Coinbase Introduces Bitcoin-Backed Token for DeFi Access on Base: BTC Holders Benefit
Bitcoin has experienced a notable 5% surge in value since Wednesday, amidst ongoing volatility and uncertainty in recent weeks. However, a significant development from Coinbase has injected fresh optimism into the market for Bitcoin (BTC) holders interested in exploring opportunities in decentralized finance (DeFi).
Coinbase recently introduced Coinbase Wrapped BTC (cbBTC), an ERC20 token that is backed 1:1 by Bitcoin held by Coinbase. Initially, cbBTC will be compatible with Base and Ethereum, with future plans to extend its support to additional blockchain networks.
This initiative by Coinbase enables Bitcoin holders to tap into new avenues within DeFi, granting them increased flexibility in utilizing their BTC across various platforms. The introduction of cbBTC by Coinbase signifies a step forward in expanding economic freedom within the cryptocurrency space, offering BTC users more avenues to leverage their assets while staying connected to the evolving DeFi ecosystem.
Furthermore, Coinbase’s move to link deep off-chain Bitcoin liquidity to rapid, cost-effective financial networks on Base and Ethereum marks a groundbreaking step. This connection allows Bitcoin holders to access their assets across multiple chains, fostering a more interconnected financial landscape. Wrapped assets like cbBTC play a crucial role in enabling users to employ Bitcoin in innovative ways, bridging the gap between traditional Bitcoin ownership and DeFi applications.
By facilitating seamless compatibility with DeFi applications, cbBTC streamlines the process of transferring assets between different blockchain networks, opening up possibilities such as using Bitcoin as liquidity for DeFi protocols or as collateral for borrowing other cryptocurrencies.
At its launch, cbBTC will be accessible on decentralized exchanges (DEXs) like Aerodrome, Curve, Matcha, and Uniswap, as well as lending platforms such as Aave, Compound, Morpho, Moonwell, and Spark. Additionally, cbBTC can be utilized in real-world asset (RWA) protocols like Maple.
When Coinbase users transfer Bitcoin from their accounts to an address on Base or Ethereum, their BTC automatically converts to cbBTC at a 1:1 ratio. Similarly, when users receive cbBTC in their Coinbase accounts, it seamlessly converts back to BTC. Notably, cbBTC will not have a separate trading pair or order book on Coinbase but can be traded through DEXs via Coinbase Wallet and potentially other third-party exchanges supporting it.
Meanwhile, the price of Bitcoin is currently hovering around $58,302, nearing higher price levels. To sustain an upward momentum, Bitcoin must surpass the 4-hour 200 exponential moving average (EMA) at $58,717, a critical resistance level that could signal a shift in trend direction. A successful breach and hold above this EMA may lead Bitcoin to test the next significant supply level around $61,500, which will serve as a crucial resistance point to monitor.
On the contrary, failure to surpass the $60,000 mark in the near future could result in a consolidation phase or a deeper correction, indicating persistent resistance and potential challenges for Bitcoin’s upward movement. Traders and investors are advised to closely monitor Bitcoin’s performance against this resistance to gain insights into its short-term trajectory.
