what if I told you that there was one factor you could use to predict whether a major altcoin like eth Soul or sui will pump a factor which could even predict pumps for other altcoins in their ecosystems in the last Crypt bull market this Factor took e and many ethereum-based altcoins to massive all-time highs in this bull market it could do the same for soul SOI even BTC and it's about to come back into play that's why today we're going to tell you about this Factor tell you which altcoins it could boost explain how it
could drive Bitcoin much higher than anyone expected and why it could trigger the next crash this is crypto Alpha you cannot afford to miss now before I reveal the factor in question I'll start by saying that it may not seem very significant at first glance this factor is one of those things that nobody pays attention to until it's too late it's a factor that's played a role in the rise and fall of every crypto bull market and one that you need to start watching right now so this factor is defi leverage specifically defi borrowing using
Bitcoin as collateral for those unfamiliar during bull markets crypto Wales will often borrow stable coins against their crypto Holdings in order to buy altcoins historically they did this primarily with the smart contract crypto belonging to that defi chain for example ethereum whales would use their eth as collateral in defi protocols to borrow stable coins usually usdc then they would use this usdc to buy altcoins usually in ethereum's ecosystem as eth's price would grow so would the amount of borrowing and the investment into ethereum altcoins now here's where things get interesting in theory Bitcoin or rather
the BTC coin is the ideal form of collateral in crypto in other words the best crypto to borrow against is BTC that's just because it's the least volatile and the most liquid put simply btc's price doesn't move as much relative to altcoins the only problem is that Bitcoin doesn't support smart contracts and BTC wasn't available on Smart contract cryptos like ethereum that was until January 2019 when crypto custodian bitgo and a group of defi protocols launched wrapped Bitcoin on ethereum making it possible to borrow against wbtc without getting too technical wrapping Bitcoin involves locking some
amount of BTC on the Bitcoin blockchain to Mint an equivalent amount of BTC tokens on another blockchain in this case ethereum logically wbtc could be redeemed for the underlying BTC by burning an equivalent number of tokens the problem with the original wrapped Bitcoin was basically that it was difficult to Mint and redeem despite this though wbtc experienced explosive growth during the 2020 defi Boom by mid 2021 1% of btc's Supply had been wrapped on ethereum naturally it was used mostly as collateral to borrow against in defi now what's fascinating is that wbtc shortcomings resulted in
the creation of competing wrapped Bitcoin protocols the most obvious of these was Ren BTC which made it possible for essentially anyone one to wrap their BTC for use on multiple blockchains without the need for kyc and other similar hurdles the less obvious competitors to wbtc were all the centralized crypto borrowing platforms that emerged like Celsius the main reason why these platforms gain so much adoption was arguably because it was difficult to use cryptos like BTC as collateral in order to borrow of course the desire to earn a yield played a role too and the resulting
Leverage resulted in the downfall of most of these platforms fast forward to today and it looks like history is about to be repeated in a big way BTC has become an even more ideal form of collateral thanks to the launch of the spot Bitcoin ETFs and Associated instruments these have undeniably given an extra boost to btc's price and should lower its volatility meanwhile crypto exchanges like coinbase have started launching their own own wrapped Bitcoin protocols making it possible for their users to seamlessly mint and redeem CB BTC on multiple chains news flash but this means
it's going to be very easy to use BTC as collateral in defi this time around consider that this will not only result in more stable coin borrowing and altcoin speculation but also further increase the demand for BTC as we saw in the last cycle a substantial percentage of BTC could be locked in wrapped Bitcoin protocols further restricting its Supply and supporting its price Action Now consider that we are literally at the beginning of this wrapped Bitcoin boom in the coming months positive defi regulations are likely to be passed in United States this is going to
accelerate defi leverage from all angles be it via wrapped BTC or otherwise as before this will cause an explosion in altcoin prices and by the way if you're enjoying the video so far then be sure to smash that like button to let us know and subscribe to the channel and ping that notification Bell so you don't miss the next one now this begs the question of which altcoins will benefit from the wrapped Bitcoin boom to find the answer all we must do is look at the existing forms of wrapped Bitcoin and which chains they're on
note that some of this information comes from a recent report by coin Telegraph research which we'll link to below anyways let's start with the largest wrapped Bitcoin token wbtc over 140,000 wbtc have been minted and almost all of it exists on ethereum according to the wbtc Network website the protocol also supports the base layer 2 Cara and osmosis both Cosmos based layer ones and Tron another layer one and that reminds me as some of you will know there was some controversy around wbtc earlier this year the tldr is that custom of the BTC backing wbtc
had been split between bitgo and bit Global a crypto custodian that reportedly has ties to Tron founder Justin Sun who you'll know is a rather controversial figure whether these concerns are warranted doesn't really matter because the outcome is the same The Fallout is likely to limit wbtc growth relative to other forms of wrapped Bitcoin this is because of defi protocols like make a dow removing w BTC as collateral and centralized exchanges like coinbase delisting wbtc fortunately or unfortunately this hasn't completely stopped wbtc from growing or being used in defi onchain analytics reveal that wbtc is
still being used as collateral in protocols like AR and compound this means that there's going to be lots of borrowing against wbtc For Better or For Worse I'd also be remiss if I didn't mention the fact that just in son claims to own over 28,000 BTC and is known to be a defi whale it goes without saying that Justin is likely to wrap some of this BTC as wbtc given his apparent affiliation with wrapped Bitcoin his borrowing will give a boost to altcoins and this ties into the pressing question of which altcoins will benefit in
the case of wbtc the answer is eth and altcoins on ethereum given that most of wbtc supply is on ethereum the caveat is that potential wbtc whales like Justin could use their borrowed stable coins to invest in altcoins on other blockchains it's safe to say that Justin is likely to bridge some of his dry powder into tron's ecosystem and you can learn more about Tron using the link in the description anyhow next up we have coinbase's CB BTC which only launched in September since then though CB BTC has grown exponentially to become the second largest
wrapped Bitcoin token by market cap around 18,000 CB BTC have been minted so far on ethereum bass and salana the three chains it currently supports now you'd be forgiven for thinking that most CBBC is being minted on base given its ties to coinbase or salana given its high activity and low fees surprisingly though almost 75% of all CB BTC in circulation has been minted on E ethereum so far not so surprisingly almost all this CB BTC is being used as collateral on arve now CBBC is likely to continue growing exponentially on ethereum and other chains
because it's easy to Mint and redeem to put things into perspective coinbase reportedly has close to 100 million users chances are that a few million of them will mint CB BTC to use as collateral in defi to borrow stable coins in fact we can use platforms like Celsius and blockfi to get a sense of how many people could mint CB BTC via coinbase and how much CB BTC could be minted lo and behold these platforms reportedly had user bases in the singled digigit millions and had tens of thousands of BTC deposited this foreshadows tens of
thousands of CB BTC tokens being minted particularly if coinbase introduces BTC yield SLS savings products to its exchange that plug into CB BTC in the back end a few of you will know that the SEC was cracking down on coinbase earn this though is almost guaranteed to change in 2025 and this relates to the pressing question of which altcoins will benefit well in the case of CB BTC it's honestly still too soon to say and it's not as straightforward as it was with wbtc this is precisely because most of the CB BTC that will be
minted could come from coinbase users who will use it for savings rather than borrowing the Silver Lining is that this is likely to drive lots of value to the defi protocols that are providing these BTC savings yields with CB BTC in the back end right now this is mostly arve but again this is likely to change as CB BTC grows on other chains and defi yield opportunities present themselves elsewhere from our perspective the biggest beneficiaries of CB BTC in the future will be altcoins on Bas and salana it stands to reason that coinbase picked Bas
because it's its own layer too in our view the reason why coinbase picked salana is because it believes that sana's ecosystem will keep growing this makes sense when you consider that salana seems to be following ethereum one cycle behind this is true both in terms of Sal's ecosystem growth as well as Soul's potential and you can learn more about what Sal has been up to using the link in the description anywh who the last wrapped Bitcoin protocol we need to cover is tbtc created by a crypto project called threshold Network as you might have guessed
tbtc is a decentralized wrapped Bitcoin token it launched in September 2020 and over 5,000 tbtc have been minted so far on multiple chains via ethereum as with wbtc and CB BTC almost all of t btc's Supply exists on ethereum and over a quarter of it has been supplied as collateral on arv June analytics for tbbc reveals that it's been growing as exponentially as CB BTC and ren btc's track record suggests tbtc still has a lot of room to grow in case it wasn't clear enough Ren BTC was also a decentralized wrapped Bitcoin protocol Once Upon
a Time Ren btc's Supply hit almost 14,000 000 Ren btc's Supply collapsed to a few hundred though after FTX imploded in 2022 for context fx's sister company alamida research acquired the ren protocol in early 2021 in any case Ren btc's track record suggests that tbtc could also grow to 14,000 BTC this would translate to a total wrapped Bitcoin value in the billions that will mostly be used for borrowing in defi the catch is that T btc's growth is harder to model given its cross-chain focus and the competition from CB BTC as I hinted earlier tbtc
exists on multiple chains via ethereum technically it exists on multiple chains via the Wormhole Bridge which it integrated in 2023 this makes it easy for tbtc on ethereum to bridge to over 30 blockchains and Counting a selling point that neither wbtc nor CB BTC currently have at the same time time tbtc doesn't have any onboarding hurdles like kyc it can be minted and Redeemed by anyone anywhere any time in theory then this makes tbtc the most accessible form of wrapped Bitcoin in practice however this isn't the case given that coinbase's CB BTC is easier to
Mint and redeem via the exchange however this assumes that defi protocols won't be able to provide user experiences that are on par with centralized exchanges in case you missed the memo there's a new niche in crypto called chain abstraction which effectively lets you access defi protocols on multiple chains from a single front end more importantly ethereum and salana aren't the only ecosystems where defi is growing it's also growing in older ecosystems like Cosmos and newer ecosystems like Aptos and sui these are emerging markets that neither wbtc nor CB BTC are focused on but ones that
cross-chain tbtc could capture and this pertains to the pressing question of which alt coins will benefit well in the case of tbtc the honest answer is that we're going to have to wait and see like with CB BTC thankfully though we can watch these flows using tbtc June analytics dashboard which shows more and more tbtc going through Wormhole the link to that will be down in the description now this begs the big biggest question of all and that's what effect all these wrapped Bitcoin protocols could have on btc's price to refresh your memory more than
1% of btc's Supply was wrapped in the last cycle this is impressive given the circumstances namely bad accessibility and lack of utility in defi four years later there are dozens of wrapped Bitcoin protocols with better accessibility and expanded utility in defi not just the three we covered today as mentioned men earlier BTC has also become an even better form of crypto collateral due to things like the spot Bitcoin ETFs and the options on them when you start crunching the numbers you start to realize that a lot more than 1% of btc's Supply could be wrapped
this time around for starters we have wbtc which you'll recall still stands at 140,000 BTC W btc's growth is difficult to forecast given its own circumstances but could reclaim its all-time highs per June analytics this could mean over 280,000 BTC being wrapped as wbtc it's a figure Within Reach when you remember that Justin sun is a Bitcoin whale and likely knows lots of other Bitcoin whales who will be more willing to use wbtc because of Justin's apparent affiliation something to think about next up we have CB BTC which I'll remind you is probably going to
be analogous to the Bitcoin yield products that were offered by the likes of Celsius when you factor in the positive crypto regulations coming down the pipe in the US it looks likely that CB BTC will grow as big as wbtc did in the last cycle this would mean another 280,000 BTC being wrapped as CB BTC a figure that could easily grow much higher because coinbase is so user friendly and because defi itself is becoming more accessible to retail the latter will be a Tailwind for tbtc which should grow at least as large as r BTC
did if not much more and when you factor in all the other centralized and decentralized wrapped Bitcoin protocols you notice that close to 1 million BTC could be wrapped that would be around 5% of btc's total Supply and if that figure sounds familiar that's because the spot Bitcoin ETFs held more than 5% of btc's Supply as of November whereas most of the BTC in the spot Bitcoin ETFs can move at any time most of the BTC on chain will be locked up in defi to all intents and purposes again this restriction in circulating Supply would
be supportive of btc's price around the margins assuming demand stays the same or Rises and the higher that btc's price goes the more leverage that wrapped Bitcoin holders will take on if we assume a BTC cycle top of around $150,000 1 million wrapped BTC works out to $150 billion worth of BTC on other chains and tens of billions of dollars of stable coins being borrowed against it to buy alts I'll repeat that the altcoins which will benefit the most from this wrapped Bitcoin boom are likely to be eth soul altcoins in ethereums and Sal's ecosystems
the other smart contract cryptos these wrapped Bitcoin protocols expand to and the altcoins in their ecosystems it's too soon to say what they will be but it's not too soon to warn what the outcome of all the resulting leverage will be be and so this brings me to the question of why all this wrapped Bitcoin could be a contributing factor to the next crypto market crash specifically the one that kicks off the start of the next crypto bare Market the short answer is because this is what's happened in every crypto cycle Leverage is the historic
cause of crashes on the way up wrapped Bitcoin will help Propel the crypto Market higher because people will borrow tens of billions of dollars of stable coins against WB BC CB BTC tbtc and others in order to buy altcoins as these altcoins rally so too will the desire to take on even more leverage using wrapped Bitcoin in defi at some point though the borrowing will stop either because altcoin prices have started falling fast or because btc's price has started falling fast in the former case this would result in a wave of altcoin sales into stable
coins to repay the BTC Bank leverage in the latter case this would result in a wave of wrapped Bitcoin liquidations and this is where things get interesting again wrapping Bitcoin makes it easy to forget that tokens like wbtc CB BTC and tbtc do not exist natively on the chains they're on they're backed by BTC and are therefore native to bitcoin this means that liquidity is lower and redemptions are more difficult to process for instance imagine a scenario where $100 million of CB BTC collateral is liquidated on a but CB BTC only has $50 million of
Market depth on the chain in question this liquidation could cause CB btc's onchain price to temporarily collapse to zero causing a wave of additional CB BTC liquidations besides the fact that this could cause a shortfall for arve it could also trigger a collapsing confidence in CB BTC and a rush of redemptions for BTC on coinbase if coinbase doesn't have the BTC on hand to meet CB BTC redemptions and any Associated BTC withdrawals it could lead to a run on coinbase in turn this would crash the crypto market like FTX did in late 2022 maybe marking
the bare Market low now to be clear this exact scenario is objectively unlikely to occur it's just intended to illustrate a realistic chain of events that could unfold because of hundreds of millions of dollars of loans backed by wrapped Bitcoin on dozens of blockchains being liquidated something along these lines seems perhaps inevitable after all it was the collapse of terra's us stablecoin in May 2022 that ultimately led to the collapse of FTX a blow up in defi eventually led to a blow up in CI the difference this time is that the rising integration of Bitcoin
into trefi means that next time the blowup could hit trefi hard too for what it's worth it could be an amazing buying opportunity but well let's get that dry powder first eh okay that's all for today's video folks so if you learn something new about the crypto Market smash that like button to let us know if you want to keep learning about how the crypto Market works then subscribe to the channel and ping that notification Bell and if you want to help others learn about how the wrapped Bitcoin boom could result in a bust then
be sure to share this video with them as always thank you all so much for watching and I will see you in the next one this is Guy signing off [Music]
