cbBTC & Morpho: Unlocking DeFi on Coinbase

Coinbase’s cbBTC has shown steady growth in supply since its launch, increasing from nearly zero to approximately 20,000 BTC. During the same period, WBTC has experienced a gradual decline in supply, decreasing from around 150,000 to about 135,000 BTC. The trend suggests that cbBTC is gaining market share at WBTC's expense, though WBTC still maintains a significantly larger total supply. However, given Coinbase holds more than 2 million BTC in customer assets, even a meager conversion of users to the new Morpho lending integration could drastically increase cbBTC’s total supply.

Moreover, cbBTC on Base has shown significant growth in both trading volume and number of trades. The daily trading volumes have increased substantially from around $50-100M in early October to consistently reaching $200-400M by December and January, with some peak days exceeding $500M. The number of trades have grown in tandem with volume, showing several spikes above 100k daily trades, with particularly high activity in December.

With Coinbase safeguarding approximately 2.26 million BTC in customer assets as of September 2024 (over 10% of Bitcoin's total circulating supply), the potential for cbBTC growth is substantial. While cbBTC's current supply is around 20,000 BTC, Coinbase's massive custody platform provides an immediate opportunity for rapid expansion, as customers could potentially choose to wrap their existing Bitcoin holdings into cbBTC. The steady 8% annual growth in Coinbase's Bitcoin customer holdings since 2022 provides a strong foundation for cbBTC adoption and growth. If even a small percentage of Coinbase's custodied Bitcoin were converted to cbBTC, it could significantly increase cbBTC's market presence and potentially challenge WBTC's current dominance in the wrapped Bitcoin market. Furthermore, the upcoming pro-crypto US administration, combined with the growing institutional adoption of Bitcoin, suggest this growth trend could continue or even accelerate.

Coinbase customer crypto assets | Source: Coinbase Q3 2024 10-Q