The Hidden Cost of Trusting CEXes With Your Bitcoin

Here is the ending of yesterday's story about the extra bitcoins mistakenly credited to Bithumb users. If you missed the beginning, read my post from yesterday:

Or here is the shortest possible recap:

• due to an error, the exchange "drew" 2,000 nonexistent BTC on the balances of hundreds of users;
• some of those users immediately sold these bitcoins on the spot market.

Here is what we know as of today.

According to BlockBeats:

• a total of 620,000 BTC were mistakenly credited to Bithumb clients;
• the exchange managed to recover 99.7% of those bitcoins;
• to do so, it had to freeze operations on 695 accounts;
• the freeze happened 35 minutes after the erroneous "airdrop".

Here is what these numbers actually mean.

• 310 people received nonexistent bitcoins on their balances.
• Clearly, not all 310 "lucky" users rushed to sell them. I doubt I am wrong in assuming that no more than 10% of them did. And even that is probably an overestimate, since selling required not only the willingness to take such a questionable step, but also being online within the first 35 minutes after the "airdrop". But let's be generous: assume around 30 people sold those nonexistent bitcoins.
• The fact that 695 accounts were frozen means that at least 665 of them belonged to honest buyers who did nothing wrong and simply bought bitcoin at the incredibly attractive price available on the exchange.

In other words, at least 665 people were forced to part with their bitcoins.

• Yesterday, when the price was at its lowest level in the past 15 months, they wanted to take advantage of this rare opportunity and buy bitcoin cheaply.
• If they had gone for bitcoin not to Bithumb, but to Rabbit.io, their portfolios would already be up more than 12% today.
• Instead, people who believed they had honestly bought bitcoin not only missed this price rally, but also lost a rare chance to buy at the excellent prices that were available yesterday. Those prices are simply no longer on offer today.

Will they keep using CEXes after this?