As a researcher with experience in cryptocurrency markets, I share Willy Woo’s perspective that focusing solely on ETF inflows to explain Bitcoin’s price movements is an oversimplification. While it is true that institutions and ETFs have been active buyers of BTC, the sellers during this recent correction are not just new entrants into the market.
As a crypto analyst, I’ve observed that despite the significant inflows into Bitcoin exchange-traded funds (ETFs), the cryptocurrency is currently undergoing a considerable correction in its price. In a recent post on my platform X, I delved deeper into this apparent disconnect between positive BTC ETF dynamics and the current sell-off. Here’s a brief summary of my insights:
ETFs have seen a surge in purchases by institutions this year. However, it’s important to remember that understanding only the flow of ETF buying is just one piece of the puzzle. The total demand and supply dynamics in the market are crucial for a comprehensive analysis. Let me walk you through the basics of how the modern Bitcoin market operates:
— Willy Woo (@woonomic) June 14, 2024
Who is selling?
Woo points out that while ETFs and institutions are actively buying BTC, focusing solely on ETF flows is flawed. The primary sellers, according to Woo, are the “OGs” — original BTC holders. These early adopters possess significantly more BTC than all ETFs combined, and they tend to sell during every bull market.
The chart reveals a recognizable pattern that shows up during bull runs every cycle.
Paper is everything
Since the introduction of paper BTC in futures markets back in 2017, market conditions have undergone substantial changes. With paper BTC, traders can acquire a synthetic version of Bitcoin without physically owning it. This shift in trading behavior has resulted in less pressure on the real BTC market as demand is redirected towards its synthetic counterpart.
Previously, Bitcoin’s price experienced significant growth due to scarcity as mainly long-term investors and miners were the ones selling it. However, during the 2022 bear market, an influx of paper Bitcoin entered the market, with only minimal sales from spot holders. Woo points out that recent trends demonstrate instances where a rise in synthetic Bitcoin doesn’t trigger price gains, underscoring its influence on the market.
As a market analyst, I believe that to truly grasp Bitcoin’s (BTC) market behavior, it is essential to delve into multiple aspects of its data. Firstly, examining the on-chain data provides valuable insights into the network usage, transaction volumes, and wallet activities. Secondly, analyzing derivatives data can offer a comprehensive perspective on investors’ sentiment and market expectations through futures contracts and options. Lastly, studying technical price action helps us identify trends, patterns, and potential support and resistance levels, enabling informed trading decisions.
As an analyst, I wouldn’t recommend relying solely on ETF buying data when analyzing market trends. Instead, I’d suggest incorporating various sources of information to gain a more comprehensive understanding of the demand and supply dynamics.
— Willy Woo (@woonomic) June 14, 2024
As a crypto investor, I’ve come to realize that relying exclusively on Exchange-Traded Funds (ETFs) for investment isn’t enough. Instead, it’s crucial to expand my perspective and consider various aspects of the market to fully grasp its demand and supply dynamics.
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2024-06-15 12:46