#1321 Bitcoin Update: All-Time High and Where We Are Headed

Anthony Pompliano records a solo episode explaining what is going on in the bitcoin market, historical context, analysis of where we currently are, macro environment, and where we are headed. ======================= Introducing Espresso - the world’s most interactive portable display. They have a portable screen that is incredibly light, comes with a nice stand, and the user interface is very easy. Anyone who listens to this podcast can go to ⁠⁠⁠⁠⁠⁠⁠us.espres.so/pomp⁠⁠⁠⁠⁠⁠⁠. They have a brand new offer waiting for you. ======================= 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 265,000+ 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/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

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. Today's episode is a solo episode. You just have me and it's me trying to explain to you what's going on in the Bitcoin market, give a little bit of historical context, an analysis of where we currently are, what's going on in the macro world, and also where we are headed. It's a shorter episode, but I thought that it'd be interesting to try to do these periodically.

• 0:47Anthony Pompliano?

  So let me know what you think. Get on Twitter, tell me what you like, what you didn't like, and what I could do to improve them in the future. Here is the solo episode. I hope you enjoy it.

• 0:56Speaker 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.

• 1:20Anthony Pompliano?

  Today's episode is brought to you by Espresso, the maker of the world's thinnest portable display. Now, listen up. If you're like me, you feel like you are at a command center when you sit down at your desk. I got a gazillion tabs open and different windows for different activities. There's my web browser, my text messages. I have Slack open and I got a Notes app. I normally work on a desktop and it can be very, very productive. But everything falls apart the second I leave my desk. If I'm traveling, if I go to a coffee shop to do some work or just want to work from the kitchen table, my laptop doesn't have enough screen space. I lose my command center and my productivity falls off a cliff. It's a major problem. But this is where Espresso comes in. They have a portable screen that is so beautiful that you think Steve Jobs came back from the dead to create it. The thing is incredibly light.

• 2:05Anthony Pompliano?

  It comes with a nice stand and the user interface is so easy that I figured it out. How to do it? In less than three minutes. If you listen to this podcast, you know that's not an easy feat. So the Espresso team and I, we became friends. I got to know them because I really liked the product. And those screens, they now want to offer them to any fan of the podcast. So we struck a little deal. Here's how it works. Anyone who listens to this podcast can go to us dot E S P R E S dot S O. Or that's too confusing. Just go click the link in the description. If you go to Espresso's website, they've got a brand new offer there sitting for you. You get a little discount and you'll get a beautiful screen. Trust me, I use mine every day. You'll love the Espresso screen and I think it'll make you more productive.

• 2:49Anthony Pompliano?

  Go check them out today by clicking on the link in the description.

• 2:54Anthony 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.

• 3:37Anthony Pompliano?

  Again, that's at BuildOnBase to see cool things to do on-chain every single day. What's up, guys? Bang, bang. I thought I'd do a quick video to help you explain what exactly is going on in the Bitcoin world right now. So here we go. First, we gotta go all the way back to 2020. If you remember, heading into 2020, there was all sorts of signs about our incoming recession. There's inverted yield curve. There was CEOs leaving their jobs. All of these issues were saying a recession is incoming. Obviously, no one thought that we would have the pandemic occur, but it occurred. And we got a liquidity crisis in March of 2020. During that liquidity crisis, people froze. They didn't know what to do. They wanted to sell their assets. And so the government stepped in, the Fed cut interest rates.

• 4:20Anthony Pompliano?

  In two emergency rate cuts down to 0% and the politicians printed trillions of dollars. Together, the QE, both monetary and fiscal policy, ended up driving asset prices right back. Now, of course, if you pay attention in economics class, you know that you can't print trillions of dollars without inflation coming. Yet, there were plenty of people that said, "Don't worry about inflation. Inflation is transitory." Or my favorite one is, "It is such a deflationary environment that you won't even notice." Well, that was wrong. And of course, inflation did come. But before inflation came, in the second half of 2020, Bitcoin went on a run. It was $8,000 when we went into the second half of the year, and it ended up topping out in March of 2021 at $64,000.

• 5:03Anthony Pompliano?

  Why was it doing that? Well, people thought inflation was coming, and inflation did eventually come. In June of 2021, just a few months later, inflation crossed over 5%, and it would not come down for almost two years. Now, of course, as Bitcoin hit 64,000, we live in a global world. It's dynamic. There's lots of moving parts. China decided they were going to ban Bitcoin mining, and so all the miners in China had to unplug their machines and move them elsewhere. This led to a 50% drop in the hash rate, and Bitcoin's price cratered. It dropped about 50%. Throughout the summer, Bitcoin stayed right around 50% less, so in the 30,000 range or so. But of course, in the second half of the year, here we go again. Inflation was rocking.

• 5:45Anthony Pompliano?

  The miners got plugged back in, hash rate hit an all-time high, and Bitcoin surged once more in a coming-back party from the dead. Bitcoin ended up topping out at $69,000. Why was that the top? Well, all of a sudden, the Fed began to talk about increasing interest rates. They realized the economy was too hot. Inflation at the time was around 7%, and we eventually hit over 9%, according to the official numbers. Bitcoin sold off. Markets are forward-looking. People don't wait for inflation to show up before they go buy assets that can protect them from inflation. And also, people don't sell assets that protect them from inflation if they think inflation is going to go down. And so Bitcoin crashed, and it crashed hard. It kept going down all throughout 2022.

• 6:30Anthony Pompliano?

  Eventually, we even got the big puking from FTX, BlockFi, Celsius, and others. And so from there, we saw Bitcoin bottomed out somewhere in the 15, 16, 17,000 dollar range, 16,000, 17,000 dollars. And people thought it was dead. Plenty of people calling for 10K. Some people even calling for zero. Bitcoin is going to zero. Well, news flash, it didn't go to zero. Instead Bitcoin slowly came back into the 20,000s, then eventually into the 30,000s. We got all the way to 42,000 dollars and we saw the Bitcoin ETFs were approved. Now, why was the price going from that 17,000 back up into 40? It's because people wanted to front run the Fed. They thought that if the Fed was going to pivot and go from high interest rates back down to

• 7:13Anthony Pompliano?

  low interest rates, you should go and buy the assets before the Fed does it. Markets are forward looking. On top of that, we got an increase in global liquidity. That global liquidity was coming from China. We saw that the Fed, the ECB, and the BOJ in Japan, they were all contracting their balance sheets. They were trying to drain liquidity from the market. But China, they didn't care. They were pumping liquidity into the market. They were pumping more liquidity than the other central banks were draining. And therefore, there was a net gain in liquidity, which is a great, great tailwind for financial assets. And so Bitcoin was a big beneficiary. Then, of course, January 11th, 2024, we get the approval of the Bitcoin ETFs. 11 ETFs, all rocking.

• 7:55Anthony Pompliano?

  The response from the institutional world has been greater than I think anyone thought was going to occur. We have seen at this point, just one fund, just BlackRock alone, has over 11 billion dollars in assets in their fund. We've had over 8 billion dollars in net flows. And we are seeing that there is at least 12 to 14 times more demand every single day than there is actual Bitcoin that is being produced by the network. Why is that important? Well, if you have more demand than supply, then the price has to go up. Again, Economics 101 class. But the beauty of the Bitcoin network is that Bitcoin does not respond to increases in demand. If you saw gold or other assets have more demand, people would go invest money to create more.

• 8:40Anthony Pompliano?

  Our supply so they could satisfy the demand and the market would try to find an equilibrium. Here, there is no ability to create more Bitcoin and therefore what you get is that you see lots more demand than supply. Supply doesn't change. Price has to go up to accommodate everyone. And then we look on the horizon, we have the Bitcoin halving coming in less than 50 days. We will have that Bitcoin halving. So although there are 900 Bitcoin a day coming into the market, that will drop down to 450. Why is that number important? Well, if we're already at 12 to 14 times more demand than supply and we get the supply cut in half in terms of the daily incoming supply, that means we could be at 25 times more demand than supply if demand continues to be at the level it is and if the halving correctly executes as

• 9:24Anthony Pompliano?

  it has done in the past. So that means that there is likely to be much, much more demand in the future than supply incoming every single day. But not only is that occurring at the same exact time Bitcoin punctured the new all time high. It was only by tens of dollars, 20, $30, but still it did touch a new all time high. In the past, we have seen three of the four times that Bitcoin has broken through the all time high that the price of Bitcoin has doubled in 18 days or less. Dylan Leclerc, a great Bitcoin analyst, came up with that analysis that showed three of the last four times that Bitcoin set a new all time high price, Bitcoin's price doubled in 18 days or less. Pretty incredible. Now, does it count if it only went 20 or $30 up?

• 10:08Anthony Pompliano?

  It does. It depends. We did see one time where Bitcoin, according to Alex Thorne, the head of research at Galaxy Digital, went up. It kind of tapped the all time high just slightly above. They did it a second time. So it kind of twice tapped on that new all time high. It then consolidated for about two to three weeks and then it finally did puncture the all time high and led to a rapid appreciation of the price. And so that's kind of my expectation now is whether it happens right now or in two to three weeks. Once we're fully through, kind of breaking that $70,000, you know, kind of threshold, that's my guess of when we will start to see a rapid appreciation in Bitcoin. Now, I say rapid appreciation, how quickly does it happen? What's the timeline? That's anyone's guess. I can't tell the future.

• 10:50Anthony Pompliano?

  differently than you can. But what I do think is interesting is that Bitcoin is up 62% year to date. That is the single best performing asset so far this year in terms of asset classes. Now, as Zero Hedge pointed out, the sharp ratio is 2.1, which also is quite attractive. So Bitcoin continues to remain one of the best risk reward assets that you can allocate capital to. Now, again, that doesn't mean that past performance is going to necessarily indicate what's going to happen in the future. But it does mean that from a risk reward standpoint, so far Bitcoin this year at 2.1 sharp ratio is pretty attractive. 62% appreciation, also quite attractive. Now, it's hard to argue we're not in a bull market. We're seeing meme coins go to the moon. We've seen whiff, that's exploding.

• 11:32Anthony Pompliano?

  We saw a recent one where somebody took Joe Biden's name and they misspelled it. And that meme coins up like 2,500x in the matter of 24 or 48 hours. There is lots of frothiness underlying this, but Bitcoin continues to do exactly what it was designed. It produces block after block after block of transactions. And we are seeing institutions that are raising their hand and saying, I want that asset. Some of them may want it because they actually need exposure to the financial performance. Some may want it because they think it's a hedge against inflation or currency debasement. Others may be buying it because they think that it's an index for global liquidity. And yet others like sovereign wealth funds actually may want to buy the ETFs to get financial exposure to Bitcoin,

• 12:11Anthony Pompliano?

  but not actually buy Bitcoin itself and take custody of it because that could create complexities in the geopolitical conversation. So regardless of how you look at this, as I've previously said, it is very hard to construct a narrative right now that it is not bullish for Bitcoin moving forward. That doesn't mean that one, things can't change. Two, we can't get more information. Or three, there can't be some sort of external impact. Obviously, if the Fed all of a sudden started re hiking interest rates and continuing to increase the cost of capital, that could have a negative impact. Another thing to be aware of here is that the people who are buying Bitcoin today are not necessarily the same actors or behave the same way as people who used to buy it. For example, if you look at some of these financial advisors, what they are going to do is they are going to allocate to Bitcoin.

• 12:55Anthony Pompliano?

  And let's say that they put 1%. If all of a sudden Bitcoin's price doubles or triples, now that allocation Is two or three percent inside of their client's portfolio. They're not going to let it run. They instead are going to rebalance. And so there's some percentage of them that are actually going to become net sellers of Bitcoin. And the success of Bitcoin's price will lead to more selling. Now, of course, that doesn't mean it's everyone, and it's nearly impossible to predict what percentage of people fall in that category. But I do think that important in moments of dynamic change in a market is that you keep your head on a swivel. You've got to be paying attention. The ground is shifting in terms of who the holders are. The price action is obviously bullish, but we've also never seen Bitcoin establish a new all time high before the halving.

• 13:40Anthony Pompliano?

  So when it comes back and it recovers from some sort of price draw like it saw previously, that tends to indicate that there is a big change. And so understanding what is occurring there and what the potential implications are important. Last but not least, we can talk about regulation. It's pretty hard for people to attack Bitcoin now that the SEC has approved these Bitcoin ETFs. Doesn't mean they won't try, but it will be much, much harder. And so I think that overall, when I look at the market today, you can go all the way back to 2020 and look till now. We can see that Bitcoin is basically matured. It's growing up. It's being entered more into the traditional financial system. There's a trade off. Bitcoin was something that was outside of the system. That was part of the allure of it. And so some of that is being compromised or changed now. But at the same exact time, we also are getting some of the benefits.

• 14:24Anthony Pompliano?

  And so now there is this trade off of the more it gets integrated into the legacy system, the higher the price goes. But the more that we lose some of those other aspects. And so being able to separate out those two things is important and continue to evaluate. Why are you allocated to an asset? Should you continue to be allocated to this asset? And what do you think is going to change in the future that would make you change your mind? All important questions. Now, when I look at the actual regulation, I think what will end up occurring is that Bitcoin will continue to not be a security. I think that more and more of the legacy Wall Street players will buy Bitcoin. They will put on their balance sheets. They will put it in other funds. We've seen BlackRock, they went ahead. They have a $36 billion conservative bond fund that is called the Strategic Income Opportunities Fund. They actually are getting approval now so that they can put some

• 15:10Anthony Pompliano?

  Of that fund into the Bitcoin ETFs and you're going to see a lot of Wall Street organizations do this where they're trying to juice their financial returns by taking Bitcoin and sprinkling a little bit of it throughout their portfolio. So anytime that you see that stuff happening, again, it's going to be very hard for regulators or others to step in and say, hey, BlackRock, hey, Fidelity, hey, Vanguard, hey, whoever, you can't do what you want to do because again, they've done the work. They've now come to the conclusion that this asset is valuable and they want to put it in their portfolios and they've gotten the green light once. It's hard to repeal that back. So regulation, price action, macro, all of it looking very strong. But again, in this entire industry, anything can happen. We saw Bitcoin went up, hit the all time high, immediately it dumped 10,

• 15:52Anthony Pompliano?

  12%. It's like welcoming all the people who are getting excited about Bitcoin. Just remember, I'm a volatile asset, about an 80 vol asset, and I can go up a lot, I can go down a lot. Do not, do not sit on your laurels. Instead, what you should be doing is just dollar cost averaging into great assets, like Warren Buffett has said, and simply hold the great assets for as long as you can. So that's what I'm thinking about right now. That's what the market looks like. Hope this was valuable to you. Please let me know what you think. Get on Twitter. Let me know. What are the areas that you're really excited about? What are the things that you're worried about? What are the open questions that you have that you haven't seen other people answer? I'll do my best to answer as many of them as I possibly can. I hope all of you have a great day. Whether you're listening to this on the podcast, please make sure that you subscribe to the podcast, or if you're watching it on YouTube, you can go ahead and make sure you subscribe

• 16:36Anthony Pompliano?

  there as well. But I appreciate all of you and I will do this again, a little bit more regularly, hopefully, hopefully, once a week or so. So we will talk then.