Wrapped bitcoin (wBTC) accounts for about 10% of the excess collateral reserves of stablecoin DAI, which investors are now considering bailing out. This decision could be the basis for a bitcoin (BTC) sell-off if investors decide to redeem their wBTC reserves following Bitgo's controversial statements.
August 10, representatives from BA Labs raised the issue of mitigating the risks associated with #wBTC changes at the MakerDAO Managers Forum (MKR). As explained in the proposal, #Bitgo announced plans to transfer control of wBTC to a joint venture with BiT Global.
In addition, Bitgo, a leading provider of custodial solutions, said this would lead to a partnership with Justin Sun and Tron (TRX). If this trend continues, selling pressure on wBTC could cause selling pressure on #bitcoin , which would affect the short-term price of #MarketDownturn .
In its announcement, monet-supply traced parallels to
"a previous situation involving control of the stablecoin TUSD
" after Justin Soon's involvement. The investor noted a
"deterioration in operational process and market transparency" and fears a similar thing could happen to wBTC under new management. The question also mentions
"significant depreciation due to disruptions in redemption services" and
"suspension of real-time reserve confirmation.
The BA Labs Team's proposed solutions include reducing all three requests for wBTC in MakerDAO vaults from 1.25 billion to zero, disabling wBTC borrowing, and reducing the loan-to-value (LTV) ratio of wBTC from 74% to zero. If these measures are approved, it will be nearly impossible for synthetic bitcoin tokens to act as collateral for DAIs.
Interestingly, using wBTC to redeem DAIs is one of the most popular scenarios for using wrapped tokens. Its cancellation could not only cause a potential sell-off, but also serve as an example for other protocols that may follow MakerDAO's lead.
In order to assess the potential consequences, it is important to realize that to redeem #DAI , an investor would need to make a deposit of roughly three times the face value of wBTC, as evidenced by the 20 largest vaults using any of the three wBTC contracts.
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