wBTC Supply Hits 9-Month Low After Major Burn

The supply of wrapped Bitcoin (wBTC), an Ethereum-based ERC-20 token that mirrors the value of Bitcoin and is pegged 1:1 with its price, has hit its lowest point since May 2021. This follows a significant burn of 11,500 wBTC linked to the now-bankrupt crypto lender Celsius, which has turned its growth rate negative. The current total supply of wBTC stands at 164,396, with a monthly growth rate of -7.39%.

wBTC was co-developed in 2019 by Bitgo, blockchain interoperability protocol Ren, and multichain liquidity platform Kyber. It is managed by the decentralized autonomous organization wBTC DAO, which comprises over 30 members. When merchants want to exchange BTC for wBTC, they start a burn transaction and alert the custodians. The merchant transfers real BTC to a custodian address on the Bitcoin blockchain, which is locked. Once it receives the real BTC, the custodian address mints the equivalent amount in wBTC on Ethereum. Being an ERC-20 token makes the transfer of wBTC faster than normal Bitcoin, but the key advantage of wBTC is its integration into the world of Ethereum wallets, decentralized applications, and smart contracts.

During the peak of the bull run, wrapped tokens became a popular tool of use in the decentralized finance (DeFi) ecosystem. The supply of wBTC peaked at 285,000 in April 2022, when the price of BTC was trading above $48,000. However, with the advent of the bear market and numerous crypto contagions, the demand for wBTC started to fade away.

The first signs of lowering demand came after the Terra collapse, which forced several crypto lenders to redeem their wBTC. According to one report, Celsius Network redeemed about 9,000 wBTC amid a growing withdrawal demand. A similar scenario occurred in November 2022 after the FTX collapse, where reports indicate the now-bankrupt crypto exchange tried redeeming 3,000 wBTC just before filing for bankruptcy. After the FTX collapse in November, wBTC experienced its largest monthly coin redemption, with over 28,000 wBTC redeemed back to the original coin.

The market contagion caused by the FTX collapse also depegged wBTC from the original value of BTC. Although the slippage was just about 1.5%, it raised serious concerns about whether such synthetic tokens were a viable mode of value transfer.

The recent burn of 11,500 wBTC linked to Celsius is significant, as it is the second-largest single-day burn of wBTC. This burn has turned the growth rate of wBTC negative, meaning its supply is decreasing. The total supply of wBTC has now hit a nine-month low.

Despite this, wBTC remains an important player in the DeFi ecosystem, offering a bridge between the Bitcoin and Ethereum networks. Its integration into the world of Ethereum wallets, decentralized applications, and smart contracts provides an added advantage to its users.


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El Salvador president predicts ‘gigantic price increase’ for Bitcoin

Salvadoran President Nayib Bukele has made yet another bullish Bitcoin prediction soon after the International Monetary Fund urged his government to remove Bitcoin’s status as legal tender.

Bukele took to Twitter on Monday to predict that Bitcoin  (BTC) will ultimately see a “gigantic price increase” due to its limited supply of only 21 million digital coins.

The president cited Bitcoin’s scarcity case, emphasizing there are “more than 50 million millionaires” in the world, and there is not enough Bitcoin if each one of them wanted to own at least one BTC.

“No enough for even half of them. A gigantic price increase is just a matter of time,” Bukele wrote.

Bukele’s comments came shortly after the International Monetary Fund (IMF) urged El Salvador to end its recognition of Bitcoin as legal tender due to risks related to financial stability and consumer protection. The IMF’s report followed a sharp Bitcoin price decline, with BTC losing about $10,000 of its value in a period from Jan. 20 to Jan. 25, according to data from CoinGecko.

Bitcoin 30-day price chart. Source: CoinGecko

The latest Bitcoin crash caused major dollar-nominated losses to El Salvador’s Bitcoin reserves. As previously reported by Cointelegraph, the Salvadoran government made its first 200 BTC purchase on Sept. 6, when BTC traded around $52,000. The government then bought 420 BTC on Oct. 27 when Bitcoin’s market price was above $58,000. El Salvador also later bought some Bitcoin at around $54,000 in November and more BTC at $49,000 in mid-December.

At the time of writing, BTC is trading at $37,159, down about 45% from its historical highs of above $68,000 recorded on Nov. 9.