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The price of Bitcoin almost erased all its daily gains and returned to its previous position in just four hours. The Binance case and the upcoming Fed meeting are the most important agenda items of the week. The Binance hearing, which is expected to start at 22:00, was only a short time away when this article was prepared.
Bitcoin Analysis by Famous Analyst
Willy Woo, a famous cryptocurrency analyst who was interviewed by Peter McCormack, expressed concerns about the financialization of the king cryptocurrency through various derivative products, saying that Bitcoin has the ability to manipulate prices and divert liquidity away from BTC. According to Woo, Bitcoin’s Sharpe Ratio metric, which aims to compare the return on investment with the risk, has been slowly but steadily declining since the emergence of derivative products in 2019.
“Bitcoin used to dominate the scene. It outperformed all other assets on the planet. But now it is losing its power. The point we are at right now is similar to stocks, gold, bonds, and emerging currencies, where all macro assets on the planet are trading within a range, and Bitcoin is right in the middle of that range…”
Why is Bitcoin Not the Same?
Woo believes that this is the result of a process that started in 2018-2019. In the past, the price of Bitcoin moved independently and speculatively, far from the general markets. However, it is now being suppressed by the tight monetary policies of the Fed and other central banks in the midst of the longest bear market in history.
The analyst said:
“What happened in 2018-2019? It was the financialization of Bitcoin. We turned Bitcoin into paper. Let’s say I am the US government and I have $20 trillion in capital (M2 money supply) outside. I can make policies, print more money, stimulate certain markets. The truth is Bitcoin is maybe a half-trillion-dollar asset. There are 21 million Bitcoins associated with it. If I print $1 trillion, I can sell $42 trillion worth of Bitcoin. So the problem now is that these markets stay on paper and Bitcoin trades like other macro assets on the planet. I think this is a big concern for me. We’re talking about a spot ETF, okay, we can buy up to 21 million (actually 1 million because that’s what’s available) but in the meantime, we have these paper markets that have this great ability to control the market.”
Demand in the futures market has largely shifted from the spot market to contracts. This has resulted in less volatility in spot prices. The second point highlighted by Woo is that despite the multiplication of the asset value with derivatives, the unit price does not rise as much as before.
