What Effects Broader Sentiments Had on wBTC’s Supply vs. DeFi & Ethereum

The immense success that the cryptocurrency industry has experienced in recent years has been made possible not only by the rising popularity of Bitcoin, but also by the rise of sectors such as decentralized finance. While the industry has grown many fold since mid-2020, it has also fostered the growth of tokenized assets that aid in DeFi trading. For example, stablecoin use grew 370% in 2021, compared to the previous year.

However, what is often overlooked is the growth experienced by Packed Bitcoin (wBTC), which can often be seen on various DeFi protocols. Its use has since become so established that one in every 72 Bitcoins in circulation is tokenized on Ethereum, representing 1.4% of the total BTC supply, according to one report by Coinmetrics.

wBTCs are essentially ERC-20 tokens that are 1:1 pegged to Bitcoin and can be exchanged through the BTC held by the issuer. Since their launch in late 2018, they have expanded the DeFi market as an efficient way to incorporate the best cryptocurrency in this niche sector.

Of the total wBTC on Ethereum, 66% is tied up in smart contracts. In doing so, emphasizing their importance in facilitating trading on decentralized exchanges and lending protocols.

It should be noted here that while Ethereum remains the primary platform for DeFi trading, recent problems with congestion and high gas costs have caused some of the wBTC offering to migrate to other protocols such as Avalanche.

Source: CoinMetrics

Nevertheless, Bitcoin tokenization has brought 250,000 BTC onto the Ethereum blockchain, a growth of 113% over the past 12 months. The growth of wBTC’s new offerings has slowed since December 2021 after peaking to a record high of 271,257 BTC in January. Current supply stood at 263,162 at the time of writing, down 3% from its January peak.

This could be a result of the current bear market and the recurring slowdowns – a similar trend can be seen with DeFi. The recent changes in the total value captured in DeFi smart contracts are clear evidence of this downturn, which stood at $183 billion at the time of writing. So more than 6% losses in the past day, according to data by DeFi Llama† By contrast, the TVL was measured at $250 billion when it peaked in late November, around the same time that BTC had hit an all-time high of over $69,000.

Source: DeFi Llama

Obviously, the overall market has since followed a similar move south, with total market cap falling 47% since it peaked at $3 trillion.

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