Analysts Say the Real Issue Is Supply

• Bitcoin slid toward the $70,000 level, pulling major altcoins lower amid heightened volatility.
• The sell-off occurred without any major economic or regulatory news to explain the move.
• Analysts debate whether Bitcoin’s price is now driven more by derivatives than by on-chain demand.

The cryptocurrency market fell sharply on Wednesday, with Bitcoin sliding toward the $70,000 level and dragging major altcoins lower.

Bitcoin touched levels last seen in November 2024 during the session, and this sudden drop triggered debate on social media over what is driving the latest sell-off.

Crypto analyst The Bitcoin Therapist said the fall was “borderline insane,” adding that no clear explanation exists for the decline. The analyst dismissed commonly cited reasons such as old technical glitches or the traditional four-year market cycle, calling them unreliable indicators.

However, another technical analyst offered a sharper assessment, arguing that the confusion reflects a deeper misunderstanding of how Bitcoin’s price is now determined.

Shift in Price Discovery

According to the analyst, Bitcoin is no longer priced mainly by on-chain supply and demand. Instead, price movements are increasingly driven by derivatives markets, where large volumes of synthetic Bitcoin exposure can be created without owning the underlying asset.

In earlier years, Bitcoin’s value was closely tied to its fixed supply of 21 million coins and its resistance to duplication. That premise, the analyst said, has weakened as financial instruments tied to Bitcoin have expanded.

Cash-settled futures, perpetual contracts, options, exchange-traded funds, broker lending, wrapped tokens, and swap products now allow multiple financial claims to be built on a single Bitcoin.

From Scarcity to Synthetic Supply

Once synthetic supply enters the system, scarcity becomes less relevant, the analyst explained. Price behavior then starts to resemble that of traditional commodities such as gold, silver, and oil, which experienced similar structural shifts after derivatives became dominant.

In such markets, large institutions can create paper exposure, sell into price rallies, trigger liquidations, and buy back at lower levels, repeating the process without needing physical supply.

“This is no longer a pure supply-and-demand market,” the analyst said, describing the current structure as closer to a fractional reserve pricing system.

Related: Binance Converts SAFU Reserves to Bitcoin with $100 Million Buy