How do wrapped ERC-20 tokens acquire flexibility across DeFi?

If someone wants to create a new wrapped token (say wBAL) that's pegged to BAL, the value is derived from BAL but while using wBAL across DeFi, does it also derive its market for BAL, or is there a need to create custom markets for wrapped tokens?

For example, Uniswap has a market for BAL/ETH, BAL/USDC, etc. But if someone mints wBAL by locking an equivalent amount of BAL in a smart contract and wants to use it to swap with USDC on Uniswap or farm yield, will they also have to create a custom market for wBAL or is there a way to leverage the liquid market of the underlying tokens across DeFi protocols?

I think liquidity is very token specific. A wrapped token is still a token which requires its own pool and liquidity. The fact it's pegged to another token provides arbitrage opportunities to traders so that price efficiency is higher. But that's it.

Liquidity is token specific, however if you provide liquidity to a BAL/wBAL pool around the 1:1 price range (in Uniswap v3), people should be able to swap wBAL for ETH by having the DEX or aggregator route through BAL automatically.

Please don't blindly take my recommendation on this though... I don't know the risks involved in setting up a pool like that.