‘Vampire attack’ on the leading cryptocurrency

An analyst known as Duo Nine used the term to describe the process of ‘siphoning’ the liquidity of BTC to DeFi protocols, exchange-traded funds, and custodial services. The expert suggested Bitcoin is in danger.

“Bitcoin is in trouble. If nothing changes soon, things won’t be pretty. I’m not talking about the halving schedule or block rewards, it’s much more serious than that,” Duo Nine posted.

The analyst emphasized that the BTC network is secured by miners who should earn gradually increasing fees. However, certain trends in the Bitcoin ecosystem are growing more popular and leading to decreasing on-chain activity.

According to Duo Nine, one example of those trends is “wrapped” Bitcoin, which is becoming more widespread in decentralized finance. Native crypto coins represented by “wrapped” assets are not transacted on their network. This ‘siphons’ liquidity and fees to DeFi projects on ETH and other blockchains.

“BitGo has wBTC. Coinbase has cbBTC. Kraken has kBTC. Threshold has tBTC. Do you think this stops here? What about in 10 years?” the analyst asked.

This is related to the BTC ETF previously approved by the U.S. Government. The issue highlighted by Duo Nine is connected to the enormous amount of Bitcoin held by institutions. These assets do not move because traders use ETFs in transactions, and the value is “exported and abstracted away from its native chain.”