Coinbase's cbBTC Hits $100M Market Cap in One Day Amid Controversy

By: Isha Das

Coinbase’s newly launched wrapped Bitcoin product, cbBTC, has seen remarkable uptake within its first 24 hours, achieving a market capitalization nearing $100 million. According to Dune Analytics, the circulating supply of cbBTC has reached 1,720 tokens, valued at approximately $99.8 million. Approximately 43% of these tokens are on Coinbase’s layer-2 network, Base, while 57% are on Ethereum.

The rapid adoption of cbBTC is expected to significantly bolster DeFi activities on Base. Contributors from Moonwell DeFi, such as Luke Youngblood, have highlighted the product's impact on retail and institutional Bitcoin holdings. Youngblood noted that cbBTC’s fungibility with Bitcoin on Coinbase would facilitate the integration of retail BTC holdings exceeding $20 billion and institutional holdings over $200 billion into Base’s on-chain ecosystem.

Nansen CEO Alex Alealso has similarly commended the token’s quick adoption and projected an increase in total assets on the Base network. He added that Coinbase currently holds about 36% of the supply, while Wintermute ranks among the top holders. Alealso remarked that Wintermute’s involvement positions it as the #1 market maker, a solid business opportunity.

Not everyone shares the enthusiasm for cbBTC, though. TRON founder Justin Sun has been vocal in his criticism, referring to cbBTC as “central bank BTC” due to its lack of Proof of Reserve audits and the potential for government intervention. Sun stated, “cbBTC lacks Proof of Reserve, no audits, and can freeze anyone’s balance anytime. Essentially, it’s just ‘trust me.’ Any US government subpoena could seize all your BTC.”

Sun further claimed that integrating cbBTC into DeFi could introduce security risks. He expressed concerns that government subpoenas could freeze on-chain Bitcoin instantly, thereby undermining decentralization. “Integrating cbBTC will pose major security risks to decentralized finance. A single government subpoena could freeze on-chain Bitcoin instantly, making decentralization a joke,” he argued.

Some market observers suggest that Sun’s criticisms may be influenced by competition concerns. Coinbase’s cbBTC could potentially encroach on the market share of BitGo’s Wrapped Bitcoin (WBTC), a project with which Sun has affiliations. The debate over cbBTC’s role in the DeFi ecosystem continues to unfold, with some crypto community members now seeking alternative solutions.