The provision of wrapped Bitcoin (wBTC) dropped to its lowest since Could 2021 after the second-largest single-day burn on Feb. 27.
A complete of 11,500 wBTC ($260 million) linked to now-bankrupt crypto lender Celsius was burned, turning its progress fee damaging. The present whole provide of the wrapped token is 164,396 wBTC, with a month-to-month progress fee of -7.39%.
WBTC is an Ethereum-based ERC-20 token that mirrors the worth of Bitcoin and is pegged 1:1 with the worth of Bitcoin (BTC). Bitgo co-developed wBTC in 2019 alongside blockchain interoperability protocol Ren and multichain liquidity platform Kyber. WBTC is managed by the decentralized autonomous group wBTC DAO, which includes over 30 members.
When retailers wish to alternate BTC for wBTC, they begin a burn transaction and alert the custodians. The service provider transfers actual BTC to a custodian tackle on the Bitcoin blockchain, which is locked. As soon as it receives the actual BTC, the custodian tackle mints the equal quantity in wBTC on Ethereum.
Being an ERC-20 token makes the switch of wBTC quicker than regular Bitcoin, however the important thing benefit of wBTC is its integration into the world of Ethereum wallets, decentralized functions and sensible contracts.
Throughout the peak of the bull run, wrapped tokens grew to become a preferred instrument of use within the decentralized finance ecosystem. WBTC’s provide peaked at 285,000 in April 2022, when the value of BTC was buying and selling above $48,000.
Nevertheless, with the appearance of the bear market and quite a few crypto contagions, the demand began to fade away. The primary indicators of decreasing demand got here after the Terra collapse, which pressured a number of crypto lenders to redeem their wBTC. In line with one report, Celsius Community redeemed about 9,000 wBTC amid a rising withdrawal demand.
Associated: Celsius Community coin report reveals a stability hole of $2.85 billion
An analogous situation occurred in November 2022 after the FTX collapse, the place studies point out the now-bankrupt crypto alternate tried redeeming 3,000 wBTC simply earlier than submitting for chapter. After the FTX collapse in November, wBTC skilled its largest month-to-month coin redemption, with over 28,000 wBTC redeemed again to the unique coin.
Attention-grabbing nugget from immediately’s $WBTC Twitter House w/ @BitGo and @KyberNetwork:
Throughout FTX turmoil, somebody from Alameda tried to redeem 3k WBTC for BTC.
BitGo refused to honor.
Tokens have been burned anyway.
BitGo is not certain what to do w/ the 3k BTC.https://t.co/A1wYY72skb
— Chris Blec (@ChrisBlec) December 14, 2022
The market contagion attributable to the FTX collapse additionally depegged wBTC from the unique worth of BTC. Though the slippage was nearly 1.5%, it raised severe issues about whether or not such artificial tokens have been a viable mode of worth switch.
