As Bitcoin and many other cryptocurrencies hit new highs after the election, many investors are starting to pay attention to them.
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As of December 3, Bitcoin, and by extension Wrapped Bitcoin (WBTC), is trading around $96,000. This represents an increase of approximately 129% over last year and far exceeds last year's returns for stocks, bonds, real estate, and precious metals.
But what is Wrapped Bitcoin? If you invested $1,000 when it first launched, how much would it be worth today? When considering investing in this crypto asset, consider the following: Please keep this in mind.
$1,000 in Bitcoin Wrapped: Then and Now
Wrapped Bitcoin was first launched on January 31, 2019. On that day, the price of one Bitcoin was approximately $3,460.
This means that $1,000 will buy you 0.289 wrapped Bitcoin. Currently, that amount of Bitcoin, wrapped or not, is worth about $27,744.
To put it another way, Wrapped Bitcoin is up 2,675% since late January 2019. For context, the S&P 500 rose about 120% during the same period.
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What is wrapped Bitcoin?
Wrapped Bitcoins are pegged to the value of Bitcoin, but the underlying technology platform is different.
Bitcoin uses proprietary blockchain technology to record transaction history. Many owners buy and hold it as a long-term store of value rather than as a trading currency. Blockchain technology keeps it decentralized and secure, at least as long as wallets and cryptocurrency exchanges are secure.
Wrapped Bitcoin is actually a token on the Ethereum decentralized finance (DeFi) network. This makes it easier to buy, sell, and otherwise interact with other digital assets on DeFi networks, such as other cryptocurrencies and non-fungible tokens (NFTs). DeFi networks include an entire ecosystem of protocols such as Dharma, MakerDAO, Compound, and Kyber Network.
Technically, WBTC is a “stablecoin,” meaning it is a cryptocurrency that is backed by another currency. In this case, each WBTC coin is backed by an equal amount of Bitcoin held in trust by a custodian such as BitGo.
How can I buy WBTC?
Investors can purchase wrapped Bitcoin through decentralized exchanges such as Coinbase and Binance.
Exchanges allow you to move money between fiat currencies such as the US dollar and certain cryptocurrencies, or exchange from one coin to another. Some crypto exchanges allow you to purchase cryptocurrencies with a credit card (with fees, of course).
Please note that crypto exchanges are not as secure as traditional banks and their holdings are not insured by the FDIC.
Cryptocurrency in portfolio
Most investment experts recommend holding no more than 10% of your portfolio in cryptocurrencies.
This is a fun speculative investment that uses the “play money” part of your portfolio. But its volatility makes it too unreliable for long-term financial needs, such as during retirement.
If you like the idea of investing in cryptocurrencies but don't want to use a decentralized exchange, some licensed brokerages, such as Robinhood and Fidelity, offer cryptocurrency trading platforms. Of course, this defeats the purpose of owning wrapped Bitcoin, which is to interact with other digital assets on Ethereum's DeFi network.
Editor's note: Bitcoin price data provided by CoinDesk and is accurate as of December 3, 2024.
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This article originally appeared on GOBankingRates.com: If you invested $1,000 in wrapped Bitcoin at launch, here's what it would be worth now
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
