Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Wrapped Bitcoin (WBTC) worth $29,425.51?

Mr. Market loves Wrapped Bitcoin (WBTC). In fact, CoinMarketCap named Wrapped Bitcoin the most trending cryptocurrency with on 24 May 2022.

Similarly, CoinMarketCap gave Wrapped Bitcoin a Coin Price of $29,425.51 a Market Capitalization of $8.101 billion and a 24-Hour Market Volume of $414.673 million on 26 May 2022. So, what is Wrapped Bitcoin (WBTC) and is it worth $29,425.51?

They call Wrapped Bitcoin the first ERC20 (Ethereum Request for Comment) token backed one-to-one with Bitcoin. Thus, I consider Wrapped Bitcoin an Ethereum Stablecoin pegged to Bitcoin.

What is Wrapped Bitcoin?

A stablecoin is a cryptocurrency that makes payment in another medium. For example, the Tether (USDT) stablecoin makes payment in US dollars when it is spent. Hence, Wrapped Bitcoin is an ERC20 token that makes payment in Bitcoin (BTC).

They claim WBTC allows users to create smart contracts for Bitcoin. A smart contract is a digital robot that performs a specific task. For example, the WBTC smart contract makes payment in Bitcoin (BTC) when you spend WBTC.

They claim WBTC makes it easier to write smart contracts that an integrate Bitcoin transfers in the Ethereum blockchain. An organization they call the Wrapped Tokens DAO will maintain WBTC on the Ethereum blockchain.

How Wrapped Bitcoin (WBTC) Works

The Wrapped Tokens DAO (Decentralized Autonomous Organization) consists of Merchants and Custodians. Merchants are WBTC community administrators who begin the process of minting wrapped tokens and wrapped tokens.

The custodians provide institutional-grade security for WBTC. They claim the Custodians will make it possible to verify that WBTC is backed by on-chain reserves. In other words, the Custodians ensure that there is Bitcoin backing WBTC transactions.

To receive WBTC users request tokens from a Merchant. The Merchant performs the required know-your-customer (KYC) and Anti-Money-Laundering (AML) procedures and verifies the user’s identity. Once verification, KYC, and AML are complete. The Merchant executes a Bitcoin to WBTC swap for the user. In the swap Bitcoin transfers from the user to Merchant or Vice Versa.

Meanwhile the Custodians, mint or create new WBTC tokens. The Merchant initiates minting but the Custodian does the actual Minting.

Merchants can also burn or destroy WBTC by redeeming it for Bitcoin (BTC). When a Merchant burns Wrapped Bitcoin, they deduct the amount burnt from the Merchant’s WBTC balance, reducing the WBTC supply.

Can Wrapped Bitcoin Process Bitcoin Transfers faster?

The hope is that Wrapped Bitcoin (WBTC) can increase the liquidity and trading volume of Bitcoin and encourage more Bitcoin use. One reason for WBTC is that Ethereum is faster than Bitcoin (BTC).

Bitcoin’s blockchain is notoriously slow and clunky because of its encryption and security measures. Statisa claims it can take up to 40 minutes to process a Bitcoin (BTC) transaction. They claim the Ethereum network can process transactions faster than the Bitcoin blockchain.

In comparison, Yahoo estimates Ethereum (ETH) was processing 12 to 15 transactions per second on 16 March 2022. However, the Ethereum 2.0 Project could come online this summer. Ethereum 2.0’s promoters claim their project can increase the Ethereum blockchain’s speed to 100,000 TPS. Ethereum 2.0 is supposed to add an extra layer to the Ethereum blockchain that will enable higher speeds by creating a sidechain or shortcut around the Ethereum blockchain’s security measures.

Will Wrapped Bitcoin make Bitcoin DeFi Easier?

One obvious hope is that Wrapped Bitcoin (WBTC) can make it easier to use Bitcoin (BTC), the world’s most popular cryptocurrency for decentralized finance (DeFi).

Ideally, Wrapped Bitcoin can make Bitcoin DeFi easier by eliminating the need to create and operate multiple nodes. Additionally, exchanges, platforms, and wallets, and payment apps will only need to process transactions in one cryptocurrency, WBTC, to accept or make Bitcoin payments.

Thus, Wrapped Bitcoin could theoretically allow any Ethereum (ETH) app or platform to accept Bitcoin payments and process Bitcoin transactions. Additionally, Wrapped Bitcoin could make it easier to use Bitcoin as collateral for loans and to offer traders Bitcoin-backed margin loans.

They claim they built Wrapped Bitcoin traders, institutions, and decentralized applications (DApps). DApps are applications that can perform a wide variety of tasks on the blockchain. For example, trading, processing payments, and verifying new customers.

In particular, they claim DApps can leverage Bitcoin payments in smart contracts for lending protocols, funds, prediction markets, and token sales. This could give Bitcoin traders more liquidity and make Bitcoin trading easier. They claim exchanges will be able to move Bitcoin faster and process Bitcoin transactions faster with WBTC.

Wrapped Bticoin works with many DeFi enterprises including: Bitgo, Gnosis, the Kyber Network, Kyber Swap, Ren, Airswap, Hydro, omisego, AAVE, imToken, Loopring, Dharma, HitBTC, Blockfolio, Maker, Gopax, Grapefruit Trading, DeverseFi, Coinlist, and edioo.

What Value Does Wrapped BTC have?

Mr. Market believes Wrapped BTC (WBTC) offers some value. For example, CoinBase gave Wrapped BTC a $29,384.37 Coin Price on 65 May 2022.

CoinBase also gave Wrapped BTC a $8.1 billion Market Capitalization and a 24-Hour Market Volume of $402.2 million on the same day. They based those numbers on a Circulating Supply of 275,300 WBTC. CoinBase estimates WBTC was the 10th most popular cryptocurrency on 26 May 2022.

In comparison, CoinMaketCap gave Wrapped BTC a $29,425.51 Coin Price, a Market Cap of $8.101 billion, a Fully Diluted Market Cap of $8.114 billion, and a 24-Hour Market Volume of $414.673 million. They based those numbers on a Circulating Supply of 276,003 WBTC. CoinMarketCap estimates Wrapped Bitcoin was the 12th most valuable cryptocurrency on 26 May 2022.

Wrapped Bitcoin (WBTC) vs Bitcoin (BTC)

Wrapped Bitcoin was worth less than Bitcoin (BTC) itself on 26 May 2022. CoinMarketCap gave Bitcoin a $29,464.29 Coin Price, a $561.299 billion Market Cap, a $618.750 billion Diluted Market Cap and a 24-Hour Market Volume of $35.416 billion on 26 May 2022.

They based those numbers on a Circulating Supply of 19,049 million BTC, a Maximum Supply of 21 million BTC, and a Total Supply of 19.05 million BTC. Predictably, Bitcoin was CoinMarketCap’s number one cryptocurrency on 26 May 2022.

I think Wrapped Bitcoin (WBTC) is an interesting speculative cryptocurrency that offers enormous value. In particular, WBTC benefits from the popularity of Bitcoin and the desire to invest in that asset.

Can Wrapped Bitcoin (WBTC) Grow with Inflation?

I think Bitcoin and WBTC prices could rise if inflation rises. To explain, I think some people will take their money out of cash and stocks with inflation rising. Bitcoin (BTC) and Wrapped Bitcoin (WBTC) are logical cash alternatives because they are liquid and easier to access than precious metals such as gold.

The hope is to keep money safe but have it in asset they can access fast. Wrapped Bitcoin (WBTC) could be that asset.

If you are seeking a crypto or synthetic asset that could retain value or possibly grow with inflation. I think Wrapped Bitcoin (BTC) is worth investigating.