Data shows that ‘paper’ Bitcoin has seen a significant rise in recent times, while the spot price of the cryptocurrency has actually fallen.
Paper Bitcoin has risen while Spot BTC has remained unchanged
In a new thread On X, analyst Willy Woo has spoken about the state of the Bitcoin market. BTC has seen a bearish trend recently, with the German government selling and Mt. Gox distributions being two of the major sources of FUD among investors.
Woo pointed out that Germany sold about 10,000 BTC, while the government still holds 39,800 BTC in custody.
The data for the holdings confiscated by the German government | Source: @woonomic on X
Mt. Gox hasn’t distributed that much BTC yet, with only 2,700 BTC returned to their owners. The bankrupt exchange still has 139,000 BTC left to distribute, but the bearish impact of these holdings depends on whether the holders who receive the coins are willing to sell.
The trend in the Mt. Gox balance over the years | Source: @woonomic on X
It doesn’t seem like these two entities have exerted that much actual selling pressure on the market yet. So, what’s the real culprit behind Bitcoin’s crash? According to the analyst, it seems to be paper BTC.
Paper BTC refers to the derivative products related to the cryptocurrency that does not require ownership of any actual BTC tokens. Below is a chart showing the BTC trajectory during this latest dip in the asset.
Looks like the paper plus spot BTC balance has been on the rise on exchanges | Source: @woonomic on X
In the chart, the purple line reflects the combined paper and spot BTC inventory currently held on the various centralized exchanges in the sector. This inventory has been increasing recently.
However, this increase could also be due to spot deposits rather than paper Bitcoin being minted. However, as the blue curve shows, spot BTC has been flat-tracking while total inventory has increased. This would confirm that paper BTC is indeed behind the increase.
In total, an additional 140,000 BTC have been printed in paper form recently. “Now compare that to the 10,000 BTC that Germany sold, and you can see what caused the dump,” Woo says. So it’s possible that derivatives could see a flush if the cryptocurrency is to make a solid recovery.
While there are bearish winds coming in terms of the remaining Mt. Gox and German government divestment, there could also be a bullish development for the coin. As the analyst explained, the spot exchange-traded funds (ETFs) are already showing early signs of accumulation.
The trend in the 7-day netflows of the BTC spot ETFs | Source: @woonomic on X
BTC price
The past month has been a tough one for Bitcoin owners as the asset’s price fell by over 17% to $57,200.
The price of the coin has been riding on bearish momentum recently | Source: BTCUSD on TradingView
Main image from Dall-E, woocharts.com, chart from TradingView.com