Wrapped Bitcoin (WBTC): Increasing Liquidity of DeFi Apps

Wrapped Bitcoin (WBTC) is the recent innovation that allows effectively integrating Bitcoin with Ethereum’s network. WBTC enables Bitcoin users to effectively participate in DeFi operations by receiving access to the required liquidity that may assist them in implementing their plans. WBTC is the ERC20 token that has 100% Bitcoin coverage, and the amount of WBTC in circulation is publicly known to ensure that all obligations can be effectively met.

The major benefit of WBTC for Bitcoin holders is the possibility to participate in the DeFi segment without selling their BTC as they can use them as collateral when performing their DeFi activities. Various smart contracts can also be effectively implemented on this basis with the involvement of DAI as the relevant stablecoin that uses Ethereum’s coverage. As Bitcoin’s market capitalization is much greater than that of Ethereum, the emergence of WBTC may be highly important for significantly expanding the DeFi segment and offering the maximum functionality to all cryptocurrency holders. The growing interdependence between BTC and ETH creates the major demand for WBTC, and it may continue to increase in the following months. As WBTC is 100% covered by BTC, it has the same price of $41,606, and its current market capitalization equals $10.9 billion. WBTC has the 18^th rank among the major cryptocurrencies by their market capitalization. Its future market dynamics largely depend on the demand for BTC and ETH as well as the further development of the DeFi market.

Reasonability of Investing in WBTC

From a strategic perspective, the market potential of both BTC and ETH is high, and it may continue to increase following the growing adoption of cryptocurrency by the majority of the world’s population and the higher integration of traditional and crypto solutions globally. At the same time, the short-term perspective appears to be more complicated due to the prevalence of several contradictory tendencies. On the one hand, the entire crypto market experiences a severe correction, following the growing concerns about the impact of Federal Reserve’s regulatory measures on the money supply within the following several months. On the other hand, Bitcoin’s and other cryptocurrencies’ rapid price increase on February 4^th may signify the possibility of a new bullish cycle in the following weeks. As WBTC represents the 100% coverage of BTC on Ethereum’s platform, its price dynamics directly depend on the changes in the demand for BTC. In the short run, the price will continue fluctuating within the existing resistance and support level. Long-term sustainable growth can be expected if the WBTC price exceeds $44,000, thus approaching the next resistance level. In contrast, the decline below the current support level of $33,500 may imply the continuing recession with the risks of the further price drop to $20,000. Therefore, the optimal strategy is opening a long position when the market achieves a consistent positive trend, accompanied by the growing demand for both BTC and ETH among market participants.