Crypto traders have found another way to gain profit. They turn to wrapped tokens, which are the synthetic versions of the cryptocurrencies.
One example is Wrapped Bitcoin (WBTC), which investors have taken up after the recent plunge in Bitcoin. WBTC is the tokenized version of the main cryptocurrency, and is issued on the Ethereum blockchain. According to latest statistics, the number of WBTC is increasing every day, thanks to decentralized finance (DeFi), which converts BTC to ERC-20 tokens. In fact, a report from Arcane Research says WBTC has already increased to a record 189,000 BTC, and over the past 12 months has quadrupled to a record 1% of the circulating supply of bitcoins - 18.73 million.
Trading WBTC is also safe, so there's no doubt that it will be more in demand among investors in the future. Aside from that, one token is backed by one Bitcoin, so, in theory, its price should be roughly the same. Also, the protocol essentially allows BTC holders to tokenize their coins on Ethereum at the same amount of WBTC that can be used on DeFi platforms. These WBTCs are then often lent at attractive rates. For example, in DeFi, Aave currently pays 1.21% per annum on WBTC deposits. These WBTC tokens are used as collateral to secure cryptocurrency-backed loans, to generate mining income, or as margin collateral on decentralized derivatives exchanges.
There are also other Bitcoin tokenizing platforms such as Huobi BTC (HBTC) and renBTC. However, WBTC is the most popular one and accounts for about 80% of all BTC running on Ethereum.
With regards to Bitcoin, it remains stuck at $ 41,100, which creates problems to buyers. Only a break above this level will push BTC towards $ 46,700 and $ 52,000. Accordingly, a decline below $ 41,100 will result in another plunge to $ 36,300.
