South Korean cryptocurrency exchange Bithumb has recently become the number one cryptocurrency exchange by trading volume as it has been trading an average of $1.2 billion per day. Worryingly, its number of visitors has been dropping.

According to CryptoCompare’s November Exchange Review, Bithumb’s average daily trading volumes surged by over 280% from 323 million USD (Sept/Oct) to 1.2 billion USD (Oct/Nov) while the exchange’s unique daily visitors decreased by almost 20%.

Bithumb isn’t the only exchange seeing these sorts trends. Per the report, Coinbene and CoinTiger have shown similar trends, as shown in figure 19, their volumes have increased despite decreasing traffic.

Bithumb’s case is different, however, as it became the largest crypto exchange by volume, while having little over 5,000 users a day. In comparison, Binance had 67,200 unique visitors per day, and an average daily trading volume of $600 million.

Per the report, Bithumb’s volume improved so drastically that it saw the trading volume of BTC into Korean Won (KRW) surge 288% since last month, while the volume of BTC into USD and JPY dropped 16% and 30%, respectively. This means BTC/KRW went from about 10% of BTC’s total trading volume to fiat, to 46%, as shown in Figure 7, making KRW the largest fiat pair to Bitcoin last month:

Bithumb’s trading volumes surged after Singapore-based BK Global Consortium acquired a controlling share in the exchange for $350 million. The organization reportedly implemented a “series of airdrop competitions, raffles, rebates, and other programs” to bring in non-Korean users.

Per CryptoCompare’s report, Bithumb also implemented the controversial trans-fee mining model, as certain users who managed to trade specific trading volumes were later rewarded with “Bithumb Cash.” Trans-fee mining exchanges often have, as previously reported, thin order books and low traffic compared to their relatively high volumes.

As CryptoCompare’s report reads:

“A volume increase on an exchange, combined with a decrease in visitors may point towards incentive programs such as competitions, trans-fee mining, rebate programs or similar.”

A Shaky Lead

As reported, Bithumb’s trading volumes indicated wash trading activity was taking place, as looking at its charts showed large orders – of an average of $2,750 (the second largest of any exchange) – were being made and quickly filled in short intervals on various trading pairs. High volumes on markets with thin order books indicates that the large orders are executed against a counterparty that agrees to take the other side of the trade, otherwise these large orders would cause significant slippage.

The exchange’s order books proved to be unstable, as analysis showed it would take only 0.008% of the daily trading volume of the XMR/KRW trading pair for the price of the market to drop by 10%. The exchange also had a ‘today’s coin’ segment that seemingly saw random cryptocurrencies pump on the platform, while losing value in the rest of the market.

Notably, merely three days after CryptoGlobe reported on Bithumb’s suspicious activity, its trading volumes dropped, as CryptoCompare’s report notes “from the 11th of November, trading then dropped off considerably.”

Bithumb’s Promotions

CryptoCompare’s Exchange Review report notes that an analysis of Bithumb’s volumes shows its “Super Airdrop Festival” and “Special Gift” promotional events are behind the irregular trading volume.

As reported, Bithumb had a 120% fee payback promotion last month, which saw users essentially wash trade against themselves to collect an extra 20% on their volume from the fees the exchange was paying out. There was a payback limit set at $150,000 a day.

The hourly volume chart below shows that one users gamed the promotion and managed to claim the entire daily reward with a small number of precise trades. This activity explains the large hourly trading volume spikes.

It has also launched its decentralized exchange (DEX) this year. The DEX was showing enormous trading volumes at the time of our report. So much so that its top trading pair then, CXTC/ETH, was showing over 25,000 ETH had changed hands in a day, although available data showed CXTC’s total trading volume was of 310 ETH on other platforms. Currently, that same pair’s trading volume is at zero on the exchange.

Interestingly, in June of this year the exchange saw hackers steal 35 billion KRW ($31.5 million) from its wallets, and was at the time forced to freeze deposits and withdrawals, which were reopened in early August.

Bithumb’s shaky lead as the number one cryptocurrency exchange and suspicious trading activity has seen CryptoCompare drop it from its Aggregate Pricing Index (the CCCAGG).