Wrapped Bitcoin Trading – Tutorial and Brokers
Wrapped Bitcoin (wBTC) emerged as a market-leading crypto token in 2021. The digital asset allows Bitcoin holders to gain access to Ethereum’s growing DeFi ecosystem. Our review explains how Wrapped Bitcoin works, where to buy and sell it, plus our top day trading tips. We also list the best wBTC brokers and exchanges below.
Wrapped Bitcoin Brokers
Wrapped BTC Explained
Wrapped tokens are assets pegged to the value of a specific cryptocurrency. In this case, Wrapped BTC is an ERC-20 version of Bitcoin, which is pegged to BTC on a 1:1 basis.
wBTC offers a solution to blockchain interoperability, where users are unable to interact with other networks. Wrapped Bitcoin connects Bitcoin holders to the Ether network without the need to exchange tokens. Benefits of the Ethereum ecosystem include exclusive wallets, yield farming, governance tokens, dapps and smart contracts.
The wBTC project was started as a joint venture by BitGo, Ren and Kyber. Its source code was released on GitHub in November 2018. The wBTC project then launched officially in January 2019. It is currently controlled by the wBTC DAO, which consists of more than 30 members. BitGo also launched wBTC onto the Tron blockchain.
Today, Wrapped BTC has a market capitalisation of over $6,000,000,000 and a maximum total supply of 181,663.42419722 tokens.
How Does Wrapped BTC Work?
The Wrapped Bitcoin ecosystem consists of four main players; custodians, merchants, users and DAO members. For every 1 wBTC token, there is 1 Bitcoin held by a custodian called BitGo who controls the keys to mint new tokens. A proof of reserve system also verifies the 1:1 backing between minted wBTC and Bitcoin.
To get Wrapped Bitcoin tokens, the user must request them from a merchant through a centralised exchange. Users can also swap ETH for wBTC on a decentralised exchange. The custodian then mints the number of wBTC requested and sends it to the merchant’s Ethereum address. Wrapped Bitcoin DAO members govern custodians, merchants and users.
The key advantage of Wrapped Bitcoin is the ability to convert wBTC to BTC or vice versa at any time with relative speed and low cost. This can be done through a number of networks, including the Binance Smart Chain (BSC). The ERC-20 protocol that underpins Wrapped BTC is a technical standard for every smart contract on the Ethereum blockchain. This is what makes wBTC compatible with Ether.
Wrapped Bitcoin Chart
Benefits Of Trading Wrapped BTC
- Integration – By integrating yourself into the ETH network, you gain access to the largest ecosystem in the crypto market as well as exclusive wallets, dapps and games.
- Liquidity – Wrapped Bitcoin brings the liquidity of Bitcoin to the Ethereum ecosystem. Also, the market liquidity of wBTC is greater vs alternatives like RenBTC. This reduces volatility levels that could otherwise cause price instability, meaning buy or sell orders are easier and safer.
- Speed – wBTC transactions are authorised much quicker than Bitcoin transactions. The Ethereum blockchain adds a new block every 15 minutes vs Bitcoin’s 10 minutes. As a result, moving wBTC between ETH wallets and exchanges is much more efficient.
- DeFi – Bitcoin holders typically struggle to seamlessly participate in DeFi projects. Without Wrapped Bitcoin, more time and money is needed to change Bitcoin into Ethereum.
- Accessibility – Anyone can start day trading Wrapped Bitcoin 24/7, 365 days a year. As long as you have an internet connection, you can start buying it on leading exchanges including Binance, Coinbase and Gemini.
- Rewards – Users can pick up rewards and airdrops by staking Wrapped Bitcoin and earn through yield farming – lending the crypto.
Risks Of Trading Wrapped BTC
- Leveraged trading – Many exchanges offer leveraged trading on crypto-assets like Wrapped Bitcoin. But whilst margin trading can increase potential profits, it can also lead to large losses. As a result, using leverage with this crypto is not for the risk averse.
- Fees – To wrap or unwrap wBTC to BTC, most merchants charge a trading fee. For example, Coinlist charges a flat fee of 0.25%. While this is relatively inexpensive, costs can add up if you’re making a large number of transactions.
- Centralisation – BitGo, the custodian controlling the minting of wBTC is a centralised company. They can freeze accounts and prevent the redemption of Bitcoin. Whilst more decentralised wrapped Bitcoin protocols are gaining traction i.e. RenBTC and TBTC, they aren’t as trusted in the market yet. In the meantime, this arguably undermines the principle of decentralisation, which forms the basis of the blockchain industry.
How To Buy & Sell Wrapped BTC
1. Choose A Broker
To buy Wrapped Bitcoin, you will need to open an account with a crypto exchange that supports wBTC. You can find the token on major exchanges such as Binance, Coinbase and Gemini. On the other hand, if you already own ETH tokens, you can use a decentralised exchange like Uniswap to convert them for wBTC.
Finding the right exchange will depend on your needs, but it’s worth considering the fee structure and trading platform available, alongside any mobile investing applications.
2. Open A Wallet
Transferring your wBTC tokens to a digital wallet is important to keep your funds safe. Keeping your tokens on the exchange you purchased them on means you don’t own the private keys. Furthermore, should the platform be compromised, you might risk losing your crypto.
The best wallets to store Wrapped Bitcoin on include KeepKey (hardware wallet) and Argent (software wallet).
3. Buy Or Sell
Now that you’ve set up a brokerage account and opened a wallet, it’s time to buy Wrapped Bitcoin. Firstly, you will need to place an order on the exchange. If you choose a market order, you can buy Wrapped Bitcoin instantly at the market price. If you wish to buy Wrapped Bitcoin at a specific price, set a limit order.
You can also explore trading Wrapped Bitcoin pairs i.e. wBTC/USD, wBTC/digg and wBTC/badger.
4. Trading Strategies
When day trading Wrapped Bitcoin, it’s important to follow a strategy. You can conduct technical analysis on price charts to inform predictions. Forecasts and market outlooks can also be influenced by news announcements. Major events can trigger spikes, generating trading opportunities.
As wBTC is pegged 1:1 to Bitcoin, it’s worth following trends that could impact the value of BTC. As the price of Bitcoin rises, so too will the value of wBTC.
Final Word On Trading Wrapped Bitcoin
Wrapped Bitcoin offers a creative solution to the interoperability of the BTC blockchain. It has opened the door for Bitcoin holders to engage in the Ethereum DeFi ecosystem. And with the token now available at leading crypto exchanges, it’s easier than ever to start trading Wrapped Bitcoin.
What Is Wrapped BTC?
Wrapped Bitcoin is an ERC-20 version of Bitcoin compatible with the Ethereum blockchain. Each wBTC is pegged to Bitcoin on a 1:1 basis. wBTC allows Bitcoin holders to interact with Ethereum’s growing DeFi system, without the traditional costs associated with exchanging BTC for ETH.
Is Trading Wrapped BTC Safe?
The concept of wBTC may appear relatively safe as the technology that underpins it is secure, however trading any crypto is risky. Price volatility, wallet hacks and regulation from governments could all impact the future value of Wrapped Bitcoin. As a result, it’s important to take a careful approach to risk management.
Where Can I Buy Wrapped BTC?
Is Wrapped Bitcoin A Good Investment?
If you’re a Bitcoin holder that wishes to engage with Ethereum’s DeFi ecosystem, then wBTC could be a good investment. You can benefit from Bitcoin’s liquidity and market value, giving you the best of both blockchains. Also, by investing in Wrapped Bitcoin, you can earn variable interest on your crypto savings, though the tax and APY will depend on your jurisdiction.
Who Created Wrapped Bitcoin?
The Wrapped Bitcoin protocol was initially developed by BitGo Inc, Kyber Network and Ren. They released the wBTC whitepaper in January 2019. Shortly after, the token was launched through merchants to facilitate Bitcoin to wBTC conversions. Currently, the Wrapped Bitcoin protocol is controlled by the network’s DAO.