The price of Wrapped Bitcoin (WBTC) plummeted below $6,000 on Binance, suffering a nearly 95% loss in value within an hour. The flash crash saw WBTC’s price plunge from $98,500 to as low as $5,209 before recovering to around $98,000 on November 23. This dramatic drop occurred just days after Coinbase announced it would delist WBTC, citing liquidity concerns. The delisting will take effect on December 19, 2024.
While the cause of the price drop remains unclear, neither BitGo, the issuer of WBTC, nor the WBTC team have commented on the incident. The crash comes at a time when Coinbase is expanding its involvement in the wrapped Bitcoin market with a competing product, Coinbase Wrapped Bitcoin (cbBTC).
This move complicates the relationship between Coinbase and Justin Sun, who became involved with WBTC through a joint venture between his companies and BitGo. In August, BitGo partnered with BiTGlobal, a Hong Kong-based trust company with ties to Sun. This has led to the creation of several competing wrapped Bitcoin products, including cbBTC from Coinbase and kBTC from crypto exchange Kraken.
Sun has criticized Coinbase for not completing a proof-of-reserves process for its cbBTC token, adding fuel to the rivalry between the two firms. He has also been vocal about the competitive landscape of wrapped Bitcoin products, as the market sees increased options for tokenizing Bitcoin.
WBTC, launched in 2019, allows Bitcoin to be used within decentralized finance (DeFi) ecosystems by tokenizing Bitcoin on the Ethereum blockchain. The token is pegged 1:1 to Bitcoin and currently has a market capitalization of nearly $14 billion.
The flash crash and Coinbase’s decision to delist WBTC highlight ongoing tensions and uncertainty in the wrapped Bitcoin market, with competing products and liquidity concerns driving significant volatility.