Wrapped Bitcoin, the Bitcoin-backed token for Ethereum now valued at over $ 2 billion, has caused a spike in burns (or “unpacks”) for some of its largest users as the decentralized financial sector in Ethereum continues to cool.
BitGo customers, including Three Arrows Capital and Alameda Research, are swapping more and more of their token bitcoins minted earlier this year for real bitcoins as the bullish cryptocurrency market continues to focus on Bitcoin and the decentralized funding of Ethereum takes a back seat for the time being.
“In general, the rate of return in DeFi has decreased and increased trading on centralized exchanges has led our needs to do so,” Lan Gu, quantitative trader at Alameda Research, said in a direct message to CoinDesk.
Alameda’s WBTC burns are also, in part, the result of shifts in OTC order flow and adjustments to its internal capital base as the price of Bitcoin continues to rise, the company told CoinDesk.
Another catalyst for the increase in burns could be the sunset of the liquidity rewards program for leading decentralized exchange Uniswap on November 17, which will offer less incentive for users to keep funds on the platform, according to Kiarash Mosayeri, bitcoin product manager at BitGo. Speaking to CoinDesk, Mosayeri said the recent WBTC burns were “expected”.
To date, almost 120,000 WBTC are in circulation, over 8,000 WBTC were minted in November. However, a record 4,300 WBTC was burned in the same period. Almost 2,000 more were burned in the first few days of December without being re-imprinted.
Three Arrows Capital, another well-known Bitcoin trader that has burned over 4,000 WBTC in the past two weeks, declined to comment on why these coins were “unpacked”. The Singapore-based trading company has not minted a new WBTC since mid-October, according to BitGo’s Bitcoin order book.
The wrapped bitcoin market cap is over $ 2.3 billion as of the last review.