BitGo defended WBTC reserves as the token traded below bitcoin

Wrapped Bitcoin remained below the value of native bitcoin on November 26, 2022 as BitGo sought to contain a confidence shock around the largest tokenized version of BTC on Ethereum. BitGo chief operating officer Chen Fang said all pending WBTC burn requests had been fulfilled and maintained that each token was backed one-for-one by bitcoin verifiable on-chain.

The statement mattered because the market was not pricing WBTC exactly as that reserve design implied. A TokenInsight snapshot timestamped 04:05 on November 26 placed WBTC at $16,496 and BTC at $16,622.67. Comparing those two reported prices produces a 0.76% discount for WBTC. That is a Coinburn calculation, not a percentage published by TokenInsight.

The snapshot does not identify a common exchange, execution venue or synchronized closing auction for both instruments. It therefore documents indicative market stress, not a universal WBTC/BTC exchange rate across every venue.

How the wrapper was supposed to work

WBTC was created as an ERC-20 representation of bitcoin so BTC-derived liquidity could be used in Ethereum applications. Its original operating model required an authorized merchant to request minting or burning while BitGo, acting as custodian, held the corresponding native bitcoin. The project’s launch record described every issued WBTC as backed by one BTC, with reserve addresses and token issuance intended to be publicly auditable.

That arrangement was different from a smart contract that automatically accepts and returns its underlying asset without an intermediary. Ordinary users generally reached the mint-and-burn system through approved merchants. Consequently, even when reserve assets existed, processing constraints, merchant availability and market liquidity could allow the exchange-traded price to diverge temporarily from one BTC.

Fang’s November 26 statement was an attributable company claim about completed redemptions and reserve backing. The surviving contemporaneous record does not provide an independent audit frozen at that exact timestamp, so the claim should not be treated as equivalent to a dated third-party assurance report.

Why traders questioned the peg

The discount appeared during the broader loss of confidence following FTX and Alameda Research’s November 11 bankruptcy filings. Alameda had been a large WBTC merchant by historical minting activity, prompting speculation that its failure might leave tokens unsupported.

Minting volume alone did not establish that conclusion. Under WBTC’s stated process, a merchant had to deliver bitcoin to the custodian before receiving newly minted WBTC. Alameda’s historical role therefore did not, by itself, prove that Alameda retained custody of the bitcoin backing tokens already in circulation.

The market nevertheless had reasons to demand stronger evidence. FTX’s collapse had demonstrated the limits of company representations, while authorized redemptions were a narrower form of access than an automatic, permissionless conversion. Contemporaneous reporting also showed the WBTC supply had fallen to approximately 225,962 tokens on November 25, from about 266,880 on January 14. That decline exceeded 15%, although it cannot be attributed solely to the November discount or to solvency fears.

What was established on November 26

The defensible event-day conclusion was limited: WBTC traded below bitcoin in the cited snapshot, BitGo said all burn requests had been fulfilled, and the custodian reiterated its one-for-one backing claim. The discount demonstrated impaired confidence and slower arbitrage; it did not establish a reserve shortfall.

Later clarification

Reporting published on November 30 placed the Binance WBTC/BTC pair’s low near 0.985 BTC on November 25 and said the pair subsequently recovered. That later venue-specific reconstruction helps define the episode’s trajectory, but it was not available as a complete account on November 26 and does not retroactively convert BitGo’s event-day assertions into an independent audit.