Why the Bitcoin exchange price is an illusion: an analyst's breakdown
The current bitcoin exchange rate on exchanges may not reflect the real state of the market. More and more experts are concluding that the price of the first cryptocurrency is more the result of speculative bets rather than a reflection of real supply and demand. Let's figure out what this hypothesis is based on.
Real transactions are a drop in the ocean
The key argument of supporters of this theory is the colossal imbalance between the volume of real bitcoin transactions and the volume of derivatives trading. About 74% of all mined coins have not moved in more than four years. The owners of these assets simply hold them, not bringing them to the market. This means that the "live" market, where bitcoin actually changes hands, is extremely small.
The vast majority of transactions on the crypto market are not the purchase and sale of bitcoin itself. Traders use futures and contracts for difference (CFDs). In essence, the parties simply "bet" money on the direction of the rate, without moving real coins. It is this giant volume of derivatives, not real purchases, that forms the price we see on exchanges.
If there are few real transactions and the rate is driven by bets without delivery of the asset, a "painted" price emerges, detached from fundamental demand.
One center dictates the rate to everyone
The second important aspect is the high concentration of liquidity. The main trading volume today is concentrated on several large exchanges. Other platforms simply adjust their prices to the leader. If bitcoin becomes cheaper on the main exchange, the price instantly levels out everywhere. It creates the impression that one point dictates the rate to the entire market.
The situation is aggravated by the practice of forced position closures (liquidations). Many participants trade with leverage, i.e., with borrowed funds. When the price jerks sharply, such positions are automatically closed at a loss. This pushes the rate even further in the same direction, causing a chain reaction. Against the backdrop of a small number of real transactions, a sharp movement that knocks small traders out of the game is easily read as a planned attack on their stop-losses.
Expert opinion: The hypothesis of a "painted" bitcoin price has serious grounds. As long as the dominance of derivatives and high concentration of liquidity persist, the current rate will remain extremely volatile and susceptible to manipulation. Investors should remember that the exchange price is not always the true value of the asset, but often only a reflection of the sentiments of the crowd playing with leverage.