Despite significant inflows into Bitcoin spot ETFs, the price of BTC is experiencing a major correction. Crypto analyst Willy Woo offers insights into the current sell-off and the reasons behind the price drop, which appear disconnected from positive ETF dynamics.

In a recent post on X, Woo highlighted that while ETFs and institutions are actively purchasing BTC, this focus on ETF inflows alone is misleading. The primary sellers driving the recent price decline are the "OGs" — original Bitcoin holders who were early adopters of the cryptocurrency. These long-time holders control more BTC than all ETFs combined and typically sell during every bull market cycle.

Woo’s analysis, backed by on-chain data, reveals a recurring pattern: during bull runs, these original holders offload their BTC holdings, contributing to price drops. This trend has been consistent across multiple market cycles.

Since the introduction of Bitcoin futures markets in 2017, the market dynamics have shifted significantly. Futures markets allow for the creation of "paper BTC," synthetic Bitcoin that can be traded without holding the actual asset. This development has altered the demand landscape, as traders can engage in BTC transactions without directly impacting the spot market. Woo explains that in previous cycles, Bitcoin's price surged primarily because only long-term holders and miners were selling. However, the 2022 bear market saw an influx of paper BTC, which suppressed the price despite minimal spot selling.

The current market conditions demonstrate that increases in paper BTC do not always correlate with price rallies, underscoring the substantial impact of synthetic BTC on the market. Woo stresses that a comprehensive understanding of BTC's market dynamics requires an analysis that includes on-chain data, derivatives data, and technical price action. Focusing solely on ETF buying provides an incomplete picture of the demand and supply forces at play.

Thus, while ETF inflows signal institutional interest and confidence in Bitcoin, the actions of original holders and the influence of synthetic BTC through futures markets are critical factors that must be considered to fully grasp the market's movements. This broader perspective is essential for accurately interpreting the current BTC price dynamics and anticipating future trends.