The post Top Analyst Says ‘Paper Bitcoin’ Is Driving The Market, Not The 21 Million Supply Cap appeared on BitcoinEthereumNews.com.

A new theory circulating in the crypto market is challenging how investors interpret Bitcoin’s recent price decline. In a post shared on X (formerly Twitter), market analyst Crypto Rover argued that Bitcoin is no longer trading as a simple supply-and-demand asset, and that this structural shift is a major reason behind the current sell-off. A ‘Parallel Financial Layer’ Rover’s central claim is that although Bitcoin’s on-chain supply cap of 21 million coins has not changed, the way Bitcoin is traded in modern financial markets has effectively diluted its scarcity.  According to him, focusing only on spot buying and selling misses what is really driving price action today. BTC, he says, no longer moves primarily based on physical ownership of coins, but on activity in massive derivatives markets that now dominate price discovery. As the analyst highlighted, in Bitcoin’s early years, its valuation rested on two fundamental principles: a strictly fixed supply of 21 million coins and the impossibility of duplicating that supply.  These features made Bitcoin uniquely scarce, with prices largely determined by real buyers and sellers exchanging coins in the spot market. However, over time, Rover asserts that a “parallel financial layer” developed on top of the blockchain itself. This financial layer includes cash‑settled futures, perpetual swaps, options contracts, prime brokerage lending, wrapped Bitcoin products such as WBTC, and total return swaps.  None of these instruments create new Bitcoin on the blockchain, but they do create synthetic exposure to Bitcoin’s price. According to Rover, this synthetic exposure now plays a central role in determining how Bitcoin trades. As derivatives trading volumes grew and eventually surpassed spot market activity, Rover argues that Bitcoin’s price stopped responding mainly to on‑chain coin movement.  Instead, prices increasingly reflect leverage, trader positioning, margin stress, and liquidation dynamics. In practical terms, this means Bitcoin can…

---

Filed under: News - @ February 7, 2026 8:23 am