The cryptocurrency exchange platform Bithumb has significantly reduced its lending program just one month after its launch. This decision comes in response to low lending volume and increased pressure from regulators.
Reduction in Bithumb's Lending Conditions
On July 4, Bithumb launched its lending program, offering loans with 4x leverage on ten major cryptocurrencies, including Bitcoin and Ethereum. However, on June 29, the platform paused the service due to low lending volume. Following an internal review, the program resumed on July 8, but with stricter conditions:
* Leverage was cut from 4x to 2x * The maximum loan amount was reduced by 80%, from 1 billion won to just 200 million won
Now, even investors with over 100 billion won in trading volume can only borrow up to 200 million won.
Regulatory Response to Lending Practices
Bithumb’s changes come amid concerns from Korean regulators about the risks associated with high leverage in crypto lending. On June 31, authorities and crypto exchanges collaborated to create safer lending rules that include setting leverage limits and requirements for transparency in risk disclosure. They expressed worries that high leverage could lead to significant losses for users in case of sharp price fluctuations.
Shift in Investor Interests
Alongside changes at Bithumb, South Korean retail investors have begun to shift their investments from U.S. Big Tech stocks to crypto-related shares, especially those tied to stablecoins. From January to April, average monthly purchases of Big Tech stocks were $1.68 billion but sharply dropped to $260 million by July. Meanwhile, crypto stocks surged, making up 36.5% of the top 50 purchases in June. This shift is likely driven by growing stablecoin use and the impact of the newly introduced US GENIUS Act.
Bithumb's retreat from high-leverage lending highlights the industry's push for safer lending practices, which will be crucial for future market development.
