Even though bulls face headwinds, Willy Woo, an on-chain analyst, is bullish on bitcoin. He cites recent developments around spot, derivatives, and bitcoin exchange-traded funds (ETFs) in a post on X. The analyst shared a mail showing the events that would likely drive prices up even further.
The fall of “paper bitcoin” is bullish for prices
Woo pointed to the drop in the volume of “paper bitcoin” entering the market. Simply put, “Paper bitcoin” refers to derivatives. These are primarily futures contracts, which allow traders to speculate on bitcoin prices without actually purchasing the underlying asset, in this case, btc.
From the price of bitcoin and the inflow rate of “paper bitcoin,” Woo sees an inverse correlation between the two. For bitcoin prices to trend upward, there must be a slowdown in “paper bitcoin.” If we look at the on-chain price chart, this is precisely what is happening. Consequently, there is a high probability that prices will continue to rise despite the recent decline.
Currently, bitcoin's advantage persists. However, the fact that buyers failed to break above $69,000 and confirm buyers earlier this week is a concern for bullish buyers. So far, bitcoin has posted new all-time highs, but there has been no follow-through.
On March 5, a sudden crisis caused billions in prolonged liquidations, dragging down speculators. While prices have recovered slightly, the coin is located within the bearish candle, a net bearish development.
Woo returned to the 2022 bear market, comparing the price action to current market conditions. Then, the analyst said, bitcoin spot buyers were piling in despite the price drop. At the time, the real catalysts for the bearish pressure were speculators trading “paper bitcoin.” Their commitment drowned out the impact of cash buyers, forcing prices to drop even further.
The Impact of btc Spot ETFs
However, if we analyze the events of 2024, a notable change is observed. While “paper bitcoin” traders are declining, the number of spot bitcoin buyers is also declining. The fall of “paper bitcoin” could potentially support prices in the long term as there is greater demand for real bitcoin from spot exchange-traded fund (ETF) issuers.
Woo said the influx of billions of spot bitcoin ETF issuers like Fidelity and BlackRock is a “remedy” to the negative influence of “paper bitcoin.” Unlike speculators, spot ETF issuers hold bitcoin directly on behalf of their clients, creating demand.
Since the US Securities and Exchange Commission (SEC) approved the first spot bitcoin ETFs in January 2024, prices have risen, attracting more capital to the industry.
Featured image from Canva, TradingView chart
