In letter

  • Wrapped Bitcoin helps BTC holders become involved within the DeFi scene on Ethereum.
  • The quantity of WBTC on the Ethereum community has plateaued since December.
  • This corresponds roughly with the crypto market downturn.

Regardless of Wrapped Bitcoin’s surging recognition in 2021, its provide progress has stagnated since December of final yr, based on a report from crypto monetary intelligence supplier CoinMetrics this week.

Wrapped Bitcoin is on ERC-20 Ethereum token-backed 1:1 by Bitcoin (BTC). All wBTC is redeemable for precise BTC held custodially in a multi-signature pockets managed by BitGo. The asset is just like dollar-pegged stablecoinswhich permit holders to successfully switch and make the most of their fiat cash on Ethereum rails.

That is useful to holders of the highest cryptocurrency, because the native Bitcoin blockchain isn’t as versatile as Ethereum for enabling DeFi. Decentralized Finance, or DeFirefers to blockchain functions that allow monetary providers comparable to lending and asset swaps with out utilizing third-party intermediaries.

By changing their holdings to Wrapped Bitcoin, crypto customers can attempt to develop their holdings inside numerous sensible contract protocols whereas sustaining the power to redeem their Bitcoin at any time.

At present, about 1.4% of the full Bitcoin provide of almost 19 million BTC is circulating on Ethereum via Wrapped Bitcoin. Of these 263,000-odd tokens, 66% are locked up in sensible contracts, offering proof that merchants are utilizing the asset on decentralized exchanges and lending protocols.

Amongst these protocols, makers—the algorithmic lender behind DAI stablecoins—seems to be the most well-liked. Customers presently have about 56,000 WBTC parked within the protocol, serving as collateral for DAI loans. One other 6,000 WBTC are offering liquidity to merchants throughout 5 totally different Uniswap V3 swimming pools.

Different WBTC are additionally being held on different chains, with over 20,000 locked in a contract that bridges Ethereum to avalanches. Nonetheless, mirroring the asset’s broader progress trajectory, WBTC saved at this bridge tackle have stopped rising since 2022 started.

WBTC provide as of February 2022. Picture: CoinMetrics

The quantity of WBTC in circulation greater than doubled from January to December of 2021 however has since stayed flat at roughly 260,000 models.

This displays an identical pattern throughout the Defi house. As displayed by DefiLlamathe full worth locked in decentralized finance protocols has pulled again beneath $200 billion—down from over $251 billion on December 27.

The broader crypto market has additionally carried out underwhelmingly. Bitcoin is down 20% yr thus far, and CoinMetrics famous that lively Bitcoin and Ethereum addresses have dropped 8% since final week. Based on blockchain analytics agency Glassnode, numerous macro headwinds present that Bitcoin could also be in for a sustained bear market.

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