The Bithumb Incident Was a Foretold Man-Made Disaster... Time to Focus on Bitcoin’s Fundamentals

▲ Bithumb, Bitcoin (BTC), Virtual Assets/ChatGPT-generated image ©

"A cryptocurrency exchange is essentially nothing more than a massive ledger-based transaction system. Unless investors change their mindset, a second or third Bithumb incident will continue to occur."

Baek Hoon-jong, CEO of SmashFi, recently appeared on the YouTube channel ‘E-Trend,’ where he strongly criticized the structural limitations of domestic cryptocurrency exchanges while addressing the recent accidental overpayment incident at an exchange. He emphasized that the paradigm of the crypto market, led by stablecoins, will be completely reorganized under the leadership of the banking sector, and that investors should focus on the fundamental value of Bitcoin (BTC) in the process.

Regarding Bithumb’s recent Bitcoin overpayment incident, Baek drew a clear line, stating, “This is not a flaw in Bitcoin itself but a problem of internal controls and processes at the exchange.” He explained, “Most domestic and overseas exchanges adopt a ‘DB ledger transaction’ model, where customers’ assets are gathered in a central vault and only numbers are displayed on the app screen,” adding, “Since real coins are not transferred in real time, a single employee mistake can generate millions of fake figures and even lead to actual withdrawals, making the structure inherently vulnerable.”

He also mentioned a critical difference from traditional financial systems. “In the stock market, authority and responsibility are thoroughly distributed among the Korea Exchange, securities firms, and the Korea Securities Depository, providing built-in safety mechanisms. However, crypto exchanges monopolize all of these functions themselves,” Baek explained. He added, “Although the government and financial authorities are trying to limit major shareholders’ stakes in exchanges to 15% to increase oversight by banks or public institutions, fundamentally, there is no way to completely prevent human error within a centralized system.”

Regarding future changes in the crypto market, he predicted a strong counterattack from the traditional banking sector. “Dollar-based stablecoins are not groundbreaking innovations; they are simply digital dollars,” he said, forecasting that “traditional banks will never hand over their core authority over currency issuance and distribution to private coin companies.” He analyzed that the regulatory environment will ultimately move toward placing stablecoins under strict control of the banking sector.

In this process, he painted a very bleak outlook for major altcoins such as Ethereum (ETH). “When transactions surge, Ethereum’s fees become exponentially expensive and its speed slows down. It is not sufficiently decentralized and therefore cannot become a global payment network trusted infinitely by banks worldwide,” he pointed out. In contrast, he stressed, “Bitcoin is the only foundation with perfect neutrality and resilience that banks cannot rival. Ultimately, all core financial infrastructure—including institutional stablecoin distribution—will converge on the Bitcoin network.”

Lastly, Baek strongly urged investors to fundamentally change their perception. “Korean investors tend to view exchanges as money-printing casinos aimed at short-term profits,” he criticized, adding, “Such an environment has created enormous and distorted exchange power.” He advised, “Investors should convert fiat currency, which loses value over time, into Bitcoin—the safest hard money—and return to the fundamental investment mindset of securely storing it in a personal wallet rather than leaving it on an exchange.”

Disclaimer: This article is for investment reference only and assumes no responsibility for any investment losses incurred based on its content. The information provided should be interpreted solely for informational purposes.