Aave’s WBTC Holdings Surge To Record High Despite Restructure Drama

Aave’s pools for Bitcoin-backed tokens are thriving amid the drama surrounding Wrapped Bitcoin’s imminent ownership restructure.

Data from Dune Analytics shows the sum of WBTC deposited in Aave v3 tagging a new all-time high this month. Roughly 37,050 WBTC worth $2.42 billion is currently supplied to the protocol, marking a nearly 10% increase since the start of August.

The milestone suggests WBTC holders are moving their assets to Aave as rival DeFi protocols are moving to limit their exposure to the token ahead of Wrapped Bitcoin’s controversial restructure.

Aave also onboarded support for Threshold’s tBTC and Coinbase’s cbBTC tokens over the past week, bolstering its exposure to Bitcoin assets.

Coinbase launched cbBTC on Sept. 12 and Aave integrated support for the token 12 days later. The move precipitated Aave becoming the largest cbBTC holder on Ethereum within 24 hours, with the pool currently maxing out its supply limit of 900 BTC ($58.9 million).

Aave onboarded tBTC on Sept. 23, with the pool currently at 58.3% utilization with 320.8 tBTC ($30 million) supplied.

On the same day, Matt Luongo, the founder of Threshold, proposed delegating 40 million T to an operator running a node on behalf of Aave DAO to allow the project to participate in validating tBTC, in addition to facilitating Aave building up a treasury position comprising T earned from staking rewards. Luongo also advocated for Aave to receive a permanent seat on the Threshold Council.

Wrapped Bitcoin restructure

On Aug. 9, BitGo, the company behind Wrapped Bitcoin and its sole custodian at present, announced plans to transfer control over the protocol to a joint venture including involvement from BiT Global and Justin Sun — Tron’s controversial founder. The restructure will occur on Oct. 8 at the earliest.

Sky (formerly known as MakerDAO) was quick to react, with the protocol implementing measures on Aug. 15 to prevent new stablecoin mints against WBTC after BA Labs, a risk adviser to Sky, expressed concerns stemming from disruptions encountered by other projects associated with Sun, including TrueCoin’s TUSD stablecoin.

On Sept. 13, Sky moved towards fully offboarding the token after BA Labs said it identified evidence of concealment regarding Sun’s control over BiT Global. However, the measures were put on hold after BA Labs received assurances that BiT Global could not make changes to the Wrapped Bitcoin protocol or move Bitcoin collateralizing WBTC independent of BitGo. BA Labs added that the value of WBTC deposits in Sky had “fallen somewhat” to roughly $170 million, placing it within “a more acceptable range.”

By contrast, a recent proposal from Llama Risk, a risk analysis team, to limit Aave’s exposure to WBTC was met with resistance.

“WBTC users are legitimate users of the Aave protocol,” said Marc Zeller, the founder of the Aave Chan Initiative (ACI). “ACI will not support any scenario hurting them beyond absolute necessity.”

Instead, Aave’s community appeared to support diversifying the roster of BTC-backed tokens supported by the protocol, precipitating the onboarding of tBTC and cbBTC.

TUSD charges

However, concerns surrounding the track record of stablecoins featuring involvement from Sun continue to gain traction.

On Sept. 24, TrueCoin settled charges from the U.S. Securities and Exchange Commission (SEC) alleging the firm misled investors for at least two-and-a-half years by claiming TUSD was fully backed by U.S. dollars. The SEC claimed that 37% of TUSD’s collateral was invested in the shares of a “speculative fund” as of March 2022, with the allocation having soared to 99% as of September 2024.

One day later, Wormhole, a cross-chain interoperability protocol, proposed that Curve Finance eliminate its exposure to TUSD over “regulatory risk and solvency concerns.”