The BTC lockup on Ethereum is close to $5 billion, providing great value for DeFi

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The soaring Bitcoin price has greatly increased the value of its digital gold on the Ethereum blockchain. But because of the increase in price, the number of bitcoins on Ethereum has decreased.

Summary:

There are more than 136,000 Bitcoins in Ethereum, which are now valued at $4.9 billion, a record high.

The number of BTC locked in Ethereum actually fell by 10% from the peak in mid-November, because BTC holders began to pay attention to profit-taking after the sharp rise.

The increase in the price of BTC far exceeds the speed at which Bitcoin can withdraw funds from the Ethereum blockchain, which provides greater value for DeFi applications.

Note from OKEx Intelligence Bureau: Profit Taking or Arbitrage is also called technical correction, also called technical adjustment, which refers to changes in the market value of holders of stocks or futures contracts and options contracts, and the occurrence of favorable prices for them Later, actively change the position of the position to convert the book profit into actual profit.

Bitcoin locked on Ethereum is more valuable than ever, but Bitcoin holders have begun to find other ways to maximize their investment returns.

According to data from the blockchain data provider Dune Analytics, currently more than $4.8 billion in bitcoins are locked on the ETH blockchain, which is a record high and accounts for more than 4% of the total market value of Ethereum.

But this is not because more and more bitcoins are flowing into the DeFi blockchain. In fact, the number of locked bitcoins is at the lowest level since September last year. The number of locked bitcoins on Ethereum is low but the total value is high. This difference is due to the soaring price of bitcoins, while bitcoins are still locked in Ethereum. If bitcoins continue to soar, this trend is likely to continue. .

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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 the equivalent bitcoin tokens on the Ethereum blockchain.

But why is it so hard? The answer is that most of these DeFi services exist on the Ethereum network. If Bitcoin is not exchanged for other tokens of equivalent value running on the Ethereum network, Bitcoin users will not be able to directly use Bitcoin in these services.

DeFi represents a series of on-chain agreements that use smart contracts to automatically provide financial services such as loans, asset swaps, or interest on user deposits. Although many applications are still in the highly experimental stage, depositing tokens into DeFi to provide capital to perform financial operations can generate extremely high annual returns that traditional financial products cannot obtain.

Cross-chain transactions (platforms) like WBTC or renBTC allow Bitcoin holders to participate in services on Ethereum without the need to sell their Bitcoins to purchase digital assets based on Ethereum.

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

renBTC is based on RenProtocol’s BTC-anchored currency circulating on the Ethereum network. RenBTC and the real Bitcoin are anchored at a 1:1 value.

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In mid-November, the number of bitcoins locked by Ethereum reached a record high, close to 152,000. At that time, the price of bitcoin was $16,150, worth about $2.5 billion. Since then, the number of locked bitcoins has actually fallen by more than 10%, while the price of bitcoin has more than doubled over the same period.

Therefore, the massive loss of Bitcoin from Ethereum may be due to Bitcoin investors cashing out in order to obtain profits from their holdings. Since November last year, the price of Bitcoin has soared by more than 100%. Bitcoin is facing huge selling pressure. People need to sell Bitcoin for profit instead of investing it in agreements. These agreements ensure user funds. There is no best record (considering the previous incident of theft of funds due to contract loopholes), let’s face it.

For whatever 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, the better its borrowing rate and user usage. Even if thousands of bitcoins are transferred out of the Ethereum blockchain, the increase in value may still be seen as a positive signal for the emerging DeFi industry.