The number of tokenized bitcoins in January 2020 was only 1,110 units. DeFi and the integration of WBTC into MakerDAO have driven the increase in the figure.

In recent days, the number of tokenized bitcoins on the Ethereum network reached a new high, after having exceeded USD 1 billion in capitalization. There are currently more than 100,000 Bitcoin-pegged tokens in the network of smart contracts, according to metrics from BTC On Ethereum.

In the last month, there has been a meteoric growth. On August 19th, the total number of Bitcoin-pegged (ERC-20) tokens on Ethereum was 44,051 units. However, the figure climbed to 100,807 on September 18th, which surprised the market as that the number had been only 1,110 BTC in January.

Among the Bitcoin-pegged tokens that are on Ethereum, the main asset continues to be Wrapped Bitcoin (WBTC) with more than 70,000 tokens and capitalization exceeding USD 780 million, that is, 70% of the total number of tokens of this type. Following it are renBTC with 20,000 units (USD 220 million), HBTC with 4,800 tokens (USD 52 million), and sBTC with 3,300 units (USD 37 million). Other measured projects include imBTC and pBTC, which together account for around 1,600 BTC.

The records of the metric of Bitcoin-pegged tokens on Ethereum began in January of last year with the launch of WBTC. It is an initiative of custodial startup BitGo and decentralized exchanges Kyber Network and Republic Protocol. Since that moment, new projects have emerged so that BTC operators create a link with Ethereum.

WBTC and Bitcoin-Pegged Tokens on Ethereum

The dramatic rise began in February 2020, when the number of tokens barely exceeded 2,000 units. Two elements have played a key role in this emergence: the interest or returns generated in decentralized finance (DeFi) applications and the “integration” of WBTC as a reserve asset into MakerDAO.

The objective of adding WBTC to MakerDAO would be to establish a marketing strategy in which Ethereum offers the token to obtain Bitcoin. However, the truth is that this “integration” is only useful as a reference for setting prices.

Sam Bankman-Fried, CEO of cryptocurrency derivatives exchange FTX, said that there is another aspect at stake that could be influencing the growth in the trading volume of the tokens: “the great demand” for OTC (over the counter) purchases.

Whales (large holders or owners) and institutional investors have also contributed to driving that increase in the number of Bitcoin-pegged tokens. However, this approach also shows a negative aspect: that of the increases in the payment of fees.

Researcher Lucas Outumuro considers that hodlers, or “strong” Bitcoin savers, may prefer maintaining their positions with the first cryptocurrency to risking their funds in their search for the profits that pegged tokens and DeFi promise.

Several aspects that have conditioned the 2020 cryptocurrency market include the coronavirus pandemic, the Bitcoin halving, the increased use of DeFi, and global financial crises due to economic stoppages.

By Alexander Salazar


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