WBTC and stETH Lose Pegs to Underlying Assets

wrapped token Wrapped Bitcoin (WBTC) and stETH from Lido’s liquid staking service have lost parity with Bitcoin and Ethereum, respectively.

Since November 21, the price of WBTC has repeatedly fallen away from the first cryptocurrency. The maximum deviation from the benchmark value stood at 2.5%, according to CoinGecko. As of writing, the token trades near 0.99 BTC (on Binance).

In the community raised concerns about active minting of the token by Alameda Research and CoinList. According to Dune Analytics, the Sam Bankman-Fried-affiliated company participated in minting 101,746 WBTC, and the exchange issued 48,408 WBTC — ranking first and second by the metric.

On November 11, the FTX Group (including Alameda Research) filed for bankruptcy. A few days later CoinList paused withdrawals of several assets. Some users report they still cannot withdraw funds. The exchange called such information rumors.

In response to online information, BitGo’s chief operating officer Chen Fang stated that every WBTC issued is backed 1-to-1 by an ‘original’ asset. He said the data can be verified on chain.

BitGo is just the custodian — all end user minting/burning must go through one of the merchants in the WBTC network or trade it at an exchange

If folks capitulates to fake news, the market makers win — every WBTC is 1:1 backed, verifiable on chain

— 🍟 Chen Fang (@chenbfang) November 25, 2022

Udi Wertheimer also noted that Alameda Research was merely a middleman in WBTC issuance — the company took Bitcoin from customers and sent the cryptocurrency to BitGo for minting wrapped tokens. He stressed that the firm did not custody the assets.

The crypto misinformation HAS TO STOP.

This isn’t how WBTC works. Alameda was a “WBTC merchant” which means they’d accept BTC from customers and send it to BitGo to mint WBTC.

Alameda NEVER custodied BTC themselves!

You can track BitGo’s BTC reserves on chain. Backed 1-to-1. pic.twitter.com/6o1cIu1xWS

— Udi Wertheimer (@udiWertheimer) November 25, 2022

According to Etherscan, the largest holders of WBTC are addresses linked to MakerDAO, Aave and Compound.

Prices of stETH from Lido also lost parity with Ethereum. According to CoinGecko, the maximum deviation reached almost 3% (recorded on November 24). As of writing, the asset trades near 0.98 ETH (on Curve).

Such dynamics are linked to investor concerns and outflows from Curve pools. According to Dune Analytics, since the start of November the asset volume in relevant Curve ETH/stETH smart contracts has fallen by 62%.

Since May 2022, the value of assets in Curve ETH/stETH liquidity pool has fallen more than sevenfold. Experts linked the situation to the unwinding of positions by major investors such as Alameda Research and Three Arrows Capital.

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