• Bitcoin’s recent price drop is primarily driven by early adopters (OGs) selling their holdings, despite high net spot ETF inflows and institutional buying.
  • The introduction of paper BTC through futures markets has further impacted the market dynamics, diverting demand away from real BTC.

Bitcoin has been experiencing a major correction despite high net spot ETF inflows. Crypto analyst Willy Woo has shared his take on the recent BTC price drop. In his recent post on X, he provides some insights into the current Bitcoin sell-off and why its price does not correlate with positive BTC ETF dynamics.

ETFs are buying… Institutions are buying… Who the hell is selling? 2024 brought a mass of commentators looking at ETFs flows, as if that’s all that matters. What matters is total demand and supply. Here’s a 101 thread on how the modern #Bitcoin market works. — 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. This pattern is consistent and shows up during bull runs in every cycle.

Moreover, the introduction of paper BTC through futures markets since 2017 has significantly altered market dynamics. Paper BTC allows traders to buy synthetic BTC without holding actual BTC, which diverts direct demand away from real BTC. This means that the presence of paper BTC can significantly influence Bitcoin’s price movements.

In the past, Bitcoin’s price surged because only long-time holders and miners sold BTC. However, the 2022 bear market was influenced by a flood of paper BTC, despite minimal selling by spot holders. Woo notes that current conditions show periods where an increase in paper BTC does not lead to a price rally, highlighting the impact of synthetic BTC.

The current BTC price drop can be attributed to the selling actions of early adopters and the market dynamics introduced by paper BTC. While ETFs and institutions are increasing their BTC holdings, the significant selling pressure from OGs and the presence of synthetic BTC are crucial factors affecting the market.

This situation underscores the importance of understanding the broader market dynamics beyond just ETF flows. As Woo emphasizes, what matters is the total demand and supply, and the modern Bitcoin market operates within a complex interplay of these forces.