Wrapped Bitcoin Transfers Reserves Ahead Of Controversial Restructure

The BTC collateralizing Wrapped Bitcoin is on the move as the project prepares to restructure.

On Oct. 8, onlookers spotted the assets underpinning Wrapped Bitcoin (WBTC)’s reserves were moving on-chain.

Matt Luongo, the founder of Thesis, the issuer of tBTC — the second-largest BTC-backed ERC-20 token behind WBTC, noted that Wrapped Bitcoin’s total value locked (TVL) had abruptly dipped by 99% on Oct. 8, according to DeFi Llama.

“Stand by, a little housekeeping,” replied Wrapped Bitcoin, adding that its Proof of Reserves continue to indicate that WBTC is fully backed by BTC.

“All the coins backing WBTC in BitGo custody are on the move following the company's announcement of a shift in custody strategy,” said Sani, the founder of Timechain Index.

Luongo noted that other Bitcoin-backed tokens had experienced significant TVL losses, including solveBTC, LBTC, and fBTC. Luongo theorized that a substantial portion of reserves backing said tokens must comprise WBTC.

Wrapped Bitcoin restructure

The transactions come amid Wrapped Bitcoin’s looming controversial restructure.

In early August, BitGo, the company behind Wrapped Bitcoin, announced it would transfer control over the project to a joint venture in partnership with BiT Global and Justin Sun, the founder of Tron, after at least 60 days. The timeline meant that the restructuring would take place on Oct. 8 at the earliest.

The news was met with mixed reactions from web3 projects, with Sky (formerly MakerDAO), preventing users from using WBTC to collateralize new mints of its DAI stablecoin. BA Labs, a risk analysis team advising Sky, warned that previous projects associated with Sun have suffered major disruptions — with TUSD and USDD both suffering depegs while Huobi BTC and HUSD have failed.

Shortly after, TrueCoin, the company behind TUSD, settled charges from the U.S. Securities and Exchange Commission (SEC) alleging that the stablecoin had not been backed by USD since 2022, coinciding with when Sun was rumored to become involved with the project. As of September 2024, the SEC said 99% of TUSD’s collateral comprised the shares of a speculative fund.

However, not every project was alarmed by Wrapped Bitcoin’s plan, with Aave’s community opposing a proposal from LlamaRisk to offboard WBTC. User deposits in the form of Wrapped Bitcoin have since surged to an all-time high on Aave.

Rival token issuers comprise the primary beneficiaries of the drama surrounding WBTC’s restructure, with Coinbase's cbBTC amassing a $361.2 million market cap since launching four weeks ago, according to CoinGecko. TBTC’s market cap grew 26% to $236.7 million over the same period.