Crypto Exchanges in Crisis: Gemini, Bithumb and the Industry Under Pressure

Crypto Exchanges in Crisis: Gemini, Bithumb and the Industry Under Pressure

The Bitcoin industry is going through turbulent times – and the problems are no longer limited to price fluctuations. From massive ETF outflows to existential restructurings at established exchanges to hair-raising technical glitches: current developments reveal structural weaknesses in the infrastructure of the crypto ecosystem. While Tyler Winklevoss displays demonstrative optimism on X, his company Gemini faces radical restructuring. At the same time, a serious error at the South Korean exchange Bithumb shows how fragile the technical systems can be even at established players.

The Facts

Gemini, the crypto exchange founded by the Winklevoss twins Cameron and Tyler, finds itself in an existential transition phase. In early February, the company announced it would lay off a quarter of its workforce and completely withdraw from the United Kingdom, the European Union, and Australia ^[2]. The strategic realignment henceforth focuses on the US and Singapore markets. Shortly thereafter, a veritable exodus occurred at the executive level: Chief Operating Officer (COO), Chief Financial Officer (CFO), and Chief Legal Officer (CLO) left the company almost simultaneously, while Cameron Winklevoss had to assume additional areas of responsibility ^[2].

The business figures paint a tense picture of the situation. In a recent SEC filing, Gemini projects rising net revenues of $165 to $175 million for 2025 with approximately 600,000 monthly active users. At the same time, however, operating expenses are expected to grow to $520 to $530 million – significantly more than in the previous year ^[2]. The exchange's market position is precarious: in January, Gemini handled only 0.1 percent of global spot crypto trading, down from an already meager 0.6 percent in June 2025 ^[2]. On-chain data also suggests that Winklevoss Capital may have significantly reduced its Bitcoin holdings over the past twelve months ^[2].

In parallel, US spot Bitcoin ETFs are recording massive capital outflows. On Thursday, $165.8 million flowed out of the funds, bringing weekly losses to $403.9 million ^[1]. The outflows could extend to a five-week series, with losses since the beginning of the year already reaching $2.7 billion ^[1]. Particularly concerning: trading volume shrank by 21 percent within a week and reached the lowest levels since late December – a clear signal of declining investor activity ^[1].

Meanwhile, in South Korea, a serious technical error at the Bithumb exchange caused a stir and political pressure. During a promotional campaign on February 6, the exchange accidentally credited users with 2,000 Bitcoin per person instead of the intended 2,000 Korean won (approximately $1.40) ^[1]. In total, Bithumb distributed 620,000 BTC in this manner, which the exchange did not even possess – leading to a short-term selling frenzy ^[1]. Lawmakers accuse the Financial Services Commission of failing to detect critical vulnerabilities in Bithumb's internal systems despite at least three inspections since 2022 ^[1]. Opposition lawmaker Kang Min-guk described the incident as a symptom of structural weaknesses in the crypto market, including gaps in regulation and oversight ^[1].

It's not just exchanges struggling with challenges: Metaplanet CEO Simon Gerovich was forced to refute allegations that his company had deceived investors about its Bitcoin strategy. Critics accused the company of delaying or withholding price-sensitive information about large Bitcoin purchases and options trades, concealing losses from its derivatives strategy, and not fully disclosing key details of its BTC-backed loans ^[1]. Gerovich argued that Metaplanet had promptly reported all Bitcoin purchases, options strategies, and borrowings, and that critics were misinterpreting the financial statements ^[1].

Analysis & Assessment

The parallel crises at multiple exchanges and crypto companies are no coincidence – they reveal fundamental problems of an industry in its maturation process. Gemini's dramatic withdrawal from important markets and the executive exodus are symptoms of a classic problem: in bull markets, many companies expand too aggressively, only to have to make painful corrections in bear phases. The market share of 0.1 percent is devastating and shows that Gemini has become virtually irrelevant in competition with giants like Binance, Coinbase, or Kraken.

Particularly revealing is the strategic pivot to prediction markets and custody services. This suggests that the Winklevoss brothers have recognized that the traditional exchange business is hardly profitable anymore for mid-sized providers. High compliance costs, intense price competition, and the dominance of a few large platforms make the business model increasingly unattractive. The alleged Bitcoin sales by Winklevoss Capital could be a desperate attempt to secure liquidity – a remarkable contrast to Tyler Winklevoss' public optimism.

The Bithumb incident is alarming for a different reason: it demonstrates how vulnerable even established exchanges are to fundamental technical errors. An exchange that cannot even distinguish between 2,000 Bitcoin and 2,000 won reveals glaring deficiencies in its control systems. The fact that South Korean regulators did not discover this despite multiple inspections raises fundamental questions about the effectiveness of oversight. For Bitcoin users, this is a stark reminder of the core principle "Not your keys, not your coins" – those who store their Bitcoin on exchanges bear not only hacking risks but also the risk of catastrophic management failures.

The massive ETF outflows are possibly the most concerning because they could signal a trend reversal among institutional investors. After the initial euphoria surrounding approval, many investors appear to be reducing their positions – possibly disappointed by the absence of a rally or unsettled by macroeconomic factors. The shrinking trading volume reinforces this impression: when even professional actors are withdrawing, the market lacks the liquidity and momentum for sustainable recoveries.

Conclusion

• The structural problems at Gemini, Bithumb, and other exchanges show that crypto infrastructure remains fragile despite years of development – technical glitches and economic distortions remain systemic risks

• Gemini's withdrawal from important markets and dramatic loss of significance illustrate how difficult it has become for mid-sized exchanges to compete with dominant platforms – market consolidation is inevitable

• The ongoing ETF outflows of $2.7 billion since the beginning of the year, coupled with shrinking trading volume, suggest a serious crisis of confidence among institutional investors that could create further price pressure in the short term

• The Bithumb incident once again underscores the importance of self-custody: those who store their Bitcoin on centralized exchanges expose themselves not only to hacking risks but also to catastrophic management failures and regulatory problems

• The combination of exchange problems, ETF outflows, and regulatory uncertainty (see stablecoin discussions) paints the picture of an industry in transition – in the long term, only companies with solid business models and robust infrastructure will survive