Wrapped Bitcoin supply drops to negative after 11,500 wBTC burn linked to Celsius
The provision of wrapped Bitcoin (wBTC) dropped to its lowest since Might 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 unfavorable. The present complete 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 value 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 trade BTC for wBTC, they begin a burn transaction and alert the custodians. The service provider transfers actual BTC to a custodian deal with on the Bitcoin blockchain, which is locked. As soon as it receives the true BTC, the custodian deal with mints the equal quantity in wBTC on Ethereum.
Being an ERC-20 token makes the switch of wBTC sooner than regular Bitcoin, however the important thing benefit of wBTC is its integration into the world of Ethereum wallets, decentralized purposes and good contracts.
Throughout the peak of the bull run, wrapped tokens turned a preferred device 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 arrival 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. Based on one report, Celsius Community redeemed about 9,000 wBTC amid a rising withdrawal demand.
Associated: Celsius Community coin report reveals a steadiness hole of $2.85 billion
The same situation occurred in November 2022 after the FTX collapse, the place reviews point out the now-bankrupt crypto trade 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 Area w/ @BitGo and @KyberNetwork:
Throughout FTX turmoil, somebody from Alameda tried to redeem 3k WBTC for BTC.
BitGo refused to honor.
Tokens had 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 brought on by the FTX collapse additionally depegged wBTC from the unique worth of BTC. Though the slippage was nearly 1.5%, it raised severe considerations about whether or not such artificial tokens had been a viable mode of worth switch.
