Wrapped Bitcoin remains one of the more curious assets in the cryptocurrency industry today. It is a great way to access Ethereum DeFi as a Bitcoin holder but serves little purpose otherwise. Even so, the number of active WBTC addresses is on the rise again.
What Comes Next For Wrapped Bitcoin?
Following the popularity explosion of decentralized finance in 2020, the demand for Wrapped Bitcoin has skyrocketed. As most DeFi platforms do not support Bitcoin natively, users have to look for alternatives. That is often easier said than done. Wrapping one’s BTC holdings on the Ethereum blockchain isn’t the way things should work.
Despite this unnecessary hurdle, there is a genuine demand for WBTC. It is one of the more popular Ethereum-based tokens on the market. Currently ranked 14th by market cap, Wrapped Bitcoin is valued at $3.771 billion. A healthy amount, considering there are 115,621 WBTC in circulation today. The majority of these tokens are used to participate in DeFi projects.
To gauge the overall appeal of this token, it is pertinent to look at the number of active addresses. Despite facing a small dip recently, there appears to be a renewed interest in the token. More specifically, over 2,629 addresses have a WBTC balance of some sort. A substantial increase from the 2,004 addresses recorded on January 20th.
On the other hand, no one really knows what drives the demand for Wrapped Bitcoin. Other than DeFi purposes, there may not be too many reasons to look at this asset. Some users may trade it across exchanges, although one can use Bitcoin
for that purpose as well. A special token, and one that seems to remain relevant.
Circulating Supply Drops Slightly
Earlier, we mentioned the circulating supply of Wrapped Bitcoin. Looking closer at the supply chart, a big dip is taking shape. In November of 2020, there were over 123,085 WBTC in circulation. Today, there are over 6,000 less, indicating demand for the asset may be dwindling somewhat. Not entirely surprising, as the rise in popularity has been exponential.
It will be interesting to see if someone can come up with new use cases for Wrapped Bitcoin. On paper, there is no valid reason to tokenize Bitcoin on the Ethereum blockchain. While it provides access to everything that the ecosystem has to offer, most DApps aren’t appealing to Bitcoiners either. New use cases have to be created sooner rather than later, but that is easier said than done.
Overall interest in DeFi solutions is not slowing per se either. The total value locked on Ethereum’s DeFi surpassed $26 billion, affirming the ongoing growth. How long that growth will remain in place is anyone’s guess. Once DeFi protocols enable native Bitcoin support, demand for Wrapped Bitcoin may dry up fairly quickly.