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Wrapped bitcoin, the bitcoin-backed token on Ethereum that is now worth over $ 2 billion, has seen an increase in burns (or “discards”) from some of its largest users as the Ethereum-based decentralized finance industry continues to cool down.
BitGo clients, including Three Arrows Capital and Alameda Research, are trading an increasing amount of their tokenized bitcoins minted earlier this year for real bitcoins as the bull market in cryptocurrencies continues to focus on bitcoin and decentralized finance. Ethereum for now takes a back seat.
“Overall, the yield has decreased in DeFi and the increase in trading on centralized exchanges has directed our needs to do so,” said Lan Gu, quantitative trader at Alameda Research, in a direct message with CoinDesk.
Alameda’s WBTC burns are also partly the result of changes in OTC order flow and the readjustment of the domestic capital base as the price of bitcoin continues to rise, the company told CoinDesk.
Another catalyst for increased burns could be the suppression of the liquidity reward program for decentralized exchange leader Uniswap on November 17, which gives users fewer incentives to keep funds on the platform, according to Kiarash Mosayeri, head of the BitGo’s bitcoin product. Speaking to CoinDesk, Mosayeri said the recent WBTC burns “were expected”.
To date, nearly 120,000 WBTCs are still in circulation with over 8,000 WBTCs minted in November. A record 4,300 WBTC was burned over the same period, however. Almost 2,000 more were also burned in the first days of December without new minting.
Three Arrows Capital, another major wrapped bitcoin trader that has burned over 4,000 WBTC in the past two weeks, declined to comment on why they “discarded” these coins. The Singapore-based trading firm hasn’t minted a new WBTC since mid-October, according to BitGo’s wrapped bitcoin order book.
The market cap of the wrapped bitcoin is over $ 2.3 billion at the last check.
