Bitcoin’s maximum supply is still capped at 21 million. That has not changed on chain.
What has changed is how Bitcoin’s price is discovered, and that shift is a major reason why recent market moves feel disconnected from fundamentals.
If you still think Bitcoin’s price is driven only by spot buying and selling, you are missing the larger picture. Bitcoin no longer trades purely as a simple supply and demand asset. That structure changed once large derivatives markets began to dominate price discovery.
Originally, Bitcoin’s valuation rested on two core principles:
• A fixed supply of 21 million coins
• No ability to duplicate that supply
This created true structural scarcity. Price discovery was largely driven by real buyers and sellers in the spot market.
Over time, a second layer formed on top of Bitcoin. A financial layer.
This layer includes:
• Cash settled futures
• Perpetual swaps and options
• Prime broker lending
• Wrapped BTC products
• Total return swaps
None of these instruments create new BTC on chain. However, they do create synthetic exposure to Bitcoin’s price. That synthetic exposure now plays a major role in how price is set.
Once derivatives volume grows larger than spot volume, price stops reacting mainly to real coin movement. It starts reacting to positioning, leverage, and liquidation flows.
In simple terms, price begins to move based on how traders are positioned, not just how many coins are physically being bought or sold.
There is also another layer to this shift: synthetic supply.
A single real BTC can now be referenced across multiple financial products at the same time. That same coin can simultaneously support:
• An ETF share
• A futures position
• A perpetual hedge
• Options exposure
• A broker loan structure
• A structured product
This does not increase on chain supply, but it significantly increases tradable exposure tied to that coin. That directly impacts price discovery.
When synthetic exposure grows large relative to real supply, scarcity weakens in pricing terms. This is often described as synthetic float expansion.
At that stage:
• Rallies are frequently shorted through derivatives
• Leverage builds quickly
• Liquidations drive sharp moves
• Price becomes more volatile
This pattern is not unique to Bitcoin. The same structural shift occurred in gold, silver, oil, and equity indices once derivatives markets became dominant.
This also explains why Bitcoin can fall even when spot selling appears limited. Price pressure can come from:
• Leveraged long liquidations
• Futures short positioning
• Options hedging flows
• ETF arbitrage activity
Not just spot selling.
The current Bitcoin decline cannot be understood purely through retail sentiment or spot flows. A significant portion of the move is happening in the derivatives layer, where leverage and positioning drive short term price action.
Bitcoin’s 21 million supply cap has not changed on chain.
But in financial markets, synthetic or paper Bitcoin now plays a dominant role in price discovery, and that structural shift is a key reason behind the recent crash.
