Wrapped Bitcoin (WBTC) is an ERC-20 token representing Bitcoin that can be swapped with BTC on a 1:1 basis. The digital asset was created to allow Ethereum developers to use Bitcoin in the blockchain (Ethereum). By doing so, it combines the best of both networks, the liquidity of BTC, and the decentralised application support of Ethereum.
Wrapped Bitcoin launched in 2019 as a joint project of major blockchains, including MakerDAO and Compound. The forked blockchain works by fixing the original token, BTC, in a digital vault and minting a new one, WBTC, on Ethereum. The function is enabled with the help of a model of custodians, merchants, end-users, and WBTC DAO.
The reason you should be interested in Wrapped Bitcoin is due to its importance in the crypto space. It addresses the biggest challenge in the sector – interoperability. The current landscape of blockchain technology is characterised by independent projects with different functionalities.
While it preserves the security of individual networks, it hinders communication and transfer of assets. WBTC bridges this important gap, although it uses a different security model from that of bitcoin. The model is referred to as proof of reserves. Nonetheless, with WBTC, one gets a fixed interest income from lending BTC tokens as DeFi collateral.
WBTC meets resistance amid a bullish momentum
Technically, WBTC price moves similarly to that of BTC, making it an option for investors searching for tokens related to the latter. At the time of writing, WBTC was trading at $20,209, 7% higher in the past week.
Source: TradingView
The daily technical outlook shows that WBTC found resistance at $20,959 and is currently on a retracement. The MACD momentum indicator affirms a bullish momentum, while the Stochastic Oscillator is slightly below the overbought zone.
Should you buy WBTC?
The fundamental side of things is promising for Wrapped Bitcoin due to its use cases in DeFi. Technically, however, the price has retraced to the immediate support. The cryptocurrency could, however, be affected by macro developments, just like BTC.