Understanding Bitcoin’s Recent Struggles Despite Spot ETF Purchases
Despite the recent surge in spot exchange-traded fund (ETF) purchases, Bitcoin has been facing downward pressure. Analyst Willy Woo sheds light on the reasons behind this unexpected bearish momentum.
Spot Selling Pressure from Long-Term Holders
The main source of selling pressure comes from long-term holders (LTHs), also known as HODLers, who hold onto their coins for extended periods. These investors rarely sell, but when they do, it follows a pattern throughout history.
- Bitcoin’s Coin Days Destroyed (CDD) metric indicates that dormant coins are being moved on the blockchain.
- Significant spikes in CDD coincide with price rallies, suggesting that LTHs are selling.
- Similar patterns were observed during the 2017 and 2021 bull runs.
The Influence of Paper Bitcoin on Market Dynamics
Another factor contributing to Bitcoin’s slowdown is the rise of “paper BTC,” referring to derivatives that do not involve owning actual cryptocurrency tokens. Woo explains that the influx of paper BTC has significant market implications.
Historically, BTC experienced exponential gains with minimal selling from early adopters and miners. However, the emergence of paper Bitcoin now plays a crucial role in market dynamics.
- Data showing Bitcoin inventory on exchanges reveal periods of stagnant or declining spot supply.
- During the 2022 bear market, the combined spot and paper BTC inventory increased, highlighting the role of derivatives in dictating market trends.
- Instances of rising paper BTC coinciding with Bitcoin’s slowing rally have been noted by analysts.
Current Bitcoin Price Movement
Bitcoin briefly surpassed $66,000 over the weekend before retracing to $65,300 today.
Hot Take: Analyzing Bitcoin’s Struggle Amid Spot ETF Inflows
Bitcoin has been grappling with downward pressure despite increased purchasing activity in spot ETFs. Analysts suggest that a combination of spot selling pressure from long-term holders and the influence of paper Bitcoin derivatives could be contributing to the ongoing bearish sentiment.
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