Weekly Onchain Insights: The Rise of Bitcoin on Ethereum
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Every week the IntoTheBlock team publishes a newsletter that summarizes key data insights about the crypto market. Below is a quick summary.
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Hey onchainers,
Welcome back to IntoTheBlock’s newsletter. We have created a different type of newsletter for crypto fans that is not about news, but about data and analytics. Every week, we deliver valuable data insights about the crypto market.
Bitcoin Price Analysis: $10,291.28 (3:00am EST 09/11/2020)
Can Bitcoin bounce back to $11,000 in the short term?
The In/Out of the Money Around Price (IOMAP) indicator reveals that Bitcoin faces stiff resistance ahead. In order for Bitcoin to reach $11,000 again, it has go through 1.7 million addresses that previously bought over 1.4 million BTC.
If Bitcoin breaks the $11,000 barrier, the most crucial resistance level sits at that $11,675. Roughly 1.41 million addresses previously purchased approximately 1 millon BTC at the range between $11,528.55 and $11,837.52.
Looking at the levels of support, over 1.3 million addresses had previously purchased a total of 558 thousand BTC between $9,964.38 and $10,292.66. This is expected to act as support as holders in this range will attempt to remain profitable on their positions and push prices above this level.
See the Bitcoin In/Out of the Money Stats
This Week Analysis: The Rise of Bitcoin on Ethereum
An On-chain Analysis of Wrapped Bitcoin (WBTC)
Since Bitcoin cannot be easily moved cross-chain, tokenized versions of Bitcoin are available on the Ethereum blockchain. These ERC-20s are pegged 1:1 to the price of BTC being backed by the equivalent amount of Bitcoin. The first recognized Bitcoin ERC-20 to launch was Wrapped Bitcoin (wBTC), which was released in January 2019. Wrapped Bitcoin is led by a consortium akin to USDC’s Circle.
While there are several tokenized versions of Bitcoin on the Ethereum blockchain, Wrapped Bitcoin (WBTC) — a centralized alternative held by the custodian Bitgo — remains the largest with a market cap of approximately $534 million at the time of writing. WBTC uses a proof of reserve mechanism which keeps the peg with BTC at 1:1 through the burning and minting of tokens.
Using the IntoTheBlock indicators, we will analyze WBTC from an on-chain perspective.
1. Daily Active Addresses Peak Following Incentives Boost
Added incentives have had a clear impact in the number of users leveraging Bitcoin on Ethereum. Throughout 2019 on-chain activity for WBTC remained relatively stagnant as there was a lack of apparent benefits for holders, averaging only 58 daily active addresses.
In 2020, though, Wrapped Bitcoin hit a point of inflection as use cases and ways to profit from holding it increased. First, following the approval of WBTC as a collateral for DAI, daily active users surpassed 300 for the first time. Since then the number of daily active addresses remained at a higher average level moving sideways until mid-June.
As major liquidity mining updates were launched in DeFi throughout June, Wrapped Bitcoin was poised to benefit from this frenzy. This was certainly the case, as daily active addresses jumped by 5x within 5 days following the release of the yield farming partnership between Ren, Curve and Synthetix.
Overall, through the integrations with other DeFi protocols WBTC has been able increase the number of daily active addresses to a record of 976 on September 10.
2. Large Transaction Volume Skyrockets with Yield Farming Release
At IntoTheBlock we monitor transactions of over $100,000 of value through our large transactions series of indicators. While data for this indicator for WBTC was close to non-existent throughout 2019 and the first quarter of 2020, it grew remarkably as a result of the integration into other DeFi protocols.
Similar to the case with daily active addresses, large transaction volume had first reached a high of $28 million following the MakerDAO integration before being propelled by yield farming incentives. The effect of the Ren, Curve, Synthetix initiative in large transactions was so vast that even zoomed in on the 3 month time frame the increase is quite vertical.
As can be seen in the graph above, large transaction volume went from near zero to over $500 million since June. To be precise, WBTC’s large transaction volume increased by 200x in 6 days following the yield incentives provided to liquidity providers.
As can be seen in the graph above, the large transaction volume experienced yesterday was overwhelming at $502m, an all-time high.
See the WBTC Large Transactions Stats
3. The growth in tokenized Bitcoin has largely been driven by whales and institutional investors
By analyzing key on-chain metrics from IntoTheBlock, we can determine that the growth in tokenized Bitcoin has largely been driven by whales and institutional investors. This is reflected in the average balance of a wBTC holder reaching $108,000.
The adoption by large players may come as no surprise given the high gas fees users have to incur to tokenize their Bitcoin and deposit into DeFi protocols. Partly because of this, the total number of addresses holding these tokens has not grown as significantly, with only 4,950 addresses holding wBTC Another potential reason is that aside from early adopters, the average retail user, in general, takes longer to trust and learn how to use these yield-generating Bitcoin alternatives.
See the WBTC Average Balance Stats
This Week in IntoTheBlock Predictions
A few weeks ago, we announced the release of IntoTheBlock Price Predictions. With this release we have added price predictions for Ethereum, Litecoin and Bitcoin Cash, as well as more prediction models for Bitcoin. We also added support for a much-requested feature: predictions notifications. IntoTheBlock subscribers will be able to obtain browser notifications for their favorite tokens based on their desired outcome (e.g. notify me when Ethereum is predicted to go up).
How Did We Do Over the Last 7 Days with our Ethereum 20 Basis Point Model?
IntoTheBlock’s Ethereum 20 basis points prediction model managed to achieve 65.15% accuracy this week. The model gave out a total of 132 predictions as it only provides one when it has a high degree of confidence. Throughout this week, the model did not drop below 50% on any day.
