Is Bitcoin’s scarcity over? Willy Woo says derivatives now drive price movements
Is Bitcoin’s scarcity over? Willy Woo says derivatives now drive price movements
Claims have emerged that the fundamental order of the market is being shaken as price determination power for Bitcoin (BTC) shifts away from the scarcity derived from its fixed supply of 21 million BTC toward “paper Bitcoin” in derivatives markets.
According to NewsBTC, a cryptocurrency-focused outlet, on February 7 (local time), digital asset analyst Willy Woo assessed that the key driver moving Bitcoin’s price today is not the limited supply capped at 21 million BTC, but paper Bitcoin represented by futures and derivatives. Woo analyzed that Bitcoin’s value proposition of scarcity is being diluted by the massive liquidity of derivatives markets, and that this phenomenon is distorting actual price movements.
Paper Bitcoin refers to instruments such as futures trading and exchange-traded funds (ETFs) that bet on price movements without holding actual Bitcoin. Woo explained that derivatives markets create a near-infinite virtual supply, overwhelming Bitcoin’s real scarcity. As open interest in derivatives markets grows, the influence of paper Bitcoin becomes disproportionately large compared to actual Bitcoin holdings, effectively shifting the market’s price discovery mechanism entirely to futures markets.
Woo noted that, unlike past bull markets, the current market is more sensitive to liquidation volumes and leverage ratios within derivatives markets than to supply shortages. While the market has expanded with the influx of institutional investors, the predominance of derivatives-based trading has significantly slowed the pace at which on-chain supply shortages translate into price increases. Woo emphasized that “the market is now dominated by ledger numbers rather than real Bitcoin.”
Such structural changes could act as a factor suppressing Bitcoin’s price appreciation. Although the actual supply of Bitcoin is limited, paper Bitcoin can expand indefinitely according to the needs of financial institutions, potentially neutralizing traditional supply-and-demand dynamics. Concerns are also being raised that large financial players could use derivatives to artificially control price volatility or exert downward pressure.
Ultimately, Bitcoin investors are now faced with the need to closely monitor derivatives market liquidity and open interest trends rather than focusing solely on the issuance cap. As a market structure led by paper Bitcoin becomes entrenched, Bitcoin’s price is likely to be influenced more by dynamics within the financial system than by the intrinsic value of the underlying asset. Investors should understand this systemic shift and establish asset allocation strategies that account for volatility in derivatives markets.
*Disclaimer: This article is for investment reference only, and no responsibility is assumed for investment losses based on this content. The information should be interpreted solely for informational purposes.*
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