Have you ever wanted to use your favourite cryptocurrencies on different blockchains? If so, you might be interested in wrapped tokens. Popular examples are wrapped bitcoin(wbtc) and wrapped binance coin (wbnb).
Wrapped tokens are a type of cryptocurrency that can be used on blockchains other than their native ones. They are backed by the original asset, locked in a digital vault by a custodian or a smart contract. Wrapped tokens enable users to access the features and benefits of various blockchains and ecosystems. This article will explain what wrapped tokens are and analysis of wbtc.
Table of Contents
Wrapped Bitcoin: A Tale of Two Blockchains
Wrapped Bitcoin is tokenized version of Bitcoin (BTC) crypto that operates on the Ethereum (ETH) blockchain. It is backed 1:1 by Bitcoin, which BitGo, a regulated custodian, stores. Users can convert their Bitcoins to WBTC and vice versa through BitGo or its partners.
WBTC was launched in January 2019 by a consortium of partners, including BitGo, Kyber Network, and Ren. At that time, WBTC was worth around $3,300, which was the same as BTC. Since then, it has followed the price movements of BTC closely, as it is always pegged to it. As a result, WBTC reached its all-time high of $162,188, the same time as BTC. As of February 24, 2023, WBTC is worth around $28,070, a 745% increase from its all-time low of $3,330 on February 6, 2019.
The price is mainly influenced by the supply and demand of WBTC and BTC and the performance of the Ethereum and DeFi ecosystems. The supply and demand of WBTC and BTC depend on the preferences and needs of users who want to switch between the blockchains. For instance, if more users want to use their Bitcoins on Ethereum DApps and DeFi protocols, they will convert their BTC to WBTC, increasing the demand and price of WBTC. Conversely, if more users want to use their Bitcoins on the Bitcoin network or other platforms, they will convert their WBTC back to BTC, decreasing the demand and price of WBTC.
Current Price Analysis
The current market cap stands at $4.2 billion with a circulating supply of 151.1k tokens and a volume of $60.8 million. Let’s have a look at the chart for trend analysis:
WBTC’s future is closely tied to the future of Bitcoin and Ethereum. As long as Bitcoin remains the most dominant and valuable cryptocurrency in the market, there will be a demand for WBTC as a way to use Bitcoin on other blockchains.
Likewise, as long as Ethereum remains the most popular and innovative platform for DApps and DeFi, there will be a demand for WBTC as a way to use Bitcoin on Ethereum DApps and DeFi protocols. However, if either Bitcoin or Ethereum loses its edge or relevance in the crypto space, WBTC’s future might be jeopardized.
WBTC’s future also depends on the development and adoption of other solutions for blockchain interoperability. For instance, if other cross-chain bridges or layer-2 solutions become more efficient and secure, they might replace or reduce the need for WBTC. Alternatively, if other wrapped tokens or synthetic assets become more popular and trusted than WBTC, they might compete or coexist.
We will continue our series of wrapped token with analysis of wrapped binance coin next!
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