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In the letter
- There are more than $ 2 billion worth of Bitcoins on Ethereum.
- Synthetic Bitcoin, such as WBTC, is used on DeFi protocols which offer high returns.
- The rise in the price of Bitcoin is a factor.
There are now more than $ 2 billion worth of Bitcoin on the Ethereum network, according to the latest data compiled on the metrics site Dune Analytics.
The data shows that there are 150,049 Bitcoins on Ethereum, which is 4.32% of Ethereum’s market cap, or $ 2.021 billion. As of mid-September, that figure stood at just 80,000 Bitcoins, valued at just under $ 1 billion at the time. Since then, the price of Bitcoin has risen by $ 3,000.
But Bitcoin isn’t … Bitcoin and Ethereum, well, Ethereum? Nice Place: All Bitcoin on Ethereum is, in fact, synthetic representations of Bitcoin. In order for Bitcoin to become usable on Ethereum-based protocols, it must first be exchanged for synthetic versions of Bitcoin based on Ethereum.
The most popular is called Wrapped Bitcoin – it holds nearly 80% of the market share and has a market cap of $ 1.5 billion alone (that’s enough for second place among DeFi coins, according to CoinGecko). The way it works is that you send some actual Bitcoin to its smart contracts and you will receive Ethereum-based WBTC in return.
Bitcoiners can move their Bitcoins to Ethereum to get involved in decentralized finance protocols, many of which offer high returns. Long-term HODLers, is an attractive option for those looking to earn money on any Bitcoin they own.
Decentralized finance, also known as DeFi, refers to non-custodial financial products, such as decentralized lending protocols or exchanges. Exchanges like Uniswap offer commissions to the people who provide liquidity (cryptocurrency) to the exchange and the lending protocols offer high returns to lenders.
According to metrics site DeFi Pulse, investors have placed roughly $ 11 billion worth of cryptocurrencies into DeFi smart contracts.
Synthetic Bitcoin took off alongside the DeFi industry, which actually only began towards the end of June when the first DeFi protocols began offering extra incentives to platform users, sometimes with returns of over 1,000% per year. (Admittedly, these rates were highly volatile, and many protocols burst into flames.)
The synthetic Bitcoin market progressed at a faster pace towards the end of August and has grown significantly since then. The reason? Perhaps it is due to the huge increases in the price of Bitcoin. The coin, the largest by market cap, grew from around $ 10,000 in late August to just under $ 14,000 this month.
This has led many investors into Bitcoin and while they wait for the price to rise, they are putting it to work on Ethereum’s DeFi protocols.
Disclaimer
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.
