Nearly $5 Billion in BTC Locked on Ethereum, Providing Huge Value for DeFi

Author: Alexander Behrens

Source: decrypt.co

Summary:

Summary:

• There are more than 136,000 bitcoins on Ethereum, now worth $4.9 billion, an all-time high.

• The amount of BTC locked in Ethereum is actually down 10% from its mid-November peak, as BTC holders focus on profit-taking after a surge.

• The increase in the price of BTC has far exceeded the speed at which Bitcoin can be withdrawn from the Ethereum blockchain, which provides greater value for DeFi applications.

Note from OKEx Intelligence Bureau: Profit Taking or Arbitrage is also known as technical correction or technical adjustment. It refers to the changes in the market value of stock or futures contracts and options contracts, and the emergence of favorable prices for themselves. Finally, it is a trading behavior that actively changes the position of the position to convert the book profit into the actual profit.

Bitcoin locked on ethereum is worth more than ever, but bitcoin holders have started looking for other ways to maximize their investment.

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Source: duneanalytics

But this is not because more and more Bitcoins are flowing into DeFi blockchains, in fact, the amount of locked Bitcoins is at the lowest level since last September. The number of locked bitcoins on Ethereum is low but the total value is high. This difference is due to the surge in the price of bitcoin, while bitcoins are still locked in ethereum. If bitcoin continues to surge, this trend is likely to continue. .

Bitcoin and Ethereum use completely independent blockchains, but the rise of DeFi (decentralized finance) has attracted billions of dollars worth of BTC into cross-chain asset services. These services involve trusted third-party custodians or wallets controlled by automated smart contracts that hold bitcoins and their equivalent in bitcoin tokens on the ethereum blockchain.

But why bother? The answer is that most of these DeFi services exist on the Ethereum network, and Bitcoin users will not be able to use Bitcoin directly in these services without exchanging Bitcoins for equivalent tokens running on the Ethereum network.

DeFi represents a series of on-chain protocols that use smart contracts to automatically provide financial services such as loans, asset swaps, or interest on user deposits. While many applications are still highly experimental, depositing tokens into DeFi to provide capital to perform financial operations can generate extremely high annual returns unavailable with traditional financial products.

Cross-chain transactions (platforms) like WBTC or renBTC allow Bitcoin holders to participate in services on Ethereum without selling their Bitcoin holdings to buy Ethereum-based digital assets.

Note from the OKEx Intelligence Bureau: WBTC realizes value transfer through anchoring with Bitcoin, so that Bitcoin can be used indirectly on the Ethereum network. One WBTC is equal to one BTC, BTC can be converted to WBTC and vice versa.

renBTC is based on the BTC-anchored currency issued by RenProtocol and circulated on the Ethereum network. renBTC and the real Bitcoin value are 1:1 anchored.

In mid-November, the number of bitcoins locked on ethereum reached an all-time high of nearly 152,000, when bitcoin was priced at $16,150, or about $2.5 billion. Since then, the amount of bitcoin locked has actually fallen by a little over 10%, while the price of bitcoin has more than doubled over the same period.

Therefore, the massive exodus of Bitcoin from Ethereum may be due to Bitcoin investors cashing out their Bitcoin holdings for a profit. Bitcoin, whose price has soared more than 100 percent since November, is facing massive selling pressure, with people needing to sell bitcoin for a profit rather than putting it into protocols that play an important role in securing users' funds Not the best track record (given previous incidents of stolen funds due to contract bugs), let's face it.

Regardless of the reason, the amount of BTC flowing out of the Ethereum lock is still not enough to prevent the total value from continuing to rise. The higher the value of DeFi, it means its better lending rate and user usage. Even with thousands of bitcoins moving off the Ethereum blockchain, the rise in value could still be seen as a positive sign for the nascent DeFi industry.