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$2 Billion worth of Bitcoin now tied up in DeFi

Photo of: Nathan VDH
by Nathan VDH

The equivalent of $2 billion in Bitcoin has been tokenized for use on the Ethereum blockchain and the DeFi protocols it hosts. This is a way for Bitcoin holders to make their cryptocurrencies grow while waiting for the stock price to rise.

Bitcoin’s commitment to the Ethereum blockchain and the decentralized finance protocols is not waning as the months go by. By mid-September, 1.05 billion dollars in Bitcoin had been tokenized to access these services and generate passive revenues, on Curve Finance or Aave for example.

At the beginning of the month, this amount exceeded $1.5 billion, of which $1 billion was through the Wrapped BTC (WBTC) protocol alone. And the growth continues. Currently, there are 150,049 bitcoins on Ethereum, representing about 4.32% of Ethereum’s capitalization or $2.021 billion.

In order to have Ethereum-compatible tokens, users continue to prefer Wrapped BTC. This tokenization service alone accounts for nearly 80% of the Bitcoin available on the blockchain. This represents the equivalent of $1.5 billion.

And the advantage of transforming Bitcoin in this way is simple: access to DeFi. Despite the ambition of competing blockchains, Ethereum remains an essential part of this ecosystem. According to DappRadar’s indicators, Ethereum represents 96% of the total transaction volume.

For long-term Bitcoin holders, DeFi is therefore a fruitful way to monetize their capital – in anticipation of a possible capital gain on the resale of Bitcoin, a safe haven. Services such as Uniswap also offer passive income in return for the provision of liquidity.

The loan protocols are also an opportunity to reap returns through substantial interest. Although the DeFi bubble is easing, it still totals around 11 billion dollars of crypto’s money through its smart contracts. The high volatility of certain DeFi protocols still makes it a risky investment.

Moreover, the main DeFi indexes, including Binance’s DeFi Composite Index, declined in October. This trend was particularly noticeable at the beginning of the month. For example, according to Santiment indicators, daily trading volumes of DeFi tokens fell by 30% in total. The most popular protocols (Sushi, UNI and YFI) showed heavy losses, from 30 to 50% over a week.