According to Glassnode, the number of Bitcoin (BTC) addresses that have 1 BTC fell to its lowest level in four months on 20 September. But it is too early to say that this is a bearish signal for the most important cryptocurrency.

What led to the sharp decline in the number of small bitcoin addresses?
The remarkable decline in Bitcoin microtitles coincides with the massive expansion of the decentralized financial market (DeFi).

Since August 1, the total value of Defi’s private protocols on Ethereum has increased from $ 4.091 billion dollars to $ 9.77 billion. Defi’s massive capital increase has increased demand for tokens such as Wrapped Bitcoin (wBTC).

Users mainly use DeFi protocols to generate revenue from cryptocurrency assets. Since Bitcoin cannot be converted to Ethereum, users convert BTC to wBTC and then use wBTC on DeFi platforms.

By using wBTC to access DeFi platforms and increase productivity, Bitcoin holders can achieve two goals. First, BTC users can still use DeFi protocols without selling BTC. Second, bitcoin investors do not overlook the potential for bitcoin prices.

The number of small Bitcoin addresses containing 1 BTC is likely to decrease as the demand for WBTC increases. Users could switch BTC to wBTC as Defi’s popularity increased.

In July, Jacques Pardee, a researcher at Messari, said that the dominance of the WBTC is likely to continue in the short to medium term. He said:

For these reasons, the WBTC will continue to dominate in the short to medium term. However, there is still an imminent threat of government intervention when these assets become large enough to attract the attention of the regulator. ”

However, the reduction in the number of headers and the recovery of WBTC do not necessarily indicate a downward trend for Bitcoin.

Finally, when users decide to withdraw wBTC from the DeFi protocols, they convert it back to BTC. Transferring BTC addresses to wBTC for Ethereum does not mean that users sold BTC.

Instead, he points out that there may be a short-term trend that may continue until the end of the current DeFi cycle.

WBTC accelerates to $ 1 billion
On September 18, Skew reported that the value of WBTC is accelerating to nearly $ 1 billion. According to CoinMarketCap, there are currently 76,047 wBTCs in circulation, indicating that more users are transferring BTC to Ethereum-powered DeFi platforms for revenue.

Since wBTC represents the exact value of 1 BTC, this is not a long-term downward trend for Bitcoin. In fact, it can be argued that this is a positive indicator, as users will not miss a potential Bitcoin bullish trend.

While DeFi platforms that allow users to generate income with wBTC are lucrative, there are pools with high risk and high returns. The increased market value of WBTC indicates that many users are reluctant to take risks due to the potential growth of BTC.

Source: CoinTelegraph

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