Behind Bitcoin’s return to $16,000 is an ecological expansion of all-round brutal growth

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Bitcoin, including the entire digital asset market, needs to expand the scope of its ecological applications to allow holders to use it for new financial applications or attract more funds and participants to enter the market.

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  • In September 2020, the DeFi ecosystem flowed into nearly 69,000 bitcoins, while the miners only dug up 28,000 bitcoins that month.
  • Through integration with other DeFi protocols, the number of active addresses of WBTC has increased to about 1,500, an increase of about 25 times compared with 2019.
  • In the six months after the Bitcoin halving, the amount of BTC held by Grayscale was basically equal to the amount mined in the same period.
  • Bitcoin, including the entire digital asset market, needs to expand the scope of its ecological applications to allow holders to use it for new financial applications or attract more funds and participants to enter the market.

On November 12, Bitcoin returned to above the $16,000 mark after a lapse of 1039 days. In the entire 12 years since its birth, only 15 trading days have closed above this level. When people are still arguing When the popularity of DeFi will allow Ethereum to achieve a counterattack, Bitcoin is the first step to return to the “peak”.

From Satoshi Nakamoto’s vision of “peer-to-peer electronic cash” to the so-called disruptive “global currency” in the later period, and now regarded as a gold-like “store of value”, there is no doubt that Bitcoin’s status is in all digital The heart of the asset man cannot be shaken.

In the 12 years since the birth of Bitcoin, we seem to be able to perceive a trace of its development difficulties. The core function of Bitcoin is trading and storing value. It is formed by and confined to both. Compared with the rise and exit of Ethereum based on smart contracts, the ecology of Bitcoin appears stubborn and closed. But we are also very pleased to see Bitcoin’s influence gradually spreading.

In the field of digital assets, Bitcoin participates in the Ethereum DeFi ecosystem in an anchored manner, enabling users to choose more open financial products; in the traditional financial field, Bitcoin is becoming a trust, bond, etc. A “financialized” investment asset, which is accepted by traditional financial investment institutions. In this article, Lianwen will take readers to briefly analyze the expanded Bitcoin ecosystem from a data perspective.

150,000 Bitcoins flowing to the DeFi ecosystem

If DeFi is a new trend of blockchain technology, then with the help of Bitcoin’s own user scale, holdings and transaction volume, as well as network effects and other characteristics, Bitcoin anchor coins are destined to develop in the future DeFi ecosystem .

Bitcoin-anchored coins are a special type of tokens issued on non-bitcoin networks whose prices are anchored to the original Bitcoin. To a certain extent, it increases the number of channels for holding Bitcoin and expands the utility of Bitcoin. The current Bitcoin anchored coins based on Ethereum include WBTC (Wrapped Bitcoin), renBTC (Ren), SBTC (Synthetix), imBTC (TokenIon), HBTC, BTC++ (PieDAO), pBTC (pTokens) and tBTC (Keep Network), etc. .

According to data from DeBank, the total issuance of eight Bitcoin anchored coins based on Ethereum has reached 153,458, with a total lock-up amount of nearly 2.4 billion U.S. dollars, all setting record highs. Although the recent rise in the price of Bitcoin has returned, the number of Bitcoins locked in the DeFi field is still high.

Data source: https://debank.com

As of November 11, 2020, the total circulation of Bitcoin anchor coins has exceeded 150,000, with a total of 153,000, an increase of approximately 5,928% from the 2,538 on May 1. Among them, the total issuance of WBTC is 123,411, accounting for 80.66% of the total issuance of BTC anchor coins; the issuance of renBTC is 19,222, accounting for 12.56%, ranking second, followed by the issuance of HBTC with 6,010.

Take the most widely used WBTC as an example. Before May of this year, Bitcoin locks in the DeFi ecosystem mainly occurred in WBTC and the lightning network in the payment field. After May, as MakerDAO voted to pass WBTC as Dai’s new collateral, its Bitcoin lockup volume rose sharply, far exceeding the number of Lightning Networks.

Behind Bitcoin's return to $16,000 is an ecological expansion of all-round brutal growthData source: https://analytics.skew.com

Through the connection with the ERC20 format, a large number of highly liquid and high-yielding DeFi products such as Maker, Compound, Aave, Balancer, Curve and Uniswap can use Bitcoin for decentralized lending, margin trading, and the development of derivatives markets.

According to Dune Analytics data, as of November 11, among the more than 120,000 WBTCs that have been issued, the circulation usage of Uniswap platform is about 33,000, accounting for more than 26%; 24,000 are circulating in Compound, accounting for nearly 20%. %; Other DeFi platforms also circulate over 23% of WBTC.

Behind Bitcoin's return to $16,000 is an ecological expansion of all-round brutal growthData source: https://www.duneanalytics.com

On the other hand, IntoTheBlock data shows that in 2019, WBTC had only 58 active addresses per day on average. Since the liquidity mining detonated the DeFi ecosystem in June, the number of non-zero addresses and the number of active addresses of WBTC has shown a significant increase in fluctuations. trend. Through integration with other DeFi protocols, the number of active addresses of WBTC has increased to about 1,500, an increase of about 25 times compared with 2019.

Behind Bitcoin's return to $16,000 is an ecological expansion of all-round brutal growthData source: https://www.intotheblock.com

IntoTheBlock classifies transactions worth more than $100,000 as large transactions. In the whole year of 2019 and the first quarter of 2020, WBTC’s large transactions were almost zero. However, since mid-August, the number of large transactions on WBTC has increased significantly. On September 17, the number of large transactions in a single day even exceeded 970.

Behind Bitcoin's return to $16,000 is an ecological expansion of all-round brutal growthData source: https://www.intotheblock.com

With liquid mining and other new features of open finance, DeFi has ignited the passion of the digital asset industry. It can also be seen from the growth of WBTC’s number of active addresses and large transaction volume that more and more traditional institutions and large participants are participating in the DeFi market through it.

At present, the Bitcoin anchor coin project on Ethereum is in a state of steady growth. Although the Bitcoin in the DeFi ecosystem only accounts for about 0.8% of the Bitcoin circulation, as long as there are no black swan incidents such as similar market or hackers, it continues to develop The ecology and application, the ecology of Bitcoin and Ethereum will all benefit from it. From the data point of view, the monthly growth of the Bitcoin anchor coin is almost the same as the output of its miners. Especially in September 2020, the DeFi ecosystem flowed into nearly 69,000 Bitcoins, while the miners only dug up 28,000 Bitcoins that month.

Behind Bitcoin's return to $16,000 is an ecological expansion of all-round brutal growth

Grayscale Fund’s Bitcoin Crazy Increase Plan

If the emergence of anchor coins makes Bitcoin add application scenarios in the field of digital assets, then the Chicago Mercantile Exchange (CME), the trading platform Bakkt established by the parent company of the New York Stock Exchange, and the extremely eye-catching grayscale this year Bitcoin Trust has brought more attention from traditional financial institutions to Bitcoin.

A compliant digital asset tool that precedes the implementation of Bitcoin ETF

In January of this year, the GrayScale Bitcoin Trust (GBTC), a subsidiary of the digital asset management company Grayscale Investment, became the first digital asset tool to comply with the standards of the US Securities and Exchange Commission. In other words, at this stage when the Bitcoin ETF has not yet been approved by the SEC, it is one of the compliance preferences for passive investment in Bitcoin.

In the second quarter of this year, Forbes disclosed that nearly 20 institutions have invested in GBTC. These institutions include well-known investment companies such as Ark Invest, which manages US$4.5 billion in assets, and Horizon Kinetic, which manages US$5.3 billion in assets. In addition, new investment companies such as Rothschild and Addison Capital also participated in the investment.

Let institutions run in

Grayscale Investment released a Bitcoin Investor Survey Research Report in October, showing that more than half (55%) of the US investors surveyed are interested in buying Bitcoin, which is much higher than 36% in 2019. This trend is confirmed by the fact that this asset management agency is using an unstoppable force to set off the transformation of traditional financial funds into the Bitcoin market and further expand the original ecology of Bitcoin.

According to official data, Grayscale’s total inflow of funds for all products in the third quarter was US$1.05 billion, which was the largest quarterly inflow in history and set a new high for the third consecutive quarter. Bitcoin Trust’s inflow of funds in the third quarter was $719.3 million. As of November 10, 2020, Grayscale Bitcoin Trust’s asset under management (AUM) has surged from USD 1.9 billion at the beginning of the year to USD 7.622 billion, an increase of approximately 300% in 2020.

Behind Bitcoin's return to $16,000 is an ecological expansion of all-round brutal growth

Grayscale Bitcoin Trust’s holdings have been rising all the way this year, and the growth is very impressive. Take the time period after Bitcoin’s halving as an example. Before the third Bitcoin halving, Grayscale’s Bitcoin holdings were approximately 334,100. On November 10, Grayscale Bitcoin Trust once again increased its holdings by 1,701 BTC, an increase of 0.34%. According to statistics from the chain, as of now, Grayscale’s total Bitcoin holdings have reached 497,800. During the six months after the halving, Grayscale’s Bitcoin holdings increased by 162,700, an average daily increase of 940.

On the other hand, during the same period, miners only mined 163,200 bitcoins, with an average daily output of about 938. This also means that in the six months after the Bitcoin halving, the amount of BTC held by Grayscale was basically equal to the amount of mining during the same period.

Bitcoin is being accepted by traditional institutions by constructing different ecological roles. Grayscale’s third-quarter report shows that 81% of its current investment comes from institutional investors. JPMorgan Chase analysts recently released a report also pointed out that Grayscale’s investment in Bitcoin trusts outperformed gold ETFs. This trend may be Promoted by institutional investors such as family offices. He pointed out that “family offices may be seeing Bitcoin as a gold substitute.”

summary

Bitcoin is the default “store of value” in the market, which is “digital gold”, but this does not mean that it only needs the support of HODL. A large number of digital assets, including Bitcoin, currently lack the necessary application value. In this case, Bitcoin, including the entire digital asset market, needs to expand the scope of its ecological applications to allow holders to use it for new financial applications, or to attract more funds and participants to enter the market.

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