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Bitcoin may need to become high quality capital in DeFi to stay at all-time high prices

November 2, 2021
  • Bitcoin and Ethereum prices remain above $60k and $4k respectively after reaching new all-time highs, some six months after previous peaks. In response, large investors added 185k bitcoin to their holdings in the week of 25 October, bringing their holdings to the highest level in 2021 so far.
  • Despite this demand, it has become clear in the last six months that bitcoin faces competition as Ethereum and other Layer 1 assets become more innovative, with DeFi and NFT use cases, while bitcoin’s primary use case continues to be as a scarce fungible digital asset.
  • For bitcoin to retain its high value in the long term, it may need to bring its role as the highest quality capital in crypto into DeFi. However, this likely requires the decentralised wrapping of bitcoin from it’s blockchain to others. This likely requires a protocol upgrade but would guarantee bitcoin’s continued relevance and supercharge DeFi by providing access to all the value that has on-ramped into crypto via bitcoin.
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