading.
Given that Bithumb remains as a significant bitcoin cash exchange and the concentration of bitcoin cash trading in the South Korean cryptocurrency exchange market, more than 3,000 Bithumb clients held Bithumb accountable for the brief period in which traders were unable to access the platform to trade or sell Bitcoin Cash.
According to the Bithumb representative, the exchange processed an unexpectedly large volume of trades on November 12, as it handled $6 billion worth of global cryptocurrency trades, attracting volume three times larger than that of the South Korean stock exchange KOSDAQ. The representative explained:
“Bithumb canceled orders that were initially queued to be processed during that period to limit the losses of investors. The Bithumb team is currently investigating into the total losses of clients during the November 12 server outage, and with the assistance of third-party investigators, the Bithumb team plans to provide a detailed roadmap to handle the situation in the upcoming weeks.”
The result of the pending lawsuit is unconfirmed, but Bithumb is working quickly to amend the server crash. It is during events like these that were are able to see the number of pieces in motion at an exchange. When prices soar or drop, cryptocurrency exchanges are beginning to understand a grave importance in managing the incoming traffic.