WBTC Sees Catastrophic 60x Surge in Redemptions Following BitGo's Announcement of Custodial Changes Involving Justin Sun

WBTC is a token on several blockchains that is backed one-to-one by BTC held by a centralized custodian. Redeeming WBTC entails holders can burning WBTC tokens and receiving native BTC in return

Cryptocurrency token Wrapped Bitcoin (WBTC) has seen a surge in redemptions compared to mints following an announcement of custodial changes for the token by digital asset custodian BitGo.

According to a Dune Analytics dashboard, over the past two weeks, 1,353.7 bitcoins, valued at nearly $90 million, were redeemed for WBTC tokens, while only 20 new WBTC tokens were minted.

This marks a significant shift from the two weeks prior to the custody announcement, during which no tokens were redeemed and users deposited nearly $11 million worth of Bitcoin to mint 172.1 WBTC tokens.

The dashboard is maintained by 21Shares, the parent company of crypto exchange-traded products (ETP) issuer 21Shares.

WBTC is a token on several blockchains that is backed one-to-one by BTC. Redeeming WBTC entails holders burning WBTC tokens and receiving native BTC in return, while minting WBTC involves depositing native Bitcoin and receiving WBTC tokens, as described in WBTC’s whitepaper.

BitGo controls the multi-signature wallet holding the bitcoins backing WBTC. On Aug. 9, BitGo began a 60-day transitional period to diversify its custodial operations through a joint venture with BiT Global, a Hong Kong-based custody platform.

The joint venture includes the Tron ecosystem and its founder Justin Sun, who has long been a controversial figure in the cryptocurrency industry.

According to a report by crypto news outlet The Block, the custody announcement sparked concerns among some WBTC users, who expressed担忧 that Sun’s involvement could introduce new risks to the token’s integrity.

In response to these concerns, BitGo later clarified that Sun and his affiliates would not have any involvement in the custody of WBTC tokens, and that the token would continue to be custodied by BitGo and Galaxy Digital.

However, the announcement and subsequent developments appear to have had a noticeable impact on the demand for WBTC tokens, as evidenced by the large-scale redemptions.

“The large outflows we’re seeing are indicative of the general sentiment across large WBTC holders and their tolerance to the uncertainties created by the recent custody changes, especially in the institutional landscape,” Scott Guenther, head of finance at exchange infrastructure provider 0x, told Unchained in an email.

“To me, this seems to be squarely due to declining trust [in WBTC],” Jim Hwang, chief operating officer of crypto investment firm Firinne Capital, told Unchained.

According to Hwang, the decrease in trust was also on display when “Maker passed a proposal [on Aug. 15] to eliminate further exposure to WBTC.”

“The data suggests the community and industry are in search of a more reliable, institutional-grade alternative,” 21Shares research analyst Tom Wan wrote on X.

Data from CoinGecko shows that WBTC has a total supply of 153,372 tokens, representing claims on roughly 0.8% of the current BTC supply.

If measured as a separate token, WBTC is the 15th largest cryptocurrency, with a total market cap of almost $9.8 billion – ahead of Shiba Inu (SHIB), Wrapped ETH (WETH), and Chainlink (LINK).

The above is the detailed content of WBTC Sees Catastrophic 60x Surge in Redemptions Following BitGo's Announcement of Custodial Changes Involving Justin Sun. For more information, please follow other related articles on the PHP Chinese website!