What effects broader sentiments had on wBTC supply vis-à-vis DeFi & Ethereum
The immense success that the cryptocurrency industry has experienced over the past couple of years was facilitated not just through Bitcoin‘s rising popularity, but also the emergence of sectors such as decentralized finance. While the sector grew many-fold since mid-2020, it also fostered the growth of tokenized assets that aid in DeFi trade. For instance, stablecoin usage grew 370% in 2021, as compared to the previous year.
However, what is often overlooked is the growth experienced by wrapped Bitcoin (wBTC), which can often be seen trading on various DeFi protocols. Their usage is in fact so ingrained by now that one in every 72 Bitcoins in circulation is tokenized on Ethereum, representing 1.4% of the total BTC supply, according to a report by Coinmetrics.
wBTCs are essentially ERC-20 tokens that are pegged 1:1 to Bitcoin and are redeemable through the BTC in the custody of the issuer. Since their launch in late 2018, they have proliferated the DeFi market as an efficient way to include the top cryptocurrency in this niche sector.
Out of the total wBTC on Ethereum, 66% are locked up in smart contracts. Thereby, highlighting their importance in facilitating trade on decentralized exchanges and lending protocols.
It should be noted here that even as Ethereum remains the primary platform for DeFi trade, its recent issues with congestion and high gas fee have led to some of the wBTC supply migrating to other protocols such as Avalanche.
Source: CoinMetrics
Nevertheless, Bitcoin tokenization has brought 250,000 BTC on the Ethereum blockchain, growing 113% in the past 12 months. The growth in new wBTC supply has dwindled since December 2021 after peaking to an all-time high of 271,257 BTC in January. Its current supply stood at
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