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Analysis Shows Bithumb May Have Stabilized Bitcoin Price


usethebitcoin.com 18 December 2018 20:30, UTC
Reading time: ~3 m

Bitcoin price has yet to find a bottom to the dismay of many investors. There have been many factors that have weighed on its price including panic selling. However, a recent study by CryptoCompare suggests that Bithumb, one of the largest crypto exchanges in South Korea may have contributed to the stabilization of the price of Bitcoin longer than the fundamental and technical factors may have suggested.

The End Of Bithumb’s Trading Promotions Coincided With Bitcoin Sell-off

According to Aggregate Pricing Index by CryptoCompare, the South Korean exchange led other exchanges in daily trading volume from October to November. It averaged $1.24 billion in daily turnover.

In that period the exchange registered a month over month increase of 284 percent. Interestingly, the leading crypto exchange by trade volume, Binance saw a decline of 34 percent within the same period.

But, if one would have bothered to check CoinMarketCap, they would have found that Binance was still listed as the leading crypto exchange by trading volume. It’s not surprising given that Bithump’s volume was not entirely organic as it coincided with several trading promotions the platform was conducting.

There was the Super Airdrop Festival and the Special Gift. Both promotions saw the exchange ramp up its daily volume.

Also, there was a prominence of KRW in the crypto spot market trading even though analysis shows that the number of active traders on the platform had decreased significantly.

The report notes:

“Bithumb saw a 284% increase in volumes from the previous average of 323 million USD for the Sept/Oct period. This increase in volumes follows after Singapore-based BK Global Consortium bought a controlling share in the exchange in recent months, and later implemented a series of airdrop competitions, raffles, rebates, and other programs designed to incentivize non-Korean users to sign up to the exchange and trade in exchange for rewards. They have also implemented a potential form of trans-fee mining for certain users, where trading beyond a specific volume is rewarded in the form of “Bithumb Cash” at a later date.”

It’s no secret that higher trading volumes always correlate with a stable price for Bitcoin. However, lower volumes negatively impact its valuation.

The fact that Bithumb managed to increase its trading volume even as its user base shrunk suggests that the trading promotions helped stabilize the price of Bitcoin above $6,000 longer than it should have.

The first break below $6,000 was recorded after one of Bithumb’s trading promotion ended. In a way, the exchange indirectly contributed to the sell-off that began last month.

Speaking to CCN, Mati Greenspan, a senior market analyst at eToro said that Bithumb shouldn’t be blamed for the recent collapse since it helped stabilize Bitcoin’s price for a while.

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