At 6:23 AM on October 11, 2025, something bizarre happened on Bithumb. Tether—you know, the stablecoin that's supposed to just sit there at $1—hit 5,755 won. That's about $4. While everywhere else in the world, it was trading at its normal $1.
Three minutes. One exchange. A 338% spike in what's literally called a "stablecoin."
If you weren't watching Korean exchanges that morning, you missed one of the weirdest meltdowns in crypto history. And honestly? It tells you everything about how fragile these markets really are.
Trump Drops a Bomb, Markets Freak Out
Let's rewind a bit. The night before—October 10, US time—Trump went on Truth Social and announced he'd slap 100% tariffs on Chinese imports starting November 1. Not 10%. Not 50%. A full double-your-price tariff.
Global markets lost their minds. Crypto got absolutely hammered. We're talking $19.3 billion in liquidations in one day—the biggest liquidation event in crypto history. Bitcoin dropped 13% in an hour. Altcoins? Some fell 30% or more.
People panicked. And when crypto traders panic, they usually run to stablecoins. Tether, USDC—anything that should hold its dollar value while the rest of the market burns.
So on Bithumb, starting around 6:22 AM Korean time, everyone tried to buy Tether at once. Perfectly reasonable reaction, right?
Except there was basically nobody selling.
When Everyone Wants to Buy and Nobody Wants to Sell
Here's what made Bithumb different from, say, Upbit or Coinone or literally any other exchange. At that exact moment, Upbit was trading Tether at 1,650 won. Coinone had it at 1,670 won. Overseas? Still basically $1, or about 1,400 won.
Only Bithumb exploded to 5,755 won.
Why? Two words: leverage trap.
Bithumb runs this service called "Lending Plus" where you can borrow crypto. And not just a little—you could leverage up to 400%. People had borrowed massive amounts of Tether. We're talking 127.5 billion won worth (roughly $95 million).
Now here's where it gets messy. When the price of what you borrowed goes up too much, the system automatically liquidates your position. It just... does it. No asking, no warning when things move this fast. The system sells everything to pay back the loan.
So Tether's price starts climbing. First liquidation triggers—system buys Tether at market price to close the position. That buying pushes the price higher. Which triggers more liquidations. Which creates more buying. Which pushes the price even higher.
Classic death spiral. Except instead of going down, this one went up.
Within days, 38.5 billion won of that Tether lending just... disappeared. By October 14, the total lending had crashed from 127.5 billion to 89 billion won.
The Order Book Was Basically Empty
You know what makes this even worse? Bithumb's order book was paper-thin that morning.
Industry people estimate that a single 100 million won order (about $74,000) could've moved the price significantly. Now imagine hundreds of millions in forced buy orders hitting all at once.
All the low-priced sell orders got eaten instantly. Then the medium-priced ones. Then everything reasonable. Eventually, the only Tether left for sale was from people who'd put in absurdly high limit orders—maybe as a joke, maybe just hoping for a miracle.
The system didn't care. It just kept buying. At 2,000 won. At 3,000 won. At 5,755 won.
The craziest part? The system never paused. No circuit breakers. No "wait, this seems wrong" moment. It just executed order after order into an increasingly insane price range.
The Missing Piece: Market Makers
Here's something most people don't realize about big exchanges like Binance or Coinbase. They have these things called market makers—specialized firms whose whole job is to always have buy and sell orders ready.
When markets freak out, market makers don't disappear. They might widen their spreads (the gap between buy and sell prices), but they stay there. They're like shock absorbers for price movements.
Korean exchanges? They mostly don't have these.
Why not? Regulatory gray area. The rules around market making in Korea are vague enough that most firms just... don't do it. Too risky legally.
So Korean exchanges run entirely on retail traders. When retail panics and everyone rushes to one side, there's no institutional backstop. No professional firm steps in to provide the other side of the trade.
During that same October 10-11 global crash, Binance had its own problems—a stablecoin called USDe dropped to $0.68 due to oracle issues. But they had systems in place. Liquidity vaults absorbed the shock. Auto-deleveraging kicked in. Institutional buyers saw cheap prices and started accumulating.
The market recovered.
Bithumb? Alone in the dark, algorithms executing trades into an empty void, prices going absolutely bonkers.
The Kimchi Premium Makes a Comeback
Okay, so there's this thing called the "kimchi premium." It's been around for years. Basically, crypto often costs more in Korea than anywhere else.
Why? Capital controls. Korea makes it really hard to move money in and out of the country, especially for crypto trading. So if Bitcoin is $100,000 globally but $107,000 in Korea, you can't easily buy it cheap overseas and sell it expensive in Korea. The government makes that difficult.
Usually this affects Bitcoin, Ethereum, all the normal stuff. But during the October crisis, it hit stablecoins hard.
By October 14, Tether was trading around 1,490-1,500 won on Upbit. The actual dollar-to-won exchange rate? About 1,420-1,435. That's a 5-6% premium on a coin that's supposed to be exactly $1.
Not a glitch. Just structural pressure. Koreans wanted dollars (or dollar-like things) because the won was weakening. They wanted stablecoins because crypto was crashing. But getting actual dollars into Korea is hard. So Tether prices just... floated above where they should be.
Bithumb's 5,755 won spike was an extreme version of this. The kimchi premium on steroids.
Bithumb's Compensation: A Band-Aid on a Broken System
On October 13, Bithumb announced they'd compensate everyone who got screwed. If your Tether got auto-liquidated above 1,700 won (which was the high price on other exchanges), you'd get your losses back.
The damage? 95 users, 660 transactions, about 1.16 billion won (roughly $860,000).
You can apply until November 12. They'll review your case in 15-30 business days. Don't like the answer? You can appeal twice. Final payment comes within 20 business days after everything's approved.
Nice gesture, honestly. But here's the thing—compensation doesn't fix the problem. It's paying people back for getting caught in a system that shouldn't have blown up like that in the first place.
What happens next time? What happens when it's not Tether but something else? What happens when the losses are bigger?
What This Means If You're Not in Korea
If you're outside Korea watching this and thinking "that's wild but doesn't affect me," well... sort of.
But here's what you should know:
Korean prices aren't real prices. I mean, they are—people actually pay them. But they include premiums driven by capital controls and local demand. During crazy times, these premiums can explode or completely flip into discounts. You can't just see a price and think you understand what's happening.
Those leverage numbers are traps. 400% leverage sounds exciting until you realize you're trading in a market where automatic liquidations might execute at prices that literally don't exist anywhere else on Earth. You could get liquidated while watching global prices stay totally normal.
"Stable" is relative. In markets where you can't easily move money in and out, even stablecoins can go haywire. The coin itself isn't breaking—the market structure around it is.
The kimchi premium applies to everything. Not just Bitcoin. Stablecoins, random altcoins, all of it. And it swings both ways. Sometimes Korean prices are higher (normal kimchi premium), sometimes lower (reverse kimchi premium). Depends on which way the money's trying to flow.
Korea Knows It's a Problem
Regulators aren't blind to this. In July 2025, Upbit and Naver Pay announced plans for a won-pegged stablecoin. Big Korean banks—KB Kookmin, Shinhan, Woori—are working together on their own version, probably launching late 2025 or early 2026.
The idea? If you have a stablecoin pegged to the won that can easily swap with USDT or USDC on-chain, maybe you can bypass all the capital control headaches. The kimchi premium would shrink because arbitrage would actually work.
Sounds good in theory.
Except... the won itself isn't tradable internationally. Korea keeps all won transactions onshore. You can't just send won overseas freely. So any won-stablecoin would probably need to be KYC'd and tied to Korean users anyway.
And here's the kicker—Korea already has instant, free bank transfers domestically. Like, actually instant. So a won-stablecoin doesn't really solve a payment problem inside Korea. Its main use would be international... where capital controls block it anyway.
It's a bit of a catch-22.
The Real Lesson: Know Your Market's Plumbing
Look, Seoul's exchanges are a perfect case study in what happens when retail-heavy markets hit extreme volatility without institutional safety nets. But this isn't just a Korea thing. You see similar dynamics anywhere with capital controls or regulatory isolation.
Check order book depth before levering up. In markets without market makers, a handful of large orders can make prices do crazy things. If you're leveraged, you're not just exposed to price risk—you're exposed to liquidity risk. The risk that your forced liquidation executes at some bonkers price just because there's nobody on the other side.
Understand why arbitrage isn't working. When you see prices way out of line with global markets, ask yourself why nobody's closing that gap. Usually there are regulatory, technical, or capital barriers preventing it. Those barriers create pockets where normal price discovery just... stops working.
Question what "stable" actually means. Stablecoins are only stable when arbitrage mechanisms can keep them stable. If moving dollars in and out is restricted, stablecoins can trade way above or below their peg. The coin isn't failing—the market is.
Final Thoughts
Bithumb's Tether surge was extreme, but it exposed everyday problems. Thin liquidity, cascading liquidations, missing market makers, capital restrictions—these aren't bugs that'll get fixed with a software update. They're features of how the market is structured.
For Korea, fixing this probably means giving market makers legal clarity, gradually loosening capital controls, and building out institutional infrastructure. That's a years-long project. Volatility won't wait.
For traders anywhere, the lesson is simpler: when you see a stablecoin trading at 300% premium on one exchange while everywhere else is normal, you're not looking at free money. You're watching a liquidity crisis happen in real time.
And those are never as profitable as they look.
Disclaimer: This article is for educational and informational purposes only and should not be considered as financial, investment, or trading advice; always conduct your own research and consult with a qualified financial advisor before making any investment decisions.