Bitcoin (BTC) Market Dynamics: Why Its Price Does Not Correlate with Positive BTC ETF Inflows

Bitcoin is experiencing major correction despite high net spot ETF inflows. Crypto analyst Willy Woo has shared his take on the recent BTC price drop. I shared my views. In a recent article posted on X, he provides insight into his current BTC selling pressure and why its price does not correlate with the strong movement of his BTC ETF.

ETFs are buying, institutions are buying, but who is selling?

In 2024, numerous commentators focused on his ETF flows, as if that were all that mattered.

What matters is aggregate demand and aggregate supply.

Below is a 101 thread on how the modern #Bitcoin market works.

— Willy Woo (@woonomic) June 14, 2024

Who is selling

While ETFs and institutions are actively buying his BTC, focusing only on ETF flows is Mr. Wu points out that this is insufficient. According to Wu, the main sellers are “OGs,” or his early BTC holders. These early adopters hold far more of his BTC than all his ETFs combined, and they all tend to sell in every bull market.

This chart shows a recognizable pattern that appears during the bull phase of every cycle.

Paper is all about it

The introduction of paper BTC through the futures market since 2017 has significantly changed market dynamics. Paper BTC allows a trader to buy synthetic BTC without owning his actual BTC, which directly diverts demand away from his actual BTC.

In the past, Bitcoin price rose because only long-term holders and miners sold their BTC. However, the 2022 bear market was affected by a large amount of paper BTC, even though sales by spot holders were minimal. Wu points out that in the current situation, there are periods when the increase in paper BTC has not led to a rise in price, highlighting the impact of synthetic BTC.

Wu claims that to understand BTC market dynamics, it is necessary to analyze on-chain data, derivative data, and technical price movements.

So just looking at buying ETFs is not enough.

We need to take a broader view and understand the complete picture of supply and demand.

Putting it together is an art, not a quantifiable science.

Everyone is just making an educated guess.

— Willy Woo (@woonomic) June 14, 2024

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