The decentralized finance movement has helped drive up the value of Ethereum and other ERC-20 based projects compared to Bitcoin and other assets. It has prompted even Bitcoin holders to “wrap” their BTC in Ethereum.
The amount of BTC supply wrapped in Ethereum has doubled in August alone, but why exactly is this happening, and what does it mean for Bitcoin?
Explosive DeFi Trend Teaches Old Dogs New Tricks As Crypto Adapts
The buzz surrounding DeFi has breathed new life into the crypto market, but no assets more than Ethereum any related projects. Ethereum is up over 200% year to date as a result.
The DeFi bandwagon has created a thriving sub-industry, where crypto insiders speculate on assets they know full well are potentially “worthless” yet are willing to risk capital anyway.
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So far, these insiders have been making a fortune. Several DeFi projects have risen the ranks of the crypto market top 100, while one such token has now more than tripled the price per BTC currently.
The amount of ETH tokens locked up in DeFi has soared throughout the year. Now, Bitcoin is following a similar path, with the amount of the BTC supply wrapped in Ethereum doubling in August alone according to glassnode data.
But what is the reason for crypto investors moving their Bitcoin to Ethereum, and how does this benefit the holder over traditional BTC?
Why Ethereum Wrapped Bitcoin (WBTC) Supply Has Doubled Over The Last Month
As the first-ever cryptocurrency, it was designed to be a peer-to-peer electronic replacement for cash. The altcoins that came after its creation, have a lot more tricks up their sleeve. Ethereum’s smart contracts allow it to do a lot more than Bitcoin can.
Ethereum can also lend some of its abilities to Bitcoin, by “wrapping” each BTC.
Each WBTC is an ERC-20 smart contract tied 1:1 to a corresponding BTC asset. As for why anyone would do such a thing, wrapping BTC this way bestows it some of the attributes of an ERC-20 token.
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For example, it allows Bitcoin to be lent out in DeFi apps or to be traded on decentralized cryptocurrency exchanges.
Bitcoin is arguably the biggest and therefore the best cryptocurrency. But by wrapping it in Ethereum, it makes a good thing even better and teaches this old dog a few new tricks.
The ability to wrap BTC has been around for some time, but the recent DeFi lending buzz and explosion of Uniswap has made wrapping BTC far more attractive. It also has the side effect of making the leading cryptocurrency by market cap far more versatile.
Could the ultimate cryptocurrency be WBTC? Rapidly rising supply at least says it has growing merit and could become even more attractive in the future.