Bitcoin Blockchain Integration Is Hitting All-Time Highs as BTC Price Does the Same

Stack this with the billions of dollars coming in from the BTC ETFs and the increasing rate of adoption of institutions (not to mention the US government now), and it becomes apparent that something big is cooking for Bitcoin.

Is Bitcoin Suddenly Becoming an Innovation Center?

For many years, new users filled the crypto ecosystem with liquidity. Most of this, however, wasn’t fully utilized as the technology was still nascent and developers could only build applications with simple mechanics.

Now, the crypto ecosystem is becoming more mature as new networks emerge and old chains are updated with modern functionality. At the same time, the rate of new liquidity inflows is decreasing. This is encouraging developers of new ecosystems to implement tools that maximize the efficiency of “old” liquidity within their blockchains.

And where does much of this old liquidity reside? Bitcoin!

Due to the minimal technical development of the Bitcoin blockchain until now, a great deal of liquidity has been confined to BTC wallets. These assets have been stored for years with little benefit to other crypto ecosystem participants and at the cost of unrealized value for holders.

Now, as the market shifts in favor of stable, more sustainable growth, developers are increasingly seeking to unlock existing liquidity by integrating Bitcoin into DeFi ecosystems and platforms.

Implications for the Wider Crypto Ecosystem

Bitcoin’s increasing integration is opening up new opportunities and additional revenue streams for bitcoin holders. For example, BTC holders can now borrow stablecoins against their assets on lending platforms like the EVAA Protocol, allowing them to utilize the value in their wallets without parting with precious bitcoins.

Bitcoiners can also earn yields from providing security for oracle solutions and even blockchains in their entirety. As a side effect, this significantly expands the liquidity and security of other blockchains.

Overall, this has two effects. The first is that of fortifying Bitcoin as the primary force for web3. After all, its capitalization is still roughly equal to the combined value of all other cryptocurrencies. So, the more use cases it has on other networks, the less likely we are to ever see another asset leading the way. But the question of what will be the second asset after Bitcoin remains open.

However, it also creates an opportunity for projects to capture capital coming into Bitcoin and bring it to their chain. Those blockchain ecosystems that are most successful in drawing liquidity from Bitcoin have a good chance of outperforming their competitors and taking second place.

The Challenges

As Bitcoin continues to hit ATH after ATH (now hovering around $105k), there’s a growing risk that the blockchain could become unusable to smaller investors.

The Bitcoin user experience is already uncomfortable for almost any investor. This is due to its transaction costs combined with incredibly slow speed and minimal functionality. As the crypto ecosystem grows, the inflow of new users will only aggravate these problems, congesting the network and making this technology, conceptualized in 2008, slower and more frustrating to use.

If this situation does not improve, there is a possibility that people will be tempted to abandon holding Bitcoin and transition to other forms, such as Wrapped Bitcoin (wBTC), Coinbase Wrapped BTC (cbBTC), and TON Teleport BTC (tgBTC).

With the increasing decentralization of bitcoin solutions on other blockchains, Bitcoin may become underutilized even among the most conservative bitcoin-maxies.

Predictions and Opportunities in the Current Cycle

In the last cycle, Bitcoin grew 20 times in a year and a half. 3% annualized returns on the asset, which today can be found, for example, in Babylon staking, do not look impressive compared to profits from the growth of this asset.

Over this cycle, BTC is unlikely to grow more than 10x from the bottom. This trend of decreasing growth amplitude is likely to continue in future cycles.

So with each cycle, opportunities to generate additional returns on bitcoin (as opposed to just holding the asset) will look more and more attractive, incentivizing holders to explore new liquidity strategies in new ecosystems.