On-Chain Analyst Bullish on Bitcoin Despite Headwinds
In a recent post on X, on-chain analyst Willy Woo expressed his bullish outlook on Bitcoin. He highlighted several recent developments that he believes will drive prices even higher, including spot, derivatives, and spot Bitcoin exchange-traded funds (ETFs).
“Paper Bitcoin” Drop Signals Bullishness
Woo first pointed out the drop in the volume of “paper Bitcoin” entering the market. This refers to derivatives such as futures contracts that allow traders to speculate on Bitcoin prices without owning the underlying asset. According to Woo, there is an inverse correlation between the inflow rate of “paper Bitcoin” and Bitcoin prices. Therefore, a slowdown in “paper Bitcoin” is likely to lead to higher prices.
By analyzing the on-chain price chart, Woo observed that there is currently a slowdown in “paper Bitcoin.” This suggests that prices will continue to rally despite the recent drawdown.
Limited Upside Potential
Although the current trend is positive for Bitcoin, there are concerns about the failure of buyers to push above $69,000 and confirm the buyers’ strength. While new all-time highs have been reached, there has been no follow-through.
Furthermore, a flash crash on March 5 resulted in billions of dollars in long liquidations and caused prices to range inside a bearish candlestick. This net bearish development raises some uncertainty about future price movements.
Difference from 2022 Bear Market
Woo compared the current market conditions to those of the 2022 bear market. In that period, spot buyers of Bitcoin continued accumulating despite falling prices. However, speculators trading “paper Bitcoin” exerted significant downward pressure on prices.
In contrast, in 2024, there has been a decrease in both “paper Bitcoin” traders and spot Bitcoin buyers. This shift could potentially support prices in the long run because there is more demand for actual Bitcoin from spot ETF issuers.
Spot BTC ETFs Making an Impact
One significant factor contributing to the decrease in “paper Bitcoin” is the influx of billions from spot Bitcoin ETF issuers like Fidelity and BlackRock. These issuers hold Bitcoin directly on behalf of their clients, creating demand for the asset.
The approval of spot Bitcoin ETFs by the United States Securities and Exchange Commission (SEC) in January 2024 has led to a surge in prices and attracted more capital to the industry.
Hot Take: Bullish Outlook Despite Challenges
Despite facing headwinds, Willy Woo remains bullish on Bitcoin. He believes that the drop in “paper Bitcoin” and the rise of spot BTC ETFs will drive prices even higher. While there are concerns about the failure to break above $69,000 and the recent drawdown, Woo’s analysis suggests that there is still upside potential for Bitcoin.
With the decrease in “paper Bitcoin” and the increasing demand from spot ETF issuers, the market dynamics are different from those of the 2022 bear market. This could support prices in the long run.
Overall, while there may be challenges ahead, Woo’s analysis indicates that Bitcoin’s bullish trend is likely to continue. Investors should closely monitor developments around spot BTC ETFs and any changes in the volume of “paper Bitcoin” entering the market.
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