WBTC Depeg Has DeFi Community On Edge

BitGo COO Assures Investors that WTBC Reserves Can Be Verified On-Chain

By: Samuel Haig Loading...

WBTC Depeg Has DeFi Community On Edge

The DeFi community is watching nervously as Wrapped Bitcoin (WBTC), the leading wrapper for Bitcoin on the Ethereum network, continues to trade at a slight discount to Bitcoin.

With arbitrageurs appearing unwilling to step in and trade WBTC’s price back up to parity with Bitcoin, and Alameda Research’s role as a WBTC merchant under scrutiny, observers are worried that all is not well with the popular wrapper that enables Bitcoin to be deployed in DeFi.

On Kraken, WBTC has traded at a roughly 1% discount for much of the past fortnight since the collapse of FTX, with the token falling as low as 0.98 BTC on Nov. 25.


WBTC/BTC on Kraken, 4-hr chart. Source: TradingView

A chart circulating on Twitter shows that Alameda Research is by far the top Wrapped Bitcoin merchant by the number of tokens minted, having created more than 100,000 WBTC.

CoinList, a centralized exchange that has recently blamed withdrawal suspensions on technical issues suffered by its custodians, is second with 48,400 WBTC. Three Arrows Capital, the defunct crypto hedge fund, is the fourth largest minter with 12,450 WBTC.

The data has prompted many users to warn against exposure to WBTC, propagating fears that the underlying Bitcoin backing Alameda’s WBTC could be commingled with FTX’s funds or otherwise impacted by the recent insolvencies suffered by major crypto firms.

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It’s worth noting that major DeFi lenders Maker, Aave and Compound hold around $1.2B worth of WBTC, accounting for roughly a third of the supply.


Top WBTC Holders. Source: Etherscan

‘Fake News’

Chen Fang, the COO of BitGo, the centralized digital asset custodian servicing Wrapped Bitcoin, sought to reassure investors that WBTC is safe.

“If folks capitulate to fake news, the market makers win — every WBTC is 1:1 backed, verifiable on-chain,” Fang said.

“The crypto misinformation HAS TO STOP,” weighed in Udi Wertheimer, a crypto influencer. “Alameda was a “WBTC merchant” which means they’d accept BTC from customers and send it to BitGo to mint WBTC. Alameda NEVER custodied BTC themselves!”

Multisig Reshuffle

On Nov. 25, Victor Tran, the co-founder of Kyber Network, said his team will work with Wrapped Bitcoin to migrate and update the multi-sig signers for the Wrapped Bitcoin DAO.

“The current big DAO multisig… has 18 signers and requires 11 to form a consensus and process a transaction,” Tran said. “Now that nearly 4 years have passed, several of the original signers have become inactive and/or lost control of their keys which diminishes the availability of the multisig.”

The migration will reduce the number of signers to 13, including members from prominent DeFi teams Balancer, Badger, B.Protocol, Chainlink, Compound, Krystal, Kyber, Loopring, Multichain, and Ren. The centralized exchange Gopax, custodian BitGo, and Tom Bean, the co-founder of bZx, round out the new signers.