Bitcoin Price Action Controlled by Derivatives, Not Supply and Demand, Analyst Claims

TLDR:

• Bitcoin derivatives create multiple financial claims on single coins, undermining the scarcity principle. 
• Analyst identifies six simultaneous claims possible on one BTC through ETFs, futures, swaps, and lending products. 
• Price discovery shifted from blockchain transactions to derivative positioning and liquidation flows. 
• Trader compares Bitcoin’s structural change to derivatives dominance in gold, silver, and oil markets. 

Bitcoin trades around $65,690 as market observers note unusual price behavior. A crypto analyst suggests the issue extends beyond typical market dynamics.

The digital asset now faces structural changes in how its value gets determined. Traditional supply-demand principles may no longer fully explain current price movements, according to commentary from trader 0xNobler.

Synthetic Supply Creation Alters Market Structure

The analyst argues Bitcoin’s foundational scarcity premise has shifted since derivatives products entered the market. “The moment supply can be synthetically created, scarcity is gone,” 0xNobler stated in a post on X.

Cash-settled futures, perpetual swaps, options, exchange-traded funds, and wrapped Bitcoin versions now exist alongside the underlying asset. These instruments allow multiple financial claims on single coins.

This layering creates what the trader calls a “Synthetic Float Ratio.” When derivative positions exceed actual coin availability, price discovery moves away from blockchain transactions.

Instead, positioning flows, hedging activity, and liquidation events drive valuations. The shift mirrors patterns seen in commodities like gold, silver, and oil.

Wall Street institutions can manufacture exposure without holding actual Bitcoin. Prime broker lending and total return swaps add further layers.

One coin potentially backs an ETF share, futures contract, perpetual swap, options position, broker loan, and structured note simultaneously. The analyst counts six different claims on the same underlying asset.

This structure enables what the trader describes as inventory manufacturing. Institutions short into price rallies, trigger liquidations, and cover positions at lower levels.

The cycle repeats as derivative supply expands. Price movements respond more to these mechanics than to spot demand for coins.

Original Bitcoin Thesis Faces Challenge

Bitcoin’s valuation framework rested on two concepts: a fixed 21 million supply cap and no rehypothecation. The analyst contends both principles eroded once derivatives took over price setting.

“Bitcoin’s valuation was built on two ideas: a hard cap of 21 million, no rehypothecation,” the trader explained. While the blockchain maintains its hard cap, the derivatives layer operates without such constraints.

The commentary suggests retail selling or weak investor sentiment cannot explain current price action. “What you’re watching right now is not normal price action. It’s not weak hands. It’s not sentiment,” 0xNobler wrote.

Instead, derivatives flows dominate. The analyst claims Bitcoin no longer trades as a pure supply-demand asset.

Rather, it functions within what the trader calls “a fractional-reserve price system wearing a Bitcoin mask.” Paper claims exceed physical holdings in this framework.

Price discovery shifted from on-chain activity to derivatives markets. According to the post, this change represents a structural break similar to those in traditional asset classes.

The trader maintains this pattern will continue, noting experience calling market turns over the past decade. “I’ve been calling Bitcoin tops and bottoms for over a decade now, and I’ll do it again in 2026,” the analyst stated.

However, broader market participants continue to debate whether derivatives truly control Bitcoin’s price or if spot demand remains the primary driver.

The discussion highlights ongoing questions about how institutional involvement reshapes cryptocurrency markets.

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