Wrapped Bitcoin ‘Burns’ Increase as Traders Rotate Capital Out of Cooling DeFi

WBTC burns picked up in November, continuing into December.

AccessTimeIconDec 3, 2020 at 8:00 p.m. UTC
Updated Sep 14, 2021 at 10:38 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Wrapped bitcoin, the bitcoin-backed token on Ethereum now worth over $2 billion, has seen an increase in burns (or “unwrappings”) by some of its largest users as the Ethereum-based decentralized finance sector continues to cool.

BitGo clients including Three Arrows Capital and Alameda Research are exchanging an increasing amount of their tokenized bitcoins minted earlier this year for real bitcoins as the bullish cryptocurrency market continues to center on bitcoin and Ethereum’s decentralized finance takes a back seat for now. 

“In general, the yield has dipped in DeFi and the increased trading on centralized exchanges directed our needs to do so,” said Lan Gu, quantitative trader at Alameda Research, in a direct message with CoinDesk. 

In the months following DeFi’s red-hot summer when bitcoins were wrapped faster than they were mined, the sector has cooled significantly and yields across various Ethereum-based protocols have subsequently dropped. 

Alameda’s WBTC burns are also partially the result of shifts in their OTC order flow and internal capital base readjustment as the price of bitcoin continues to climb, the firm told CoinDesk. 

Another catalyst for the increase in burns could be the sunsetting of liquidity rewards program for leading decentralized exchange Uniswap on Nov. 17, giving users less of an incentive to keep funds on the platform, according to Kiarash Mosayeri, wrapped bitcoin product manager at BitGo. Talking to CoinDesk, Mosayeri said the recent WBTC burns “were expected.”

WBTC mints and burns in 2020
WBTC mints and burns in 2020

To date, nearly 120,000 WBTC are still in circulation with over 8,000 WBTC minted in November. A record 4,300 WBTC were burned over the same period, however. Nearly 2,000 more were also burned in the first few days of December with no new minting. 

Three Arrows Capital, another prominent wrapped bitcoin merchant that burned over 4,000 WBTC in the past two weeks, declined to comment on why they “unwrapped” these coins. The Singapore-based trading firm has not minted new WBTC since mid-October, per BitGo’s wrapped bitcoin order book. 

The market capitalization of wrapped bitcoin is above $2.3 billion at last check.

WBTC burns in 2020
WBTC burns in 2020


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.