Crypto Executives Push Back on Viral Claim That Derivatives Render Bitcoin’s Supply “Infinite”
February 24, 2026 – CoinTelegraph
A recent market‑analysis thread that amassed nearly five million views on X sparked a heated debate across the digital‑asset community. The post argued that the proliferation of cash‑settled futures, exchange‑traded funds (ETFs) and other Bitcoin‑linked instruments has effectively turned the cryptocurrency’s hard‑capped 21‑million supply into a “theoretically infinite” one. While the view resonated with a segment of retail traders, senior figures from institutional firms and research houses have uniformly rejected the premise, emphasizing that derivatives merely alter price discovery—not the underlying scarcity baked into Bitcoin’s code.
The viral thesis
The analysis, authored by self‑styled analyst Robert Kendall, claimed that Bitcoin’s traditional valuation model—anchored on a fixed supply—has been undermined by the growth of a “paper market.” According to Kendall, the combination of cash‑settled futures, spot‑based ETFs and digital‑asset treasuries (DATs) gives investors exposure without actually acquiring a physical coin, thereby diluting the scarcity signal that has historically underpinned Bitcoin’s price.
Kendall’s post cited the sharp corrections seen in early‑2026 as evidence that the market is now reacting to leverage and synthetic exposure rather than to the concrete supply‑demand dynamics of the blockchain.
Industry response: scarcity remains unchanged
Harriet Browning, Vice President of Sales at institutional staking platform Twinstake, dismissed the claim as a misunderstanding of how Bitcoin is held on‑chain. “ETF and DAT allocations do not mint new Bitcoin,” she said. “They simply move existing coins into custodial accounts that are, by design, inaccessible to the broader market, reinforcing scarcity rather than eroding it.”
Luke Nolan, senior research associate at CoinShares, drew a parallel with precious metals: “Gold has an extensive derivatives ecosystem, yet its physical scarcity is never questioned. The same logic applies to Bitcoin—paper contracts cannot create additional units on the ledger.”
Nolan also highlighted that a substantial portion of mined Bitcoin is effectively out of circulation. Roughly 4 million BTC are believed to be lost forever due to forgotten keys or hardware failure, leaving an “effective supply” closer to 17 million. When institutions lock up the remaining liquid coins in custodial ETFs or corporate treasuries, the amount available for day‑to‑day trading shrinks further, intensifying scarcity.
Nima Beni, founder of crypto‑leasing platform BitLease, echoed the sentiment: “Suggesting that synthetic exposure destroys scarcity mirrors the flawed argument once made about paper gold. The underlying asset remains as limited as ever.”
How derivatives shape Bitcoin’s price discovery
All parties agreed that while derivatives do not alter the blockchain’s supply, they have reshaped the mechanisms through which Bitcoin’s market price is set.
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Futures as a leading indicator – Institutional traders use CME and Binance futures to signal bullish or bearish views before these positions filter into the spot market. When futures diverge from spot prices, arbitrageurs engage in basis trades, pulling the two prices back together.
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ETF‑driven demand – Banks and wealth managers that sell Bitcoin‑linked notes often hedge by purchasing spot Bitcoin or ETF shares, creating a direct demand for the underlying asset.
- Funding‑rate arbitrage – In crypto‑native perpetual contracts, positive funding rates incentivize long positions to buy spot Bitcoin while shorting the perpetual contract to collect payments, reinforcing spot demand. A reversal of rates can have the opposite effect.
Browning summed up the dynamic: “Spot markets now act largely as the settlement layer, whereas derivatives dictate marginal price formation. The price is negotiated first in the paper market and then transmitted to the on‑chain world.”
Key takeaways
| Insight | Detail |
|---|---|
| Supply cap unchanged | Bitcoin’s 21 million limit is baked into the protocol and cannot be overridden by any financial product. |
| Effective float is declining | Roughly 71 % of mined coins are considered illiquid, with an additional 4 million permanently lost. Institutional custody further removes supply from active trading. |
| Derivatives drive short‑term price signals | Futures, ETFs and perpetual contracts now serve as the primary venues for expressing institutional views and affect spot price via arbitrage and hedging flows. |
| Scarcity narrative remains intact | Industry leaders argue that synthetic exposure does not dilute scarcity; instead, it may accentuate it by locking more coins in custodial holdings. |
| Market participants should differentiate | Investors need to separate the “paper market” (derivatives, ETFs) from the on‑chain reality when assessing Bitcoin’s valuation fundamentals. |
Outlook
As 2026 progresses, the gradual migration of price discovery to derivative venues appears set to continue. The increasing participation of traditional finance—evidenced by CME’s rising futures open interest and the growth of spot‑based ETFs—suggests that Bitcoin will be priced increasingly by the same mechanisms that govern commodities such as gold.
Nevertheless, the core premise of a fixed, immutable supply remains unchallenged by code changes or product innovation. The debate sparked by Kendall’s viral post underscores a broader educational need: market participants must understand that while synthetic exposure expands access, it does not alter the fundamental scarcity that underpins Bitcoin’s long‑term value proposition.
Source: https://cointelegraph.com/news/bitcoin-scarcity-dead-crypto-execs-push-viral?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
