#1266 Will Clemente | Bitcoin Bear Market Is Over. Here Is Proof.

Will Clemente is the co-founder of Reflexivity Research. In this conversation, we talk about bitcoin, why the price has gone up, ETF speculation, various metrics, bitcoin halving, and more. ======================= Trust and Will has simplified the process of creating and managing your will or trust online. They leverage a data-driven, design-first approach and amazing customer support to help you protect your legacy from the comfort of your home starting at just $159. Sign up today for 10% off using ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://trustandwill.com/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ======================= Base is making it their mission to bring a billion people onchain. But what exactly is Base? It's an Ethereum L2 offering a seamless experience for both builders and users. With near-zero gas fees and rapid transaction speeds, Base is shaping the future of the onchain world. Base is a canvas for everyone, with hundreds of apps in the Base ecosystem, whether you're an emerging creator, a seasoned developer, or someone exploring the onchain space for the first time, Base is designed to bring your ideas to life. So, if you're looking for a platform where the future of onchain is being built daily, Base is your destination. Join in and make onchain the next online. Learn more at base.org and follow along on Twitter at @BuildOnBase to see cool things to do onchain, everyday. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Will Clemente is the co-founder of Reflexivity Research. In this conversation, we talk about Bitcoin and why the price keeps going up, how much is related to the ETF speculation, what is going on with various metrics that he's paying attention to, and how we should anticipate the Bitcoin halving next year

• 0:47Anthony Pompliano?

  having an impact on the price. Will is one of the best Bitcoin analysts in the world. I always learn something when I talk to him, and today's conversation is no different. Make sure you pay attention, because Will is dropping knowledge all throughout this episode. Here is my conversation with Will Clemente.

• 1:04Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:27Anthony Pompliano?

  Today's episode is brought to you by Trust and Will. I've gone through a number of different changes in my life over the last few years. I got married, I had a kid, and I had to start thinking about, how could I ensure that my wife and my child would be okay if anything ever happened to me? That's where trust, wills, and estate planning come into play. Now, most people, what they do is they get introduced to a friend, an uncle, or someone in their local community. It tends to be someone who's really expensive, a lawyer, an accountant, or somebody who does estate planning, and they just simply are using a one-size-fits-all template and just telling you, pay me thousands of dollars, and I'll use the same thing for you as the guy down the street. But that's not what Trust and Will does. They have a trusted online estate planning product that starts as low as $159.

• 2:10Anthony Pompliano?

  Which allows you to now protect your legacy from the comfort of your own home. Get to leverage their excellent customer support available via phone, email, or chat. They have thousands of five star reviews and a rating of excellent on TrustPilot. It takes most people 20 to 30 minutes to complete their estate plan with Trust and Will. And not only that, but if you go to trustandwill.com/pomp, you'll get 10% off. Plus you'll get free shipping of all your estate planning documents. So go to trustandwill.com/pomp and make sure you get an estate plan in place. Whether it's for you or one of your loved ones, having a trust and/or a will can literally be the difference between someone being taken care of and someone not. Go check them out today at trustandwill.com/pomp.

• 2:56Anthony Pompliano?

  Today's episode is brought to you by Base. Base is making it their mission to bring a billion people on chain. What exactly is Base? It's a layer two offering a seamless experience for both builders and users. With near zero gas fees and rapid transaction speeds, Base is shaping the future of the on-chain world. Base is a canvas for everyone with hundreds of apps in the ecosystem. Whether you're an emerging creator, a seasoned developer, or someone exploring the on-chain space for the first time, Base is designed to bring your ideas to life. So if you're looking for a platform where the future of on-chain is being built daily, Base is your destination. Join in and make on-chain the next online. Learn more at base.org or follow along on Twitter at BuildOnBase.

• 3:38Anthony Pompliano?

  Again, that's at BuildOnBase to see cool things to do on-chain every single day. All right, guys, I've got Will here with me. Will, I thought a great place to start is Bitcoin dominance. It seems to just be exploding higher. Why is Bitcoin doing so well compared to everything else?

• 3:55Speaker 02

  Yeah, it's been very interesting to see this over kind of the last couple of months. Just for context on what Bitcoin dominance is, this basically looks at the market capitalization of Bitcoin relative to the rest of the crypto market. So as you'll see in the chart here up on the screen, basically over the last year and especially over the last couple of months, we've seen a really aggressive move up in Bitcoin dominance. And so, you know, what does this implicate? Basically means that Bitcoin showed a ton of kind of relative strength. To the rest of the crypto assets. And so, you know, why exactly is the case? Uh, you know, we've seen somewhat of a kind of general risk off environment outside of kind of, you know, the top, call it five or 10 kind of large, large cap tech stocks in the equities market. Haven't seen a ton of kind of breadth across the board.

• 4:34Speaker 02

  Uh, just in general, you know, some of the geopolitical uncertainty that we've recently seen in things like this. Uh, you know, perhaps this is the most kind of bullish, uh, you know, environment for, for, you know, high risk assets. Uh, while at the same time, we've seen this kind of idiosyncratic bit around Bitcoin, uh, primarily, uh, kind of due to some of the ETF expectations and kind of front running of that. Um, paired with some people kind of, you know, expecting a, a kind of pivot point perhaps in kind of the macro world of, of rates kind of peaking out. Obviously, you know, it's yet to be seen as, uh, whether we'll see higher for longer. Uh, but it seems like we've kind of, you know, surpassed the kind of peak, uh, you know, velocity of, of rate hikes.

• 5:10Speaker 02

  And perhaps that's also led to some of this kind of relative, uh, strength for Bitcoin. But, you know, I think just in general, uh, you know, how these kind of crypto native market cycles go is very similar to, uh, in equities where you see kind of high, you know, high value, deep value. Uh, assets kind of, you know, leading the, the charge off the lows. And then over time, you, you start to see that kind of liquidity dispersed into, you know, higher risk, you know, far tail assets. Same thing in crypto. So typically, uh, the way these kind of market cycles move is Bitcoin kind of leads us off of the lows, you know, of these bear markets. Uh, we then kind of see liquidity dispersed into some of these like, you know, fat tail, uh, you know, riskier assets. And it's exactly what we saw, you know, the 2021 period, uh, 2017 as well.

• 5:49Speaker 02

  And it seems like this is, uh, you know, showing a very similar pattern as well, where Bitcoin's kind of shown a ton of relative strength and kind of led the market off the lows.

• 5:57Anthony Pompliano?

  So not only has it led the market off the lows, but now Bitcoin has also reclaimed the 200 week and the 200 day moving average. Does that mean that the bear market's over and we're just up only into the bull market now? Or should we look at it some other way?

• 6:10Speaker 02

  Yeah, so for people that kind of care more about the technical analysis frameworks of kind of approaching Bitcoin, one of the best kind of moving averages to look at valuation for Bitcoin over the kind of long term is the 200-week moving average. And so typically, the 200-week moving average has been kind of a level where Bitcoin's bottomed out historically. This bear market was a bit strange because Bitcoin kind of deviated for a couple of months kind of below that level. So it had a lot of people questioning whether this time was quote-unquote different. Recently, we've finally seen that level kind of reclaimed pretty decisively, as well as the 200-day moving average. And then lastly, I think also, one thing that's noteworthy from kind of a technical standpoint, is Bitcoin essentially traded in this, you know, 30 to 60K range throughout the entirety of 2021 into 2022.

• 6:54Speaker 02

  30K was also the level where we saw three arrows go down. So I think, you know, Bitcoin kind of reclaiming that is pretty significant, not only from a technical analysis standpoint, but also just from the sense of, you know, now Bitcoin is kind of reclaiming price action that, you know, was, was, kind of came about because of the blow up of three arrows as well as Luna. And then lastly, of course, some of the SBF stuff. I know Luna went down slightly higher than where we are today, but generally around the same area. But three arrows did go, go down right around that, that 30K level. So I think it's, it's pretty significant just from a, you know, kind of ideological standpoint, as well as just kind of a technical analysis standpoint.

• 7:32Anthony Pompliano?

  If you were to survey the market, I think most people would say, hey, Bitcoin's price is going up because people are speculating on the ETF. How do you think about the ETF and its implications or kind of impact on Bitcoin's price? And is it just if the ETF gets approved, Bitcoin goes up? Is it that simple? Or is there some other aspects to evaluate when it comes to the ETF?

• 7:52Speaker 02

  Yeah, it's a great question. You know, I think it really just largely depends on the timeframe that you're looking at. I think in the short term, there's a high likelihood that the ETF approval itself is probably short-term kind of sell-the-news event. That's just typically how these things seem to go in crypto. You have a large kind of front-running of these things and the market sells off. You know, given the kind of the aggression of the move that we've seen recently, you know, if this continues heading into the event, I think there's a higher likelihood, the more aggressive of the rally into the event is that there is probably going to be short-term sell-the-news. But I think medium to long term, you know, it's incredibly positive. You know, there's a tremendous amount of capital allocators that just frankly can't get access to BTC because of regulatory compliance reasons, or maybe they just don't feel comfortable you know, kind of holding their own keys or trusting a traditional, you know, crypto native kind of custodial service.

• 8:38Speaker 02

  And so I think this kind of unlocks the, you know, all of that capital that's potentially interested in allocating to Bitcoin, but can't or isn't willing to kind of given kind of the current infrastructure that we have in the market. So Galaxy Digital actually recently released a report which showed that they're expecting about $35 billion, I believe, of inflows within the first year and then something like $75 billion in the two to three years after. I think one thing that's noteworthy in terms of, you know, there's been a lot of market commentators that maybe have said, you know, the ETF isn't going to create demand. I think one thing that's worth kind of keeping in mind is, sure, the ETF itself is just a structured product. You know, that enables, you know, perhaps people as I just described to allocate to BTC that maybe couldn't before.

• 9:20Speaker 02

  I think the kind of bigger, the bigger piece is that, you know, you'll have potentially BlackRock, Valley, some of these very large financial organizations that have some of, you know, kind of the largest, you know, sales forces, you know, advisors, and you know, just like, you know, people that are kind of discussing with very high level, you know, important people throughout the financial space. They're going to be essentially this kind of mass sales force for Bitcoin. We saw, you know, Larry Fink has now kind of television twice in the last couple of months. First time called Bitcoin Digital Gold, this last time called the recent crypto rally, quote unquote, flight to quality. And so, you know, I think that's just kind of a prelude to what you're going to see throughout the entire organization of people trying to push

• 10:02Speaker 02

  individuals to perhaps, you know, take half a percent or 1% of their portfolio and allocate it to Bitcoin through this new vehicle that they may potentially see approved. But, you know, when you, when you're doing at the scale of how large some of these, you know, leading financial organizations in the entire world are, you know, that could have some pretty large implications for Bitcoin's price.

• 10:20Anthony Pompliano?

  Now, we've got the chart here of Bitcoin's price performance since the last cycle's all time high. And it looks like Bitcoin's performance since the 2021 high is generally tracking in the same way that we've seen other cycles track. Is it just the repeat of the cycle and having a come and price goes up? How do you think about this?

• 10:41Speaker 02

  Yeah, it's very interesting. This is a debate that's kind of taking place throughout the crypto community for a long time. You know, are these kind of market cycles driven by the halving? Is it other things that are just kind of coincidental? I think the reality is they're kind of unbooring, nonsexy answers. It's probably a combination of each. I do think the halving, you know, was extremely important early on in terms of just kind of the impact on overall supply and demand. You know, I don't think it has a zero effect, but I think it's a, you know, much more minimal effect relative to the prior couple halvings. So I think one way to kind of illustrate this is if you look at like the 90-day change in issuance relative to Bitcoin circulating supply, you can basically kind of see these impulses of, you know, how impactful the halving is. We could see that over the last few halvings.

• 11:25Speaker 02

  We've seen that continue to diminish as it has a smaller effect relative to overall circulating supply. I think one way that that's

• 11:33Speaker 02

  an interesting framework to think about this is, you know, if you're kind of sitting in a bathtub and, you know, you you push your hand down or drop a rock or something in the bathtub. It has a pretty large ripple effect and it's going to displace water across the entire bathtub. You're in a lake and do that, maybe it'll ripple out 10 feet. You go in the ocean and do that, it's not even going to have an impact at all. And so I think over time, you know, the halvings are going to have a continued diminished effect on the overall market. But on the flip side of that, I do think what's really interesting and is, you know, strong narrative for kind of the market to get behind is Bitcoin stock to flow ratio will be higher than gold after this upcoming halving. And so, you know, although we know that Bitcoin is superior to gold in many ways, portability, you know, the transportability,

• 12:16Speaker 02

  divisibility, verifiability, you know, provable scarcity, all these types of things. It will be on a stock to flow ratio basis, more scarce than gold, which is, you know, a very, very, you know, quantifiable metric that you can kind of use as a talking point. And so I think that in itself is kind of a good meme or narrative for the for the market to get behind. And outside of that, I mean, what else kind of drives these cycles? I mean, the other clear answer is macro, right? So if you look at, you know, Bitcoin's kind of correlation to the year-over-year change in the DXY. If you look at Lynn Allens' work at basically comparing Bitcoin to PMI. And basically kind of tracking its its performance relative to the economy. Uh, we can see that it tracks those things fairly closely as well. Uh, and then also you just kind of have the, uh, I think just kind of natural behavioral dynamics of

• 13:01Speaker 02

  of uh, of crypto that that are also uh, kind of playing a factor there as well. So I think the reality is it's your kind of nuanced and a combination of these things. Uh, but as you mentioned, as you'll see in the chart, uh, you know, this kind of current uh, performance from, from what appears to be the cycle low so far. Uh, is kind of reflecting very similar, uh, you know, kind of signatures to what we've seen in in previous crypto cycles, uh, solely from kind of a time standpoint.

• 13:24Anthony Pompliano?

  Now, one of the most interesting data points to me is the supply that has not moved in at least 10 years is now higher than the total number of Bitcoin that is on exchanges. Is the Bitcoin that has not moved in 10 years, is that just lost Bitcoin? Or is there a way for us to understand, no, actually, these are just long-term holders who are now, you know, holding on to more Bitcoin than the amount of people who actually have Bitcoin sitting on an exchange?

• 13:50Speaker 02

  Yeah, it's a really interesting, uh, point. I actually got this, uh, chart. I'll give a shout out to this guy Jimmy on, uh, on, uh, Twitter for his last name, but shout out to Jimmy. I think this is really interesting for, for a couple of points, so which you just described. Um, A, it just shows, there's obviously, as you mentioned, a, a large amount of coins that have been lost. Uh, you know, these are, these are, in, in the chart, we're looking at coins that haven't moved in at least 10 years. Uh, so, you know, before 2013, uh, so there's probably a fair portion of that that's frankly lost. And the other piece is, of course, you know, just seeing a, a massive amount of belief uh, from individuals by looking across not just the amount of supply that hasn't moved in at least 10 years. Uh, but when we look at the amount of supply that hasn't moved in at least a year, uh, we look at long-term holder supply. Uh, long-term holder supply just reached an all-time high as a percentage of overall circulating supply.

• 14:34Speaker 02

  When we look at it just outright, it's just the number of, of coins held by long-term holders that always just goes up only. But when you look at it more importantly, as a percentage of overall circulating supply, uh, that just crossed an all-time high of over 76%. Uh, so in other words, you know, over three out of every four BTC are held by long-term holders at the moment, which is, is pretty incredible. Uh, you know, of course, higher prices will incentivize, you know, new sellers, but for the time being, uh, Bitcoin's being pretty tightly held and, uh, yeah, I think the, the metric that We have up on the screen with with kind of the amount of supply that hasn't moved in at least 10 years relative to the amount of supply on exchanges is is just another reflection of that. So I think I don't have it in front of me, but I think it's over 600,000 more BTC haven't moved in at least 10 years than around exchanges. So basically, you know,

• 15:16Speaker 02

  uh, over 600,000 more BTC are locked up, presumably a fair portion are lost and, you know, out of circulation forever relative to the amount of of supply that's currently on exchanges that's available to be bought today.

• 15:28Anthony Pompliano?

  Now, the last thing I want to talk about is this MVRVZ score. You and I have been talking about this for years. Uh, there's basically this red zone, which seems to be where, uh, you know, the the tops of bull markets hit. And then there are these green zones, which seem to be the bottoms of, uh, the bear market. Uh, during this bear market, it seems like, you know, this exact same, uh, trend played out and and we got into that green zone. We went sideways for a little bit. We're now out of it. Describe a little bit about MVRVZ score and and kind of how you use this to evaluate Bitcoin.

• 16:02Speaker 02

  Yeah. So I think, uh, just to kind of state, uh, take a step back, you know, one of the really interesting things that, uh, you know, kind of the transparency of of Bitcoin's blockchain enables is we're able to kind of analyze, uh, the market in ways that are potentially, you know, possible with with kind of traditional equities or or other assets. And the reason, of course, for that, again, is it's completely transparent. So we can see all the transactions. Uh, and there's been a ton of different, you know, kind of interesting variations of what you can do with that ability. Uh, but one of the most most interesting variations, which has now been around for about five years now, and still, in my opinion, is is arguably the the kind of best valuation, uh, metric from a crypto native standpoint for for BTC, is this MVRV ratio. So we'll kind of break it down exactly, uh, you know, what is what is that acronym stand for and and what does it mean?

• 16:44Speaker 02

  Um, it's based on this, uh, uh, metric called, uh, realized price. So realized price is essentially the aggregated cost basis of the network. Uh, the way this is done is by looking at the last price that every every single coin last moved. Uh, and then you're able to divide that by circulating supply and essentially get this this aggregated cost basis. Uh, and so when you compare that to what the current marginal trading prices, of course, you know, again, price is is set on the margin, right? So it's, you know, whatever, you know, Buyers and sellers are transacting at today, not necessarily a reflection of what every person on the planet, you know, feels like the value for BTC is at. Uh, when we compare that marginal, uh, current trading price to that realized price, uh, we got this M V R V ratio. So it's market value relative to realized value.

• 17:27Speaker 02

  Uh, and so, uh, the kind of conclusions you're able to come, come to, uh, with, by using this, uh, are basically in the bull market. Whenever, uh, you know, you, you see this ratio get very high, approaching that red zone that you described. Uh, fundamentally, what's that saying? It's saying that, uh, the kind of current marginal trading price is trading at a high multiple to that aggregated cost basis. And so by definition, market participants are largely sitting in a large amount of unrealized profit and so have a high incentive to want to sell. Uh, and then conversely, heading back into the bear market, uh, whenever we get into the kind of the, the green zone that you described, and this is something that we used in the back half of the year. Uh, kind of called out basically, you know, unless these, these metrics are broken, uh, this is, this is likely, you know, somewhat of a, a bottom here.

• 18:08Speaker 02

  Um, it was essentially what this is showing is that, uh, the current market trading price is below that aggregated cost basis. So the inverse is by definition. Uh, the market is underwater in aggregate or, or kind of they're, they're in a state of, of unrealized, uh, losses. Um, so you know, you can kind of use that to say. Generally, you, you kind of want to purchase assets whenever, you know, the market's underwater, experience it's a ton of pain and there's forced selling, et cetera. And so this is just kind of one way to kind of, to kind of look at that. Uh, and so I think, you know, how do you kind of apply this today? I think, you know, it's perhaps not super actionable at the moment, but I think like the one conclusion that you can take. I think, you know, this is best used kind of on the extremities of, of the valuation, uh, kind of, you know, spectrum on, on the, on the chart, but, uh, what you could kind of come to a conclusion of today is that Bitcoin is still largely.

• 18:53Speaker 02

  Uh, you know, kind of quote unquote, underheated or, you know, paper, maybe perhaps isn't kind of the state of like very, very, uh, you know, deep value. Uh, but still is very far from kind of overheated, uh, which is achieved whenever we see those, you know, very high multiples relative to the aggregated cost basis.

• 19:09Anthony Pompliano?

  Now, obviously, as Bitcoin has risen, there's been quite a bit of excitement and people kind of realize, hey, maybe this isn't going away. How do you see the next 12 months or 18 months playing out in terms of having coming up? Obviously, there's national debt. There's a bunch of these issues that are all coming together. Just like, given the information we have today, looking out over the next, you know, 18 months or so, what is your expectation or what are you looking for?

• 19:36Speaker 02

  Yeah, I think one of the most interesting things is I track closely on Velo data, which is one of my favorite data providers, especially the kind of trad fire CME based data around Bitcoin. Primarily, these are more traditional financial institutions that trade on the CME, which is why I think it's interesting to look at relative to, you know, a Binance or a Who will be or an FTX or whoever. And when we look at kind of CME futures activity, what we've seen over the last couple of days is this massive influx and activity of both on open interest for CME futures, which reflects the amount of contracts that are open, as well as volume reaching by far the highest that it ever did on a single day throughout the entire year at over 6 billion. The second kind of highest day throughout the entirety of 2023 was just over 4 billion. So you're clearly seeing

• 20:21Speaker 02

  kind of interest from more of these kind of traditional financial institutions. I think this has also kind of been reflected in looking at basically the the percentage of overall open interest. So if we look at like the open interest across all the different, you know, futures exchanges, all the crypto natives as well as CME, you see that CME futures open interest is now reached an all time high out of the overall open interest across all the venues for BTC. I think it's at 26%, 25 or 26%. So obviously a fourth. So I think this is interesting. Again, same thing I just described, just looking at volume out right, the percentage of of open interest drive from the CME reaching an all time high, basically, you know, kind of signals to me

• 21:05Speaker 02

  that you're seeing on a relative basis, more of these kind of traditional financial institution kind of players kind of dipping their toes in the water. And so I think, you know, over the next 12 to 60 months, to answer your question, you pair that with with kind of, you know, the ETF to onboard people. You know, I think this kind of alludes to this idea that the the kind of makeup of market participants in crypto is probably, or at least in Bitcoin, is probably going to look pretty different over the next, you know, one to two years and beyond.

• 21:33Anthony Pompliano?

  That makes a lot of sense. Tell us about reflexivity and kind of what you guys are doing there before I let you go.

• 21:39Speaker 02

  Yeah, absolutely. Feel free to check us out at reflexivityresearch.com. We do a ton of different deep dive work in crypto. You know, 20, 30, 40 page kind of deep fundamental research on various different crypto protocols, macro events, as well as of course dynamics going on Bitcoin. We just did a Bitcoin Q3 overview last week, some of the information that we pulled for today comes from that as well. So be sure to check that out. And I think there's 2025 kind of free reports that we now have on the homepage of the website that you kind of sent there and check us out.

• 22:09Anthony Pompliano?

  Awesome. I appreciate the time to do this. I always learn something every single time we talk, my friend. We'll definitely do it again in the future.

• 22:16Speaker 02

  Thanks.