Despite bulls facing headwinds, Willy Woo, an on-chain analyst, is bullish on Bitcoin. He cites recent developments around spot, derivatives, and spot Bitcoin exchange-traded funds (ETFs) in a post on X. The analyst shared a post showing the events that would likely drive prices even higher.

“Paper Bitcoin” Dropping 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, allowing traders to speculate on Bitcoin prices without actually buying the underlying asset, in this case, BTC. 

From the Bitcoin price and the inflow rate of “paper Bitcoin,” Woo notes an inverse correlation between the two. For Bitcoin prices to trend higher, there must be a slowdown in “paper Bitcoin.” Looking at the on-chain price chart, this is precisely what’s happening. Accordingly, there is a high chance that prices will continue rallying despite the recent drawdown.

Presently, the Bitcoin upside remains. However, the failure of buyers to push above $69,000 and confirm buyers of early this week is a concern for optimistic buyers. So far, Bitcoin has printed new all-time highs, but there has been no follow-through.

On March 5, a flash crash led to billions in long liquidations, washing out speculators. While prices have slightly recovered, the coin ranges inside the bear candlestick, a net bearish development.

Woo cycled back to the 2022 bear market, comparing price action to current market conditions. Then, the analyst said, spot buyers of Bitcoin were accumulating despite prices falling. At that time, the real catalysts of bear pressure were speculators trading “paper Bitcoin.” Their engagement drowned the impact of spot buyers, forcing prices even lower.

The Impact Of Spot BTC ETFs

However, looking at events in 2024, there is a notable shift. While “paper Bitcoin” traders are decreasing, the number of spot Bitcoin buyers is also falling. The drop in “paper Bitcoin” could potentially support prices in the long run since there is more demand for actual Bitcoin from spot exchange-traded fund (ETF) issuers.

Woo said the influx of billions from spot Bitcoin ETF issuers like Fidelity and BlackRock is a “remedy” for the negative influence of “paper Bitcoin.” Unlike speculators, spot ETF issuers hold Bitcoin directly on behalf of their clients, creating demand.

Since the United States Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETFs in January 2024, prices have been ripping higher, drawing more capital to the industry.