By Rufus Round, CEO, GlobalBlock Digital Asset Trading Limited
Bitcoin will undergo the taproot upgrade this Sunday when block number 709,632 is mined. We thought this fact worth mentioning to clients and readers considering both the implications of taproot in terms of upgrade and the price action of previous cycles that have incorporated halvenings and upgrades. First and most simply, taproot upgrades Bitcoin’s core software making it more secure and more private along with efficiency enhancements that will create lower transaction fees, enhanced Lightning Network capabilities and improved smart contract flexibility. This upgrade has important implications for DeFi, where currently Bitcoin is largely used as collateral via an ethereum wrapper that creates wBTC or wrapped Bitcoin. Taproot creates a more efficient bitcoin DeFi market. We will get faster, cheaper transactions with greater smart contract functionality, no longer needing an ethereum wrapper. The superior security benefit of Bitcoin’s much larger and more diverse network should prevent many of the rug-pulls that have tripped up one or two ethereum based DeFi projects. Second let us consider the possible price action implications. DeFi as we know it currently largely exploded earlier this year, taking the global crypto market cap from circa $800b on Jan 1st 2021 to just under $3 trillion today. Ethereum itself has gone from $80b market cap to circa $550b now. In this time Bitcoin has only (!) doubled its market cap year-to-date to $1.2T now. Could taproot and an enhanced DeFi lead to outsized gains for Bitcoin? Time will tell, but the question certainly merits consideration. Finally, it is worth throwing the following historical events into the mix - if you need a little more bullish context: the last significant Bitcoin upgrade happened with Segwit in 2017 - the best part of a year after the last-but-one Bitcoin halvening event in 2016. As a reminder, the end of 2017 saw Bitcoin go to nearly $20k, having languished between a range of 1000 to 5000 for most of that year. The most recent Bitcoin halvening happened in May 2020, just over a year ago with taproot coming this weekend. Exciting times ahead. For more colour on taproot: https://bitcoinmagazine.com/technical/short-bitcoin-taproot- explainer For details on DeFi rug-pulls: https://learn.bybit.com/investing/why-crypto-rug-pulls- happen-in-defi/ GlobalBlock Ltd. is a wholly owned operating subsidiary of GlobalBlock Digital Asset Trading Limited and registered in England and Wales with registration number 09450626. GlobalBlock Ltd. has been temporarily registered under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 as a cryptoasset business until 31st March 2022, pending the determination of our application by the Financial Conduct Authority. Web: globalblock.co.uk Tel: +44 203 307 3780 Email: info@globalblock.co.uk