Wrapped Bitcoin provide drops to unfavourable after 11,500 wBTC burn linked to Celsius

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 value about $260 million linked to now-bankrupt crypto lender Celsius was burned, turning its development price to unfavourable. The present complete provide of the wrapped token is 164,396 WBTC, with a month-to-month development price of -7.39.

wBTC Day by day mint and burn. Supply: Dune

WBTC is an Ethereum-based ERC-20 token that mirrors the worth of Bitcoin and is pegged 1:1 with the Bitcoin (BTC) worth. Bitgo co-developed wBTC in 2019 alongside blockchain interoperability protocol Ren and multi-chain liquidity platform Kyber. wBTC can also be managed by the decentralized autonomous group wBTC DAO, which contains over 30 members.

When a service provider desires to trade BTC for wBTC, they begin a burn transaction and alert the custodians. The custodians then ship the matching quantity of BTC to the product owner’s bitcoin deal with. Customers can then trade their wBTC for BTC at retailers, who burn the acquired tokens.

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 apps and good contracts.

Throughout the peak of the bull run, wrapped tokens turned a preferred device of use within the DeFi ecosystem. wBTC’s provide peaked at 285,000 in April 2022 when the BTC worth was buying and selling above $48,000.

Nonetheless, 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-LUNA-led crypto contagion that compelled a number of crypto lenders to redeem their wBTC. In accordance with one report, Celsius Community redeemed about 9,000 wBTC amid a rising withdrawal demand.

Associated: Celsius Community coin report exhibits a stability hole of $2.85 billion

An analogous state of affairs occurred in November 2022 after the FTX collapse, the place reviews point out the now-bankrupt crypto trade tried redeeming 3,000 wBTC proper earlier than submitting for chapter. After the FTX’s collapse in November, wBTC skilled its largest month-to-month coin redemption, with over 28,000 wBTC redeemed again to the unique coin.

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 critical considerations on the time about whether or not such artificial tokens is a viable mode of worth switch.