Yesterday CoinMarketCap showed a market capitalization of $432 million billion for Wrapped Bitcoin (WBTC), which is 588,000 times more than Bitcoin (BTC), and a thousand times larger than the estimated value of the entire world’s wealth.
This was obviously a mistake, due to a completely wrong circulating supply.
Market capitalization is simply calculated by multiplying the total number of tokens in circulation (i.e. circulating supply) by the value of the individual token (i.e. price).
CoinMarketCap this morning counted an incorrect circulating supply of over eleven trillion WBTC tokens for Wrapped Bitcoin. Instead, as can be verified on the official website, the exact figure is only 110,000 WBTC.
Wrapped Bitcoin is not CoinMarketCap’s first mistake
CoinMarketCap has now corrected, but this is not the first time it has made such mistakes.
A spokesperson for the website, which is owned by Binance, said it was a bug caused by a faulty data capture module, which reported incorrect values for one of the inputs used, namely WBTC’s own circulating supply. The problem was quickly fixed, but not enough to go unnoticed.
WBTC is an ERC-20 token that replicates BTC on the Ethereum blockchain. In fact, it is not possible to exchange bitcoin on this blockchain, so the so-called wrapped bitcoin were invented, which are nothing more than tokens that represent bitcoin 1:1 on other blockchains.
In other words, for every WBTC token issued there must be one BTC locked in a WBTC smart contract, allowing WBTC holders to return their tokens at any time and immediately receive an equal amount of bitcoin in return.
For this reason, it is impossible for the circulating supply of WBTC to exceed that of BTC, unless something goes wrong.
In fact Wrapped Bitcoin only makes sense if all WBTC tokens are redeemable in BTC, on a 1:1 basis, at any time, by anyone, and instantly (or almost instantly). Therefore what CoinMarketCap reported could only be a mistake, not least because, for obvious reasons, the price of WBTC on the market is in fact the same as the price of BTC.