The immense success that the cryptocurrency business has skilled over the previous couple of years was facilitated not simply via Bitcoin‘s rising recognition, but in addition the emergence of sectors resembling decentralized finance. Whereas the sector grew many-fold since mid-2020, it additionally fostered the expansion of tokenized property that assist in DeFi commerce. As an illustration, stablecoin utilization grew 370% in 2021, as in comparison with the earlier 12 months.
Nonetheless, what is commonly neglected is the expansion skilled by wrapped Bitcoin (wBTC), which may typically be seen buying and selling on numerous DeFi protocols. Their utilization is in reality so ingrained by now that one in each 72 Bitcoins in circulation is tokenized on Ethereum, representing 1.4% of the overall BTC provide, in keeping with a report by Coinmetrics.
wBTCs are primarily ERC-20 tokens which might be pegged 1:1 to Bitcoin and are redeemable via the BTC within the custody of the issuer. Since their launch in late 2018, they’ve proliferated the DeFi market as an environment friendly solution to embody the highest cryptocurrency on this area of interest sector.
Out of the overall wBTC on Ethereum, 66% are locked up in good contracts. Thereby, highlighting their significance in facilitating commerce on decentralized exchanges and lending protocols.
It must be famous right here that whilst Ethereum stays the first platform for DeFi commerce, its latest points with congestion and excessive fuel payment have led to among the wBTC provide migrating to different protocols resembling Avalanche.
Nonetheless, Bitcoin tokenization has introduced 250,000 BTC on the Ethereum blockchain, rising 113% up to now 12 months. The expansion in new wBTC provide has dwindled since December 2021 after peaking to an all-time excessive of 271,257 BTC in January. Its present provide stood at 263,162 on the time of writing, a 3% decline from its January peak.
This might be a consequence of the present bear market and its recurrent slowdowns- the same pattern may be observed throughout DeFi. The latest adjustments within the complete worth locked in DeFi good contracts are evident of this downturn, which stood at $183 billion at press time. Thus, dropping over 6% in simply the previous day, in keeping with data by DeFi Llama. In distinction, the TVL was measured at $250 billion when it had peaked in November finish, across the similar time as BTC had reached an all-time excessive of over $69,000.
Clearly, the general market has been following the same southbound motion since then, with the overall market capitalization retreating 47% since peaking at $3 trillion.