In a recent statement, renowned Bitcoin analyst Willy Woo sounded the alarm about a major hurdle that could potentially hinder the future growth of the world’s most popular cryptocurrency, Bitcoin (BTC). Here are the details…
Willy Woo comment came for Bitcoin
Woo, one of the leading names in the crypto world with more than 1 million followers on the X social media platform, shared an interesting graphic during his TOKEN2049 speech. The chart showed the ratio between “paper” Bitcoin, which represents derivatives tied to BTC, and actual liquid BTC in circulation. Woo explained the following in his article:
This is a slide from my TOKEN2049 talk. It shows the ratio between traded ‘paper BTC’ (compound futures open value) and actual traded BTC, which has high liquidity. We are currently in a regime where 20-30% more BTC is traded. This counteracts the upward supply shock.
Bull runs will end with this development
Woo’s concerns center around the rapid rise of Bitcoin derivatives, which, in his opinion, are draining liquidity from the real BTC market. According to Woo, this trend opens the door to price manipulation and weakens Bitcoin’s ability to stage significant rallies. The analyst noted that the abundance and accessibility of the US dollar (USD) compared to Bitcoin gives an advantage to institutional players in the futures and derivatives markets. These large organizations may have significant capital to exert inorganic selling pressure on Bitcoin. Woo believes that the increasing dominance of such markets is Bitcoin’s “enemy” and one of the key reasons why the cryptocurrency’s recent rallies pale in comparison to its early years. The analyst said:
In the long run, it allows institutions that do not hold BTC to sell without restrictions as long as they own a large number of USD. See how exponential reflexive bull runs end when futures markets come into play.
Futures markets are important
In a separate post, Woo noted the staggering volumes traded daily in futures markets, dwarfing liquidity in spot markets. According to Woo, this led to spot markets being affected by the gravitational pull of futures markets. Woo concluded his speech by shedding light on the delay in the approval of the Bitcoin exchange-traded fund (ETF). He claimed that spot liquidity has been limited for the last seven years, while futures markets have developed and significantly outperformed their counterparts in the spot market.
As Bitcoin continues to evolve, analysts like Willy Woo offer valuable insights into the challenges and opportunities ahead. The debate surrounding the role of Bitcoin derivatives in shaping the cryptocurrency’s future growth trajectory is likely to continue to be a subject of intense debate among market participants and enthusiasts.
