The unexpected failure of Bithumb late at night adds fuel to investor fury in the wake of increasing crypto exchange meltdowns. Demands to engage in compulsory compensation become increasingly stronger.
On September 2, Bithumb disrupted its trading activities for about two hours because of a late-night system outage. This abrupt collapse angered investors. This is the most recent hitch in a worrying trend of instability at the platform, as per industry insiders and users.
Source Bithumb
The exchange immediately apologized and cited emergency maintenance that was expected to take around 90 minutes.
Bithumb guaranteed its users that they would compensate every user the full amount lost during the downtime. The deadline for the compensation claim is October 2.
Shareholders Demand Accountable Investment In a Failing System
The Korean investors manifested a lot of discontent. One customer referred to the disruption as a taste of hell and warned new traders in volatile markets to be cautious.
People have concerns regarding the stability of crypto platforms that deal with real-time transactions in high-speed markets.
The failure of Bithump is not new. This happened again in November 2017 following abrupt volume spikes in trading.
Bithumb and additional large-scale exchange platforms such as Upbit were also hit by a wave of disruptions last December, fueling the panic about the instability of the system.
Why Compensation Rules Matter More Than Ever
According to data compiled by Rep. Lee Hun-seung, 89 cases of failures since 2018 in the top crypto exchanges in Korea were reported.
Bithumb represented almost 50 percent. Even though Upbit paid the biggest compensation, other exchanges paid none, and this revealed loopholes in regulations.
Cryptocurrency exchanges do not have any compensation requirement, as did the traditional ones. It leads to unequal claim procedures, which generates uncertainty among investors.
Bithumb intends to rely on industry alliance rules to set compensation, but will not provide any technical specifications due to security reasons.
Officials caution that demonstrating losses is still tricky, particularly with short-term trading involving impromptu outages.
The arguments in favor of mandatory compensation systems aimed at protecting investors are becoming increasingly louder, and crypto regulatory standards are being compared to the ones governing securities firms.
