The price of Wrapped Bitcoin (WBTC) on Binance dropped below $6,000 shortly after Coinbase removed it from its platform due to concerns about liquidity. In just under an hour, WBTC, which is issued by BitGo, experienced a massive decline of nearly 95%, plummeting from $98,500 to $5,209. However, it quickly recovered and reached around $98,000 on November 23rd.
The exact reason behind WBTC’s sudden price drop is still unknown, as neither BitGo nor the WBTC team have commented on the flash crash. This incident occurred shortly after Coinbase announced its decision to delist WBTC, citing liquidity concerns. The delisting is set to take effect on December 19th.
Meanwhile, Coinbase is expanding its presence in the wrapped Bitcoin market by introducing its own competitor, Coinbase Wrapped Bitcoin (cbBTC). This move further complicates the relationship between Coinbase and Justin Sun, WBTC’s custodial partner. Sun became involved with WBTC through a joint venture between BitGo and his companies. In August, BitGo announced a joint venture with BiTGlobal, a trust company based in Hong Kong that is connected to Sun.
Sun’s involvement in WBTC has led to the development of various competing tokens. In addition to cbBTC, crypto exchange Kraken has also launched its own wrapped Bitcoin called kBTC. In response to the increasing competition, Sun criticized Coinbase for not completing a proof-of-reserves process for cbBTC.
WBTC, which was launched in 2019, enables the flow of Bitcoin liquidity into decentralized finance ecosystems by tokenizing Bitcoin. The token is pegged 1:1 with Bitcoin and currently has a market capitalization approaching $14 billion.