Ethereum, after long playing the second fiddle to the number one cryptocurrency, bitcoin, is entering the limelight.
The price of Ethereum, which has climbed more than 10% in the last 24-hour trading period and adds to gains of nearly 300% so far this year, remains far behind the price of bitcoin – but price isn’t everything, with the number of bitcoin tokens “wrapped” in ethereum doubling in August.
Bitcoin can be wrapped on the Ethereum blockchain using a number of Ethereum-based tokens, such as WBTC, which has grown in popularity since May, according to data from Dune Analytics. During certain periods of August, more bitcoin was enveloped in ethereum than was created by bitcoin miners.
Bitcoin wrapped on the Ethereum blockchain using WBTC is backed 1: 1 by bitcoin and struck by locking Bitcoin on the Bitcoin blockchain. It is believed that by wrapping bitcoin on ethereum and making it compatible with smart contracts, users will be able to unlock tools like lending, liquidity provision, and decentralized exchanges.
“This presents an interesting dilemma for bitcoin. While it clearly has more use after being converted on the ethereum blockchain, its underlying value apparently comes from the 68 terawatt hours of power required to secure the bitcoin blockchain each. year, ”Glassnode analysts wrote. in their weekly newsletter.
“How much bitcoin needs to migrate to Ethereum before the need for the Bitcoin blockchain itself begins to be questioned,” Glassnode asks. “And, if that did happen, what would support the value of bitcoin if not the enormous amounts of energy needed to maintain its existence?”
Meanwhile, the price of Ethereum is booming, spurred by the decentralized finance (DeFi) craze that is currently sweeping the bitcoin and crypto world. DeFi is the idea that cryptocurrency technology can be used to recreate traditional financial instruments such as loans and insurance.
“After a difficult number of weeks for many cryptoassets, the price increase of Ethereum shows that it is one of the main market leaders,” said Simon Peters, bitcoin and crypto analyst at the eToro investment platform.
“I agree with Glassnote’s reports that bitcoin is no longer the first steps of crypto investors – many new investors can enter the market directly into the Ethereum or DeFi protocols, rather than choosing the bitcoin as their first or only crypto investment as they did in 2017 crypto bull run. “