Tl;dr
- BTC Dominance set a fresh 40-month high this week as all eyes tilt toward Bitcoin.
- While socio-economic factors, such as US Presidential elections and potential interest rate cuts, play their part, BTCfi is also leading the charge for rising BTC dominance.
- BTCfi is in full force as projects attract hundreds of millions in TVL.
- VCs and institutional investors are pouring millions into BTCfi projects.
- Coinbase entered the BTCfi space with cbBTC.
Bitcoin is taking center stage this week as Bitcoin dominance sets a fresh 40-month high after crossing 58%, demonstrating that most investment in the crypto world is pouring back into BTC.
The rapid rise in BTC’s dominance is largely attributed to the upcoming US election and factors suggesting that economic measures, such as potential interest rate cuts and quantitative easing, might benefit BTC in the coming months.
In addition, the proliferating BTCfi world is also playing its part as investors start to hunt for yield and DeFi activities on the Bitcoin blockchain. Finally, with institutional funds pouring into BTCfi projects and Coinbase launching its own BTC variant, the stars are aligned for an epic end to the year for Bitcoin.
With BTC dominance setting fresh multi-year highs, let’s examine the BTCfi world and see what’s driving growth.
Note: We would like to thank our friends at Bitcoin Ecosystem (@BitcoinEcoTK) for providing much of the data highlighted in this article.
Bitcoin Dominance Sets 40-Month Highs As BTCfi Makes Waves.
Bitcoin Dominance, a metric that shows Bitcoin’s market cap as a share of the entire cryptocurrency industry, recently set a fresh 40-month high after crossing 58% this week, demonstrating that investment is pouring into BTC instead of altcoins. Put simply, this means that Bitcoin’s market cap is now 58% of the total market cap of all cryptocurrencies.
The last time BTC dominance was this high was in April 2021:
A rising Bitcoin dominance suggests that investors are choosing to buy Bitcoin over altcoins, causing Bitcoin’s market cap to outpace the growth of the entire altcoin industry. Traditionally, a rising BTC dominance would indicate risk-off sentiment due to Bitcoin’s status as a safe-haven crypto and a robust store of value.
With BTC’s dominance rising, let’s examine some factors driving it higher.
1. BTCfi In Full Force
Besides the current socioeconomic narrative surrounding the US Presidential Election and the expected incoming rate cuts, the new BTCfi movement is one of the primary driving forces behind the sudden rise in BTC dominance.
Often referred to as Bitcoin Season 2, the BTCfi movement consists of dozens of projects actively building on top of the main Bitcoin network through sidechains or Layer-2s to introduce scalability and programmability solutions to Bitcoin.
As a result of the innovation, a wave of projects have entered the Bitcoin world that are bringing DeFi applications to the network.
The table below from Bitcoin Ecosystem shows that the total transactions of Bitcoin-powered blockchains in the last thirty days sit in the multiple millions, indicating increased usage and adoption of the leading BTCfi protocols.
Taking the stats further is data that shows Bitcoin-powered blockchains are seeing increased TVL, with the largest, Bitlayer, almost reaching 8,700 BTC TVL – worth around $550 million today:
The huge TVL from these protocols suggests that investors are eager to explore the bubbling BTCfi world as it progresses from its infancy.
Furthermore, newly launched protocols like Babylon also introduce new ways of generating yield for Bitcoin holders, transforming its value proposition from a simple store of value to a true yield-generating asset. Babylon devised a clever way to use the Bitcoin codebase to turn BTC into a slashable asset, allowing it to be staked on PoS chains to add economic security and generate altcoin yield. Babylon opened its doors toward the end of August 2024 and attracted 1,000 BTC in just 6 BTC blocks (roughly one hour), showcasing the immense potential behind BTC yield.
One key feature of these BTCfi projects is that none of them require a network hard fork. Instead, they utilized the Bitcoin codebase, leveraging new Bitcoin Improvement Proposals such as Taproot and SegWit to achieve their function.
With BTCfi in full force this year, it’s unsurprising to see BTC dominance outpacing the entire industry.
2. Money is Pouring Into BTCfi Projects
Another reason BTC dominance is rising is the sheer amount of investment pouring in from VCs and institutions into these newly launched BTCfi projects. These projects have raised millions of dollars in capital from huge industry players, showcasing their immense future potential.
Further data from our friends at Bitcoin Ecosystem shows that the top BTCfi platforms are seeing notable investment from top industry players:
Some of the most notable institutions and VCs that are actively investing in BTCfi projects include:
- Blockchain Foundation Fund
- BreakOrbit
- Normie Capital
- Binance Labs
- Draper Associates
- Flow Traders
- Multicoin Capital
- OKX Ventures
- Polychain Capital
- Amber
- LongHash Ventures
- Comma3 Ventures
- Mechanism Capital
- Animoca Brands
- Starkware
- KuCoin Ventures
- Spartan
With such big names pouring funding into the BTCfi world, it’s unsurprising that BTC dominance set new multi-year highs this week.
3. Coinbase Enters The Chat
The final reason all eyes are on BTC right now is the introduction of Coinbase’s BTC variant, cbBTC. Coinbase, one of the largest exchanges in the world, released its own BTC variant this month, which is a testament to the future outlook of Bitcoin and BTCfi.
cbBTC is a 1:1 ERC-20 tokenized version of Bitcoin that will go live on Base and Ethereum. The ERC-20 token is designed to help BTC holders delve into the DeFi world on the Bitcoin network and other blockchain ecosystems.
Despite its young age, the BTC variant has seen widespread adoption as popular protocols such as Aerodrome Finance, Curve Finance, Maple Finance, and Aave adopt the token. The following tweet from Bitcoin Ecosystem breaks down the protocols supporting cbBTC:
Data from Dune Analytics shows that cbBTC managed to attract almost $125 million TVL in its first week of operation, demonstrating the immense hype behind the BTC variant:
With one of the most influential companies in the Bitcoin space introducing its own BTC derivative, the sky’s the limit for the BTCfi world moving forward.
Persistence Building For Interoperability in BTCfi
With dozens of Layer-2s and sidechains spawning their own BTC variant and countless wrapped and yield-generating versions of BTC (including cbBTC) on the market, the need to quickly swap between these variants continues to grow.
Currently, the options for swapping between BTC variants are somewhat limited. Swapping often requires multiple operations, which may include centralized exchange infrastructure.
Persistence One is on a mission to make it easier to swap BTC variants and reduce the fragmentation in the BTCfi world, helping to set the foundation for it to unleash its full potential.
We’re building a platform that will enable easy trading of Bitcoin-related assets across chains as we seek to help “move Bitcoin around” in all shapes and forms. Instead of going through the traditional AMM route (like Uniswap), we’re implementing a Cross-Chain Intents-based solution, which leverages unified liquidity and instant finality. To learn more about our intent-based solution, look at this article.
In summary, Persistence will provide fast, user-friendly cross-chain swaps for various BTC assets with no slippage and a zero-TVL design. In turn, onboarding onto new BTC variants will be seamless, which should help BTCfi grow and reach its full potential as users move BTC across ecosystems to hunt for opportunities.
About Persistence One
Persistence One is building a Bitcoin interoperability solution to enable cross-chain BTC swaps across Bitcoin Layer 2s.
The rapid rollout of Bitcoin L2s and side chains has led to fragmentation, hurting BTCfi scalability. Using the power of intents, Persistence One will enable users to move assets across Bitcoin Layer 2s more efficiently than traditional bridging, offering fast, secure, zero-slippage cross-chain swaps.
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