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Bitcoin Transaction Fee Soars After Bithumb Hack

bitcoin

One of the things that make Bitcoin a risky investment is its volatility. One of the things that made Bitcoin’s price nose dive this 2018 is the fact that some crypto exchanges are constantly getting hacked. In less than two weeks, two South Korean exchanges were hacked. The most recent one that fell victim to hackers is Bithumb.

There is good news and there is bad news. The good news is that Bitcoin was able to bounce back right away. Just after Bithumb was hacked, Bitcoin dropped from around $6,700 to $6,500. But because of Bithumb’s actions afterwards, Bitcoin was able to come back to around $6,700.

However, the average Bitcoin transaction fee has increased. Currently, the Bitcoin transaction fee is at around $2.53 per transaction. This is a 315% increase from the previous day’s transaction fee.

And why exactly is this happening? If you will ask BItrefill CEO Sergeh Kotliar, he claims that that is mainly because of Bithumb clearing hot wallets. He said that “Possibly related to their hack would explain them (Bithumb) overpaying 100x on fees for consolidation. This does put a strain on the whole network, and everybody’s fee estimators”.

It appears that in an effort to secure the funds before hackers could even do more damage, Bithumb was able to clear its hot wallet. It was reported that the total damage was at an estimated $31.5 million.

The Second Incident in June

Bithumb is the second South Korean crypto exchange that fell victim to hacking in June. Just earlier this month, it was Coinrail that was hacked. Bithumb is quite different since it is currently the sixth-ranked crypto exchange platform in terms of daily volume and it is the biggest crypto exchange in South Korea. In fact, it is quite surprising that Bitcoin price was able to bounce back fast after the hack.

Tom Lee, who is the founder of Litecoin, explains that the reasons behind it is the fact that Bithumb was able to act fast. Not only did it secure the funds to a cold storage, it also paid the funds hacked from its users’ accounts.

Other Issues Surrounding Bithumb

Just earlier this month, Bithumb also dealt with some tax issues. The good news is that Bithumb was cleared from tax evasion charges and was ordered to pay $28 million in tax. But could this simply be just coincidence? There are those who are questioning the coincidence that they lost around $31.5 million in just two weeks after the incident.

The good news though is that the high fees are most likely temporary. If you could remember, fees soared high from December 2017 to February 2018. There was a time when transaction costs around $50. But with SegWit and Lightning Network protocols, things mellowed down. And for the most part of 2018, the Bitcoin transaction fee was at around below $1.

Could Bithumb hack really be connected to the spike in Bitcoin transaction fee? Will it return to the average level in just a few days? And also, is there anything fishy with the hack and the fact that Bithumb paid tax two weeks prior?

Janneke Eriksen

Janneke is a writing ninja and has vast experience in journalism, specifically in the crypto space. As a blockchain believer and avid Bitcoin fan, she’s incredibly excited to share to our readers the latest news around so they are always updated wherever they are.

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