
Paper Bitcoin Allegations Resurface Amid ETF Inflows and Price Drop
Renewed allegations surrounding so-called “paper Bitcoin” have emerged as the price of Bitcoin lags behind growing institutional demand, despite significant inflows into exchange-traded funds (ETFs) and new corporate treasury acquisitions.
Community Questions Discrepancy Between Demand and Price
Bitcoin’s recent price pullback, dipping below $104,000 over the weekend, has raised fresh concerns about the integrity of its market structure. Although over $1 billion in institutional inflows have been recorded in the past week alone, according to CoinShares, Bitcoin’s price has either stagnated or declined—a divergence that some market participants describe as suspicious.
Crypto analyst Stefan Jespers, known on social media as “Whalepanda,” reignited debate on the presence of “paper Bitcoin”—a term used to describe BTC exposure via derivatives or custodial promises that may not be backed by real, on-chain bitcoin.
“We had another $1 billion of inflows in ETFs, Saylor saying he bought more, and price is down again for the week,” Jespers posted on X (formerly Twitter). “Still people are in denial about all the paper BTC out there.”
His remarks refer to recent announcements by MicroStrategy’s Michael Saylor, who revealed an additional Bitcoin acquisition by the firm, bringing their total holdings above 240,000 BTC. Despite this, Bitcoin’s market price remains suppressed, fueling speculation that unbacked derivative claims may be diluting real demand.
Debate Intensifies Over Custodial Transparency
Concerns about unbacked Bitcoin exposure have been echoed in a recent report by CoinShares, a digital asset investment firm. The company emphasized that many treasury-holding companies do not publish on-chain proof of reserves, creating what it called a “trust gap” that could undermine Bitcoin’s foundational principle of transparency.
“If paper Bitcoin proliferates without robust verification, we risk returning to a world where market participants can’t confidently verify whether assets are backed 1:1,” the report warned.
While some companies—such as Tokyo-based Metaplanet—provide transparent on-chain addresses verifying their Bitcoin holdings, others, including MicroStrategy, have faced criticism for offering only periodic balance sheet disclosures without blockchain validation.
Riccardo Spagni, former lead maintainer of privacy coin Monero, previously criticized MicroStrategy for this lack of transparency in May, calling into question the reliability of public claims about Bitcoin treasury holdings.
Industry Veterans Demand Evidence
However, not all in the Bitcoin community are convinced of the paper Bitcoin narrative. Adam Back, cryptographer and CEO of Blockstream, challenged the theory’s credibility, urging proponents to produce concrete proof.
“Extraordinary claims require extraordinary evidence,” Back said. “If there’s an oversupply of fake BTC, show where and how—it should be evident on-chain or in ETF settlement.”
He added that most regulated ETFs must acquire actual bitcoin, held in custody by firms such as Coinbase or Fidelity, limiting the potential for unbacked claims in compliant jurisdictions.
Growing Calls for Proof-of-Reserves Regulation
As Bitcoin continues to mature as an institutional asset, calls for regulatory frameworks enforcing proof-of-reserves are gaining traction.
Experts argue that without enforceable standards or verifiable on-chain data, large custodians and treasury companies may operate in a fractional reserve-like environment—similar to traditional banks—undermining the ethos of Bitcoin as a trustless asset.
A senior analyst at crypto research firm Messari, who asked not to be named, commented:
“Without mandatory disclosures or verifiable blockchain data, there’s no way to determine if every ETF or treasury custodian actually holds what they claim. That’s a risk to market integrity.”
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