The crypto market continues to fall, who is selling? 📈
1⃣ Market decline and sell-off
In the current Bitcoin market, the market keeps falling despite the buying of ETFs and institutional investors. So who is selling?
2⃣ OG's sell-off
First, let’s look at who is selling. The answer is OGs (Old Timers). They are selling and own more BTC than all ETFs combined, 10x more. In every bull run, OGs sell some of their BTC. We are now in the modern era of BTC, with paper BTC (futures market) flooding the market since 2017.
3⃣ Impact of Paper BTC
If you wanted to buy BTC, you previously had to buy real BTC, but now you can buy paper BTC. Therefore, the coinless can sell you paper BTC, creating a synthetic BTC together. The potential demand for BTC is transferred to paper BTC, which is met by OTC traders who have no BTC to sell and only have US dollars to back their bets.
In the past, BTC would have grown exponentially because the only sellers were the trickle from OGs and an even smaller amount of newly mined coins from miners. Today, the magic of paper BTC is what you want to focus on.
4. Focus
The 2022 bear market was determined by a massive influx of paper BTC when spot holders didn’t actually sell. In the current bull market, I marked places where paper BTC rallied, and these were times when the price didn’t. We are in one of those times right now.
So, focusing only on ETF purchases is not a good idea. On-chain data, derivatives data, price technical indicators, all add to the demand and supply picture. Putting it all together is an art, not a quantifiable science. Everyone is just making an educated guess.
Alan Knitowski points out that the importance of the 21 million Bitcoin supply cap is waning. There is limited firepower to short BTC with USD collateral. Now you understand why Biden's SEC wants to enable futures ETFs and block spot ETFs. This is a war going on.
Conclusion: The market is complex and needs rational response
The current Bitcoin market is full of complexity and uncertainty. Although ETFs and institutions are constantly buying, the market's decline is obviously affected by OG selling and the large inflow of paper BTC. Investors cannot rely solely on ETF purchases, but also need to combine on-chain data, derivative data and price technical indicators to comprehensively analyze the market's demand and supply. Only through rational analysis and careful layout can we find opportunities in a complex and changing market and achieve stable investment returns.
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