Bitcoin has climbed to $13,500 this week, marking its highest level since 2018. Wrapped tokens are a key driver of the recent surge. Developers building lending and borrowing apps on Ethereum have be
Bitcoin has climbed to $13,500 this week, marking its highest level since 2018. Wrapped tokens are a key driver of the recent surge.
Developers building lending and borrowing apps on Ethereum have begun anchoring their platforms with bitcoin secured through WBTC, a wrapped token that lets users earn yields without moving coins to a traditional custodian. Bloomberg has reported on this trend, noting how DeFi enthusiasts now funnel bitcoin into yield protocols.
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Wrapped Bitcoin works as a custody mechanism. BitGo accepts bitcoin deposits and issues the wrapped equivalent to traders, who then deploy WBTC into platforms like Compound to capture the outsized returns that DeFi delivered through 2020. The opportunity has drawn significant inflows.
The trend is gaining pace. Wrapped bitcoin holdings crossed $1 billion in early October, about 0.5% of bitcoin's total market cap. Chen Fang, the chief product officer at BitGo, forecasts that wrapped bitcoin could account for 10% of minted coins in two years.
Bill Noble, the chief technical analyst at Token Metrics, sees a shift in how markets treat bitcoin. DeFi protocols have made bitcoin one of the world's premier collateral assets. Investors who in the past would have sold coins now leverage them through smart contracts instead, generating passive returns.
Sam Bankman-Fried, the chief executive of Alameda Research, describes the impact this way: "WBTC has meant there's more flow through from the DeFi boom to BTC's price." Bankman-Fried argues that bitcoin will become the backbone of a decentralized financial system that replaces traditional banking.
Bitcoin opened 2020 at $7,000 and has doubled in value in under a year, a remarkable move even as COVID-19 ravaged global markets. How much higher the price climbs before year-end remains to be seen.
MiningPool content is intended for information and educational purposes only and does not constitute financial, investment, or legal advice.
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