Aerodrome captures 78% of initial cbBTC trading volume

Coinbase’s newly launched cbBTC is building up its liquidity on decentralized networks. Aerodrome, the growing Base exchange, hosts the bulk of cbBTC liquidity.

Trading activity and liquidity have started to build up for cbBTC, a new variation of wrapped Bitcoin (BTC). In the first week after launch, the new asset used the Aerodrome DEX for the bulk of its trading activity. The new asset was among the first to launch immediately on an L2 blockchain, with a native version.

Aerodrome’s high-velocity pairs boost activity for the newly launched cbBTC.

Aerodrome took up cbBTC from the first day it became available for trading and now carries more than 78% of all activity. The exchange even surpassed Uniswap, which is still the leading liquidity and DEX hub on Base.

Currently, Aerodrome is a relatively smaller holder of cbBTC, but high-volume activity is due to its approach to high-liquidity pairs. Otherwise, the Uniswap V3 wallet holds 50% of the token’s supply, with another 10% still held by Coinbase.

The market share of cbBTC rises gradually

Soon after the launch of the new asset, Ethereum carries 1,008 cbBTC, with 727 cbBTC on Base. Ethereum’s coins removed 69 cbBTC via burns, though the supply is still changing gradually. Both versions are native to their blockchains, with separate smart contracts for Base and Ethereum. Users on the Coinbase app will be able to bridge BTC directly from their wallet and use it on another chain, without extra steps for wrapping and bridging.

The launch of cbBTC immediately created a new source of flows to L2, of which only Base is the recipient for now. The new wrapped asset aims to replace other forms of wrapped BTC, but especially compete with WBTC, the most widely circulated coin.

The new asset gained a 1.9% market share in the first week after its launch, in a market where several entities have tried offering wrapped BTC with various risk levels.

The new asset is also just spreading throughout the DEX space. As of September 16, the top holders include Coinbase, Uniswap and Aerodrome Finance. Inflows and activity also come from 1Inch and Wintermute.

According to Nansen research, Wintermute was the biggest market maker in the first week after the launch of cbBTC. Currently, the activity of cbBTC may be due to high-volume trading to support top liquidity pairs, and it may not reflect the number of users or actual demand. This bootstrapping by market makers may also be responsible for boosting Aerodrome’s position.

The activity on cbBTC has not been reflected among smart wallet users. Base usually carries around 2K to 5K smart wallet users on a weekly basis.

Currently, cbBTC activity may be tied to big market makers and liquidity providers, with limited mainstream adoption. Coinbase also had experience with wrapped Ethereum (cbETH).

The cbBTC/WETH pair is one of the most active, with $28.48M in liquidity locked. Buying volume exceeds selling, with activity at around $19.06M in 24 hours.

Actual wallet adoption remains slow, and cbBTC is still not a mainstream DEX asset for onboarding. The token has only reached 356 wallets since its launch. The asset is currently held mostly in liquidity pools, though crypto influencers are also starting to buy in.

Currently, the Base blockchain shows peak activity, but actual users of cbBTC may be only a small fraction. The chain also hosts bots and Sybill accounts, which mostly focus on meme tokens.

cbBTC aims to displace other assets

For many years, BTC has been a staple in decentralized trading due to its value and the liquidity of external markets. With the expansion of DeFi lending, using BTC for loans or collateral is also appealing.

Coinbase’s approach adds a layer of centralization as the sole custodian of the underlying BTC. However, the composable, on-chain asset that can be easily used on Uniswap and other DEX is seen as a compromise. The new token also aims to displace WBTC due to fears of uncertain ownership after October 8.

One of cbBTC’s first challenges will be replacing the Sky ecosystem loans and collaterals, which are denominated in WBTC. The proposal to switch to the new asset is still in the discussion stage and has not been reflected in the minting or activity for cbBTC.

Cryptopolitan reporting by Hristina Vasileva

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