This is the current situation of the armed Bitcoin market: CryptoQuant

The closed Bitcoin market is seeing new players like Coinbase, the largest US crypto exchange. Analysts believe that the current state of the market offers an opportunity for high user participation, improved chain liquidity and significant growth in the coming years.

However, observations in the latest CryptoQuant report suggest that the competition may not be smooth, and investors may be willing to take advantage of certain tokens due to the strategies used by the custodians.

Emergence of newly minted Bitcoin Tokens

Blocked Bitcoin tokens allow holders to use other networks and decentralized finance (DeFi) applications that are not on the Bitcoin network without selling BTC. They are backed 1:1 by BTC and mostly on Ethereum. The first of its kind, WBTC was created in 2019 by digital asset infrastructure provider BitGo. It is currently the largest circulating Bitcoin in the market with a circulating supply of 153,000.

Other coined Bitcoin variants launched in 2020, including HTX exchange HBTC, Threshold Network's tBTC, and Ren Protocol's renBTC. Coinbase's cbBTC is the latest in the market, and is based on the Ethereum layer-1 network and the exchange's layer-2 protocol base.

Coinbase launched cbBTC on September 12th, and within a week the token became the third largest coined bitcoin in the market, surpassing HBTC and renBTC. CryptoQuant analysts found that 64% of Ethereum's token supply is on decentralized exchange (DEX) Uniswap. The token is placed in pools to provide liquidity to several trading pairs such as cbBTC/WBTC and cbBTC/USDC.

Issues and criticisms

Coinbase has a rolling Bitcoin supply of approximately 1,670 cbBTC ($101 million), 941 cbBTC directly on Ethereum and 729 on Base. While CBBTC has opened up various financial opportunities and allowed holders to trade, borrow, borrow and access agricultural products on DEXs, the token has faced criticism from the community.

Unlike BitGo, which publishes a list of addresses that hold BTC support WBTC on the Bitcoin network, Coinbase refuses to disclose the same information for cbBTC. This made it impossible for any user to remotely verify that a BTC backup cbBTC exists on the Bitcoin blockchain.

“Other criticisms have emerged because the cbBTC smart contract manager can log addresses from transferring, creating and burning cbBTC. This could create concerns for cbBTC users that their holdings could be frozen, CryptoQuant said.