Bitcoin continues to decline, who is selling? In addition to the overall supply and demand relationship, the emergence of “paper BTC” is also one of the key influencing factors. This article is sourced from Willy Wo, compiled, translated, and written by Foresight News.
Bitcoin spot ETF inflows show that the market is constantly buying, institutions are also buying, but the market trend seems to be the opposite, continuously declining, so who is selling?
As we enter 2024, market participants are beginning to focus more on the inflow and outflow of Bitcoin spot ETFs, as if this data has become a key to understanding the true market dynamics.
It is important to consider total demand and total supply. First, let me tell you who is selling. OG is selling, they hold more BTC than the sum of all ETFs by 10 times. They sell every bull market. This pattern has been around as long as the genesis block of Bitcoin.
To better understand this phenomenon, we can refer to the following chart: age of the coins x the number of coins sold. This chart reveals OG’s selling behavior in the market and its impact on the market trend.
The futures market is also a key factor influencing market trends. We are currently in the “modern era” of Bitcoin. Since 2017, “paper BTC” (referring to non-real BTC) has begun to flood the market.
In the past, if you wanted to buy coins, you had to purchase real BTC. In recent years, you can buy so-called paper BTC. This means that those who do not have real coins can sell that piece of paper to you. Together, you create synthetic bitcoins.
This potential demand for BTC has been transferred to paper BTC, to be met by counterpart traders who do not have BTC to sell, only dollars to act as bets.
In the past, the exponential growth of Bitcoin prices was due to the small amounts sold by early holders and the small amounts of new mined coins sold by miners.
Now, you should pay more attention to the magic of “paper BTC.” The bear market in 2022 was caused by the proliferation of “paper BTC,” and in fact, real spot holders did not actually sell.
In the current bull market, I have marked periods when paper BTC increased, and during these periods, prices did not rise accordingly.
We are currently in such a phase.
So, just focusing on ETF purchases is not enough to fully grasp market trends, one must also pay attention to on-chain data, derivative data, technical price trends, and other factors.
All these indicators increase the complexity of supply and demand. Analyzing them together is more like an art than a quantifiable science. In this market full of variables, everyone is just making logical guesses.