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Synthetic dreams: Wrapped crypto assets gain traction amid surging market

Amid all the excitement of crypto’s biggest bull run in history, some assets have been outperforming even the current high-performing market. In particular, Synthetix (SNX) has been on an epic tear, leading the growth of the whole niche. 

The news of a Coinbase listing in December helped account for some of this. However, at the time of writing, SNX has increased by over 225% since mid-December, currently trading above $16.7 and cementing its position as one of the best-performing tokens in the ongoing rally.

Beyond the Coinbase effect, the main reason for the increase in SNX’s price is the genuine demand for what Synthetix has to offer — namely digital, synthetic assets. So, why all the excitement about these instruments, and what are they used for?

A brief history of synthetic assets

Like many other elements of the cryptocurrency markets, synthetics arrived from the traditional financial sector. Synthetics are used to simulate particular instruments while altering some key characteristics. This allows investors to gain exposure to underlying assets without necessarily having to hold them.

In the cryptocurrency space, tokens are a digital synthetic representation of any other asset, including those in the real world, such as stocks, commodities or fiat currencies. Crypto synthetics can also be used to gain exposure to cryptocurrencies and tokens. A simple example could be some of the “wrapped” assets used in Ethereum’s DeFi applications.

Wrapped Bitcoin (WBTC) has succeeded over recent months, which is a testament to the appetite for such assets, having risen from a market cap of around $1.1 billion in September to $4.7 billion at the peak of Bitcoin’s recent rally above $40,000. The recent release of a synthetic version of Monero could help would-be investors get around the exchange clampdown on privacy coins. It offers investors exposure to Monero (XMR) without having to navigate the ongoing delistings, while also prov...

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