Wrapped Bitcoin (WBTC) Flash Crashes to $5K on Binance Amid Electronic Error

Wrapped Bitcoin (WBTC), a tokenized version of Bitcoin that enables its use in decentralized finance (DeFi) applications, experienced an alarming flash crash on November 23, 2024. The price of WBTC briefly plummeted to an all-time low of around $5,200 on the Binance exchange, despite trading normally on other platforms.

Flash Crash Triggers Sudden Price Drop

WBTC started the day at typical price levels of approximately $98,000. However, it rapidly dropped due to what appeared to be an electronic error in Binance’s trading system — a common culprit for flash crashes. This sudden and sharp price decline lasted only a few moments before the asset quickly rebounded to normal levels. By the end of the day, the daily candle for WBTC on Binance closed around the $97,000 mark, and the token is currently trading at expected levels.

Coinbase Delisting WBTC Sparks Controversy

The flash crash followed a major announcement from Coinbase earlier in the week. On November 19, the exchange revealed it would delist WBTC from its platform starting December 19, 2024. Despite suspending trading, Coinbase assured users that their WBTC holdings would remain accessible for withdrawal.

In its delisting statement, Coinbase explained that it continually monitors the assets listed on its exchange to ensure they meet the platform’s standards. However, the decision has raised eyebrows, particularly from those who believe it could be strategically motivated. BiT Global, the custodian for WBTC, alleged that Coinbase’s move was an attempt to promote its own tokenized Bitcoin product, cbBTC.

BiT Global Accuses Coinbase of Competitive Maneuver

BiT Global claims that Coinbase’s delisting of WBTC is designed to give cbBTC an edge in the market. The custodian for WBTC stated, “It’s clear that Coinbase’s decision is an attempt to gain a competitive advantage, pushing forward their own wrapped Bitcoin product, cbBTC, and removing the largest and most influential competitor in WBTC.”

Coinbase launched cbBTC in September 2024, shortly after controversy surrounding WBTC’s transition to a multi-jurisdictional custodial model. This new structure distributes the custody of the underlying Bitcoin between the United States, Hong Kong, and Singapore, which caused concern within the crypto community. The involvement of Tron founder Justin Sun in this custodial arrangement, in particular, sparked backlash from various factions of the community, including the former MakerDAO community, now known as Sky. This controversy eventually led to the Sky community voting to remove WBTC as collateral for trades on its platform.

Conclusion: A Volatile Time for Wrapped Bitcoin

The flash crash and Coinbase’s delisting of WBTC have created a volatile period for Wrapped Bitcoin. The asset’s rapid price dip on Binance serves as a stark reminder of the risks inherent in digital asset markets, while the strategic moves by Coinbase suggest a shift in the competitive landscape for tokenized Bitcoin products.

As WBTC’s future on major exchanges like Coinbase hangs in the balance, all eyes will be on how these developments impact the broader DeFi ecosystem and the future of tokenized Bitcoin. With cbBTC emerging as a potential alternative, the competition between these Bitcoin-wrapped assets is likely to intensify in the coming months.