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Photo: Bithumb |
[Alpha Biz= Kim Jisun] SEOUL, Oct. 19 — A sudden early-morning surge in the price of Tether (USDT) on Bithumb to ₩5,755 on October 11 triggered massive forced liquidations on the exchange’s crypto lending platform, Lending Plus, wiping out roughly ₩50 billion (USD 36 million) in investor assets within hours. Nearly 2,000 traders were affected, highlighting the growing risks of unregulated short-selling mechanisms in South Korea’s digital asset market.
According to materials submitted by Bithumb to Rep. Lee In-young of the National Policy Committee, the exchange reported that on October 11 alone, a total of 1,999 users were forcibly liquidated through the platform’s automatic repayment function, involving 6,370 transactions worth a combined ₩50.03 billion.
Bithumb’s Lending Plus allows users to borrow cryptocurrencies using existing assets as collateral, enabling leveraged or short-selling positions. However, if collateral values drop—or the borrowed asset’s price surges—the system automatically liquidates positions to cover the exposure.
During the incident, USDT’s price spiked abruptly, collapsing collateral ratios across the platform and triggering a cascade of forced buybacks as the system executed mass automatic repayments. The sudden liquidity shock further accelerated the price surge, creating a chain reaction of liquidations.
Bithumb attributed the extreme volatility to structural market imbalances rather than technical failure.
The exchange explained,
“Due to negative overseas market sentiment, the domestic ‘Kimchi Premium’ expanded sharply, and Tether’s premium reached around 5%. Automated arbitrage algorithms exploiting price gaps between Tether and Bitcoin rapidly consumed sell orders.”
However, Bithumb emphasized that,
“The buy orders generated through automatic repayments accounted for only about 4% of total trading volume during the spike, so their impact on price formation was limited.”
Still, the market briefly entered a liquidity vacuum: total sell orders fell to just 681 units, with the highest sell quote at ₩5,755 and the highest buy quote at ₩1,669, widening the bid-ask spread by ₩3,086. At 6:22:06 a.m., trades peaked at ₩5,755 before plummeting to ₩1,660 within three seconds as sell orders flooded in.
An industry official commented,
“A price swing of more than threefold within three seconds cannot be considered a normal market event. The automated liquidation system actually amplified the risk.”
Despite the ₩50 billion in investor losses, Bithumb reportedly set aside only about ₩100 million (USD 73,000) in compensation, arguing that most losses were attributable to “market volatility,” further fueling investor anger and regulatory scrutiny.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
