Coinbase, the largest US-based crypto exchange, has announced it will suspend trading for Wrapped Bitcoin (WBTC) on December 19, 2024, at approximately 12 p.m. ET.

The decision, revealed in a post on X (formerly Twitter), cites a routine review of its listed assets to ensure compliance with listing standards. 

Coinbase Sidesteps WBTC Amid cbBTC Boom

The suspension will apply to both Coinbase Exchange and Coinbase Prime. Although trading will cease, WBTC holders will retain full access to their funds and the ability to withdraw them at any time. In preparation for the transition, Coinbase has moved WBTC trading to a limit-only mode, where users can place and cancel limit orders while matches may still occur.

“Coinbase will suspend trading for WBTC (WBTC) on December 19, 2024, at or around 12 pm ET. Your WBTC funds will remain accessible to you, and you will continue to have the ability to withdraw your funds at any time. We have moved our WBTC order books to limit-only mode. Limit orders can be placed and canceled, and matches may occur,” Coinbase detailed.

Coinbase’s move to suspend WBTC comes amid the rapid success of its wrapped Bitcoin token, cbBTC. Recently, cbBTC surpassed a $1 billion market capitalization, reflecting growing adoption and trust within the crypto community. This milestone has further cemented cbBTC’s position as a strong competitor to WBTC in the decentralized finance (DeFi) space.

As of this writing, data on Dune shows that cbBTC market capitalization has increased to $1.44 billion. CBTC’s native availability on networks like Solana, Ethereum, and Base has significantly expanded its accessibility, with Arbitrum being the latest addition.

“cbBTC is live on Arbitrum. cbBTC is an ERC-20 token that is backed 1:1 by Bitcoin (BTC) held by Coinbase. It is natively available on Arbitrum and securely accessible to more users across the Ethereum ecosystem,” Coinbase shared on Tuesday.

Additionally, prominent DeFi protocol Aave is targeting cbBTC for its Version 3 (V3) platform, enhancing its utility within the ecosystem. This growing momentum may have played a key role in Coinbase’s decision to phase out WBTC trading.

WBTC Core Team Urge Coinbase to Reconsider

The team behind Wrapped Bitcoin expressed regret and surprise at Coinbase’s decision. In a statement on X, WBTC’s core team emphasized its commitment to compliance, transparency, and decentralization. 

“We regret and are surprised by Coinbase’s decision to delist WBTC…We urge Coinbase to reconsider this decision and continue supporting WBTC trading,” the team said.

The statement outlined WBTC’s longstanding reputation for novel mechanisms, regulatory compliance, and decentralized governance. Highlighting its seamless integration with DeFi protocols, WBTC described itself as an essential liquidity solution for Bitcoin users. Urging Coinbase to reconsider, WBTC reaffirmed its readiness to address any concerns or provide additional information to support its case.

Meanwhile, Coinbase’s announcement has sparked mixed reactions across the crypto community. Some users criticized the exchange, suggesting the decision reflects an inability to handle competition.

“Coinbase can’t handle fair competition?? WBTC superior to cbBTC” said Gally Sama in a post.

Nevertheless, others support the move, citing concerns over WBTC’s custody model, with one user referencing BitGo’s recent adoption of a multi-jurisdictional custody system.

“You put custody in the hands of a fraud. What did you think was gonna happen?” the user expressed.

This critique aligns with growing fears about Justin Sun’s involvement in WBTC’s custody processes, as BeInCrypto reported recently. Some users have acted preemptively to avoid potential risks, with one commenter sharing their reservations.  

“When Sun got on the multisig for WBTC, I sent all my WBTC on OP to Coinbase and exchanged for true BTC that I withdrew to my hardware wallet… You gave me confirmation just now that I made the right move,” they wrote.

The decision to suspend WBTC trading could mark a pivotal moment in the competition between wrapped Bitcoin solutions. While cbBTC’s integration across multiple blockchain networks has gained momentum, skepticism surrounding WBTC’s custody model and leadership has intensified.

Justin Sun has voiced criticism of Coinbase’s cbBTC strategy, labeling it a setback for Bitcoin’s broader adoption. As the debate continues, the industry watches closely to see whether Coinbase’s cbBTC will solidify its dominance or if WBTC can regain its position as a leading wrapped Bitcoin solution. Regardless, the shifting dynamics reflect the importance of transparency, governance, and community trust in shaping the future of DeFi.

Bitcoin (BTC) may be at risk of a catastrophic “bank run,” according to Justin Bons, founder and CIO of Cyber Capital.  

A bank run is when customers withdraw their deposits from a financial institution over fears of insolvency. 

Bitcoin Cannot Handle Mass Exits, Bons Says

In a detailed social media thread, Bons highlighted critical flaws in Bitcoin’s transaction capacity, self-custody model, and network security. In his opinion, these could lead to a crisis that would destabilize the network and devastate investors. 

Bons’ analysis centers on Bitcoin’s limited transaction processing capability, which he calculated at approximately seven transactions per second (TPS). Using data from Glassnode and Bitcoin’s code, he argued that Bitcoin’s 33 million on-chain users would face a bottleneck if a mass panic triggered simultaneous exits. 

“At this rate, the queue would be 1.82 months long under optimal conditions. However, in reality, transactions would get stuck and eventually be dropped, making it impossible for smaller parties to exit unless they pay exorbitant fees,” Bons explained.

Bons warned that this limitation could lead to a “death spiral,” where a price crash forces miners to shut down, slowing the network further. The resulting delays could deepen the panic, creating a vicious cycle of declining hash rates, prolonged block times, and falling prices. 

Further in his critique of BTC, Bons claimed Bitcoin’s transaction capacity is insufficient for real-world use. He compared Bitcoin’s 7 TPS to other systems, such as Visa’s 5,000 TPS, or even competitors in the crypto space that exceed 10,000 TPS without sacrificing decentralization. 

“There are literally ZERO use cases that can be supported by 7 TPS. Mass self-custody over BTC is a dangerous narrative. The only scalable path forward for BTC adoption is through centralized custodians and banks, contradicting its ethos as ‘freedom money’,” he stated.  

Bons also questioned Bitcoin’s long-term sustainability, citing its shrinking security budget. This, in his opinion, is a critical issue that could exacerbate the risks he outlined. The thread also touches on Bitcoin’s deviation from its original vision as “peer-to-peer (P2P) electronic cash.” He lamented that the network’s constraints and governance have turned it into a speculative asset rather than a practical medium of exchange. 

Bons’ remarks ignited a heated debate on X (formerly Twitter). Patrick Flanagan, a self-described tech expert, dismissed the claims.

“This is pure fantasy. If this was going to occur, it would have occurred years ago,” Flanagan argued.

Bons rebutted, asserting that the risk increases as the number of users grows. He noted that even a fraction of users leaving could trigger a run and added that the larger the network gets, the more severe the problem becomes.

Other users highlighted potential alternatives, such as trading wrapped Bitcoin (WBTC) on Ethereum, which bypasses Bitcoin’s base layer limitations. Bons acknowledged this but noted that wrapped BTC users could exit quickly while on-chain users would be trapped, exacerbating the sell-off.  The discussion also extended to Bitcoin’s self-custody model.

“This is something that self-custody advocates should pay attention to. One tiny bit of FUD and everyone gets their money stuck,” DashPay’s Joel Venezuela remarked.

Bons responded, acknowledging the difficult position he finds himself in as a cypherpunk and self-custody advocate. Another user raised a comparison to gold, questioning how long it would take to liquidate global gold holdings. Bons countered that while gold also has practical limits, its theoretical transaction capacity far exceeds Bitcoin’s, making it less susceptible to such bottlenecks. 

Critics of Bons’ analysis argue that Bitcoin has weathered similar concerns in the past without collapsing. However, his warning adds to a growing chorus of voices calling for a reevaluation of Bitcoin’s scalability and usability. 

Despite his grim outlook for Bitcoin, Bons remains optimistic about the broader cryptocurrency space. “There is much hope left for cryptocurrency as a whole,” he concluded, suggesting that Bitcoin’s original ethos now thrives in other blockchain projects. 

Meanwhile, while Bitcoin remains the dominant cryptocurrency, debates over its scalability and resilience continue. Bons’ warning serves as a stark reminder of the challenges Bitcoin faces as it seeks broader adoption in a changing financial space. Elsewhere, Galaxy CEO Mike Novogratz has almost similar reservations about a Bitcoin reserve in the US.

“I think that it would be very smart for the United States to take the Bitcoin they have and maybe add some to it… I don’t necessarily think that the dollar needs anything to back it up,” Novogratz claimed.

The Bitcoin reserve campaign in the US continues to gain momentum, with more players showing support by the day. With endorsements at state and national levels, prospects continue to grow for the US stockpile of Bitcoin (BTC) to reach 1 million coins eventually.

Nevertheless, skeptics also exist, with some pushing that a Bitcoin reserve would be detrimental to the United States.

VanEck Joins Bitcoin Reserve Campaign

VanEck’s head of research, Mathew Sigel, announced the company’s full endorsement of a strategic Bitcoin reserve, signaling growing institutional support for the concept.

“FOR IMMEDIATE RELEASE: VanEck Endorses Strategic Bitcoin Reserve. No need for ‘sources’ — we’ll just tell you ourselves,” Sigel declared.

The Bitcoin Reserve movement, which aims to position Bitcoin as a national or state-held reserve asset, has been gaining traction. It follows President-elect Donald Trump’s public advocacy four months ago.

During a speech, Trump proposed replacing Gary Gensler at the SEC and highlighted Bitcoin’s potential to bolster national reserves. He said, “Bitcoin Reserve is the future,” sparking a wave of interest among policymakers and financial institutions. 

Prominent political figures, including Senator Cynthia Lummis, have also lent their support. Lummis recently proposed selling portions of the US gold reserves to acquire Bitcoin. The senator, a long-time Bitcoin advocate, believes that diversifying the nation’s reserve assets with digital currencies could strengthen financial resilience. Her efforts have garnered bipartisan attention, with ongoing debates in Congress about the viability of such a move. 

Meanwhile, US states are also entering the fray. Florida State’s CFO has publicly endorsed a Bitcoin reserve strategy. In the same way, Pennsylvania lawmakers recently introduced a bill advocating for a state-level Bitcoin reserve. These developments suggest a decentralized push toward integrating Bitcoin into government balance sheets. 

The campaign has extended beyond US borders. Poland’s libertarian leader, Sławomir Mentzen, promised to pursue a national Bitcoin reserve strategy if elected. Mentzen’s pledge reflects the international appeal of Bitcoin as a modern monetary asset capable of countering inflationary pressures and enhancing fiscal sovereignty. 

BlackRock’s Cautious Approach 

Amid the rise of the BTC Reserve movement, BlackRock, the world’s largest asset manager, has adopted a more measured stance. While VanEck openly supports the concept, Fox Business correspondent Eleanor Terret reported that BlackRock is skeptical.

“Sources close to BlackRock tell Fox Business the big money manager is not endorsing a strategic BTC reserve despite recent reports that it is,” Terrett shared.

However, BlackRock’s actions paint a complex picture. The firm’s Bitcoin ETF recently surpassed $40 billion in assets under management (AUM), setting industry speed records. BlackRock has also increased its Bitcoin exposure by investing heavily in MicroStrategy, a company known for its substantial Bitcoin holdings. The asset manager also acquired $680 million in Bitcoin through its IBIT ETF and direct investments. Meanwhile, critics remain skeptical of BlackRock’s intentions.

“BlackRock is playing the Franklin Templeton game—they are pushing the ETF but know they are really here for the tokenization,” one user shared on X.

This viewpoint suggests that BlackRock’s endgame may be less about Bitcoin adoption and more about the broader application of blockchain technology for asset tokenization. Meanwhile, data on Arkham shows BlackRock’s Bitcoin stash has reached 471,707K BTC, valued at $43.53 billion as of this writing.

Adding to the skepticism, billionaire investor Mike Novogratz recently expressed doubt about the feasibility of a US Bitcoin reserve. Novogratz believes Bitcoin remains too volatile and politically divisive to become a core government asset in the near term. 

“It’s a low probability. While the Republicans control the Senate, they don’t have close to 60 seats. I think that it would be very smart for the United States to take the Bitcoin they have and maybe add some to it… I don’t necessarily think that the dollar needs anything to back it up,” Novogratz claimed.

Despite divergent views, the BTC Reserve campaign has undeniably gained momentum. It has drawn attention from global policymakers, financial institutions, and private investors. Whether through state-led initiatives, international adoption, or institutional investments like BlackRock’s ETF, Bitcoin’s role in the global financial system continues to grow. 

“In addition to the macro environment, there is a renewed sense of optimism that regulatory clarity for bitcoin and digital assets more broadly may emerge following the US election. President-elect Donald Trump campaigned on maintaining a strategic bitcoin reserve, while pro-crypto politicians in the House and Senate races from both sides of the aisle enjoyed electoral success. The macro-environment combined with supportive policies could combine to accelerate and broaden Bitcoin’s adoption,” BlackRock shared.

VanEck’s public endorsement, coupled with growing interest from figures like Senator Lummis and international leaders, could mark a tipping point in the integration of digital assets into mainstream financial strategies.

As debates intensify, the question remains whether Bitcoin will become the gold standard of the digital age or whether its volatility and skepticism from major players like BlackRock will hinder its adoption as a reserve asset.   

Bitcoin is up by a modest 0.59% as of this writing. BeInCrypto data shows the pioneer crypto is trading at $92,207.