Upbit Goes 99% Cold Storage after Over $30M Hack Shock

Core Viewpoint - Upbit, South Korea's largest crypto exchange, is moving over 99% of its digital assets to cold wallets following a significant hack that resulted in a loss of approximately $31 million [1][2]. Group 1: Security Measures - Upbit's parent company, Dunamu, announced the transition to cold wallets to enhance security after the breach of its Solana hot wallets [1]. - The exchange already holds 98.33% of its cryptocurrency in cold storage and aims to reduce hot wallet holdings to below 1% [2]. - The move aligns with South Korea's Virtual Asset User Protection Act, which mandates that exchanges keep at least 80% of their digital assets in cold wallets [1]. Group 2: Financial Impact - The hack on November 27 resulted in a loss of 44.5 billion KRW, approximately $31 million, with Upbit managing to freeze $1.77 million of the stolen funds [2]. - Upbit has committed to covering all losses from its reserves, assuring users that their funds are safe [3]. Group 3: Market Implications - The shift to cold storage may set a new security standard for other exchanges, potentially reducing the risk of large-scale losses from hacks [4]. - However, this increased security could lead to lower liquidity, as most funds will be offline, which may slow down withdrawal processes during high-demand periods [4]. - Delays in withdrawals could exacerbate price discrepancies between Korean exchanges and global markets, known as the "Kimchi premium," especially during volatile market conditions [5]. Group 4: Exchange Overview - Upbit is the leading exchange in Korea, with a daily trading volume exceeding $1.3 billion and supports 301 different crypto tokens [6]. - The exchange's liquidity issues could lead to significant price fluctuations, with potential for double or triple pricing in the market if access to global markets is restricted [6].