On 6 July 2024, Willy Woo, a well-known cryptocurrency analyst, shared detailed advice on X (formerly known as Twitter) about trading Bitcoin (BTC) with leverage.

Woo is a prominent figure in the cryptocurrency world, known for his in-depth analysis of Bitcoin and the broader crypto markets. He began investing in Bitcoin in 2013 and has since gained a substantial following due to his expertise in on-chain metrics, which involve analyzing data directly from the blockchain to understand market trends and investor behavior.

Woo was born in Hong Kong and moved to New Zealand as a child. He started his career in tech startups, eventually transitioning to finance and investing in gold during the 2008 financial crisis. His interest in Bitcoin was piqued around 2013-2014 when Bitcoin’s price experienced significant volatility, and he began acquiring Bitcoin and diving deep into its mechanics​​​​.

In his recent posts on X, Woo began by advising traders to avoid buying Bitcoin futures if they want to leverage their positions. According to Woo, buying futures contracts allows any counterparty with USD collateral to fulfill the transaction. This process, he argues, essentially creates synthetic Bitcoin, which increases the overall supply without affecting the actual Bitcoin in circulation. Woo explained that this increase in synthetic supply can dilute the market, leading to bearish conditions because it doesn’t impact the real supply-demand dynamics of Bitcoin.

In contrast, Woo suggested that traders should buy spot BTC using borrowed USD (margin). Woo pointed out that when you buy spot BTC with margin, you are purchasing real Bitcoin from current holders. He says this reduces the available supply of Bitcoin in the market, creating a supply shortage. Woo emphasized that a supply shortage typically leads to a bullish environment, as the reduced availability of Bitcoin can drive up its price. This method of leveraging is fundamentally different from using futures because it directly affects the actual supply of Bitcoin.

Woo also highlighted the cost efficiency of this approach in a bull market. He noted that it is often cheaper to fund a long position using borrowed USD or USDT rather than through futures or perpetual contracts. According to Woo, this cost efficiency makes margin buying more attractive during bullish trends, enhancing potential returns for traders.

Another critical issue Woo discussed was the prevalence of synthetic or “paper” Bitcoin in the market. Despite significant liquidations of long positions, Woo observed that new long positions keep entering the market, preventing a proper reset. Woo used the Open Value (OV) Oscillator to illustrate how many bets are in the system, denominated in BTC. Woo emphasized that the market is flooded with synthetic BTC, with 170,000 new synthetic BTC created since the last peak. Woo explained that this influx of synthetic supply makes it challenging for spot demand to significantly move the price upward. He contrasted this with the 9,332 BTC sold by Germany, underscoring that the creation of synthetic BTC has a much more substantial impact on market dynamics.

Woo’s core advice was to long spot BTC rather than futures. By buying actual Bitcoin, Woo argued that traders can contribute to a supply shortage, which is likely to drive up prices and create a more bullish market environment. This strategy, according to Woo, leverages the basic mechanics of supply and demand, making it a more effective approach for enhancing potential returns.

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