With bitcoin and many other cryptocurrencies surging to new highs after the election, many investors have started paying more attention to them.
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As of Dec. 3, bitcoin — and by extension, wrapped bitcoin (WBTC) — is trading around $96,000. That marks about a 129% gain over the last year — far outstripping returns from stocks, bonds, real estate and precious metals over the last year.
But what is wrapped bitcoin? If you had invested $1,000 in it when it first launched, what would it be worth today? Keep the following in mind as you consider this crypto investment.
$1,000 in Wrapped Bitcoin: Then and Now
Wrapped bitcoin first launched on Jan. 31, 2019. On that day, the price of one bitcoin sat around $3,460.
That means that $1,000 would have bought you 0.289 wrapped bitcoin. Today, that amount of bitcoin — wrapped or otherwise — is worth about $27,744.
Put another way, wrapped bitcoin has risen 2,675% since late January 2019. The S&P 500, for context, has risen around 120% in the same time period.
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What Is Wrapped Bitcoin?
Wrapped bitcoin is pegged to the value of bitcoin, but they use different underlying technology platforms.
Bitcoin uses its own blockchain technology to log transaction history. Many owners buy and hold it as a long-term store of value, rather than as a currency for transactions. The blockchain technology keeps it decentralized and secure — at least to the extent that the wallet or crypto exchange is secure.
Wrapped bitcoin is actually a token on the ethereum decentralized finance (DeFi) network. That makes it easy to buy, sell and otherwise interact with other digital assets on the DeFi network, such as other cryptocurrencies and nonfungible tokens (NFTs). The DeFi network includes an entire ecosystem for protocols such as Dharma, MakerDAO, Compound and the Kyber Network.
Technically, WBTC is a “stablecoin,” meaning it’s a cryptocurrency backed by another currency. In this case, each WBTC coin is backed by an equivalent amount of bitcoin, held in trust by a custodian such as BitGo.
How Do I Buy WBTC?
Investors can buy wrapped bitcoin through decentralized exchanges like Coinbase or Binance.
Exchanges let you move money between fiat currencies like U.S. dollars and specific cryptocurrencies, or exchange from one coin to another. Some crypto exchanges even let you buy cryptocurrencies with a credit card — for a fee, of course.
Just beware that crypto exchanges aren’t as secure as traditional banks, and your holdings aren’t insured by the FDIC.
Crypto in Your Portfolio
Most investing experts recommend keeping no more than 10% of your portfolio in cryptocurrencies.
They make for a fun speculative investment with the “play money” portion of your portfolio. But their volatility makes them too unreliable for long-term financial needs, such as retirement.
If you like the idea of investing in crypto but don’t want to use a decentralized exchange, some licensed brokerages, like Robinhood and Fidelity, offer crypto trading platforms. Of course, that defeats the purpose of owning wrapped bitcoin: interacting with other digital assets on ethereum’s DeFi network.
Editor’s note: Bitcoin price data was sourced from CoinDesk and is accurate as of Dec. 3, 2024.
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This article originally appeared on GOBankingRates.com: If You’d Invested $1K in Wrapped Bitcoin at Its 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.
