#717 Bitcoin Market Structure w/ Dylan LeClair

Dylan LeClair is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system. In this conversation, we discuss bitcoin, on-chain metrics, market structure, and what to expect from the rest of the bitcoin bull market. ======================= If you haven’t started building your crypto portfolio on Okcoin, there’s no better time. They’re one of the fastest growing global exchanges around and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in BTC with a friend when you invite them to sign up for Okcoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more BTC you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on Okcoin until November 1. That’s no fees at all on your purchases until the holidays. Get started on the web or on their new super easy-to-use app at okcoin.com/pomp ======================= My friends at Coin Cloud will give you $50 in FREE Bitcoin when you buy $200 or more at any of their 4,000+ machines. Use promo code POMP to get your free Bitcoin. For details or to find your nearest Coin Cloud machine, visit www. Coin. Cloud/Pomp Coin Cloud has been serving customers since 2014 and has established itself as the world's leading digital currency machine (DCM) operator. More than just a Bitcoin ATM, Coin Cloud machines make it easy to buy and sell Bitcoin and 30+ other digital assets with cash. To find your local ATM and get $50 in free Bitcoin, visit www. Coin. Cloud/Pomp =======================

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. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Dylan Leclerc is the Senior Market Analyst at UTXO Management, a digital asset fund investing in the analog to digital transformation of money and the emergent financial system. In this conversation, we discuss Bitcoin, on-chain metrics, market structure, and what to expect from the rest of the Bitcoin bull market. I really enjoyed this conversation with Dylan, as always, and I hope you do as well. Before we get into this episode, I want to quickly talk about our sponsors. First up are my friends over at OKCoin. If you haven't started building your crypto portfolio on OKCoin, there's no better time. They're one of the fastest-growing global exchanges around, and they have some promotions

• 0:47Anthony Pompliano?

  happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in Bitcoin with a friend when you invite them to sign up for OKCoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more Bitcoin you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on OKCoin until November 1. There's no fees at all on your purchases until the holidays. They have extended it past November 1st, so go check out, no fees on your recurring buys, daily, weekly, or monthly. Get started on

• 1:32Anthony Pompliano?

  the web or on their new, so, super easy-to-use app at OKCoin.com/pomp. If you're doing recurring buys, do it on OKCoin, OKCoin.com/pomp, and they'll hook you up. OKCoin.com/pomp. Go check it out and let me know what you think about that brand-new app as well. Next up are my friends over at CoinCloud. Did you know you can buy and sell crypto with cash? I want to introduce you to CoinCloud. More than just a Bitcoin ATM company, CoinCloud is the world's leading digital currency machine operator. They've been around since 2014 and have thousands of machines across the country. You can buy and sell Bitcoin, Doge, Cardano, and over 13 30 other digital assets, no connecting bank accounts, no long waits.

• 2:13Anthony Pompliano?

  If you have questions, you can speak to a live US-based customer support rep 24/7. I've had a lot of Bitcoin ATM companies reach out, but CoinCloud is the only team I've found that does things right. They put together a special offer for listeners of this show. You can get $50 in free Bitcoin when you buy $200 or more at any CoinCloud machine and use the promo code POMP. 50 bucks for free of Bitcoin, buy $200 or more at a CoinCloud machine, use promo code POMP. I don't make the rules, I just tell you about them. Go to coin.clored slash POMP today to find a machine near you. Coin.clored slash POMP. When you get to the machine, buy $200 or more of Bitcoin. They'll give you $50 in Bitcoin for free, use promo code POMP.

• 2:57Anthony Pompliano?

  All right, let's get this episode with Dylan. I hope you guys enjoy this one.

• 3:00Speaker 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.

• 3:23Anthony Pompliano?

  All right, let's bring Bitcoin Magazine's Dylan Leclerc. Dylan, how are you, man?

• 3:27Speaker 02

  Yo, yo, what's up, guys?

• 3:28Anthony Pompliano?

  Dude, you just look cool today. Like Bitcoin all-time high, and Dylan comes on just looking cool. What's up?

• 3:34Speaker 02

  Yeah, I got the drip on, I guess. You know, how to celebrate that a little bit. Felt good, vindicating, huh?

• 3:39Anthony Pompliano?

  I hear you. All right, give me a high-level view, Bitcoin all-time high. What's your general thought process? Are you excited? Are you cautiously optimistic? Are you scared out of your mind? What's going on?

• 3:49Speaker 02

  I mean, I'm feeling good. Kind of been expecting it for a little bit, just with, you know, what we've seen in the market since the summer. Came on here a couple of times, talking about how we're building up to, you know, to have some sort of reflexive bull market, you know, into the fall and winter. And I think we just kind of started that reflexive, you know, uptrend the last week or so here.

• 4:09Anthony Pompliano?

  Explain what reflexive means for those that don't know.

• 4:12Speaker 02

  Yeah, so this was like kind of a term that George Soros made popular in the investing world. And essentially, it's just kind of... When a trend just feeds on itself, so you know, the Bitcoin price goes up, more eyeballs on it, the world starts talking about it, more people realize they need to allocate to it. Uh, holders, you know, aren't, aren't selling and they have to continue to bid the price up and it just feeds on itself. It's just like a positive feedback loop. Uh, and that's what we've kind of seen over the course of, uh, of Bitcoin's history is that, uh, when the price runs, it doesn't just run up a little bit. Uh, you can't look at it and, and, uh, on a linear scale, you need to whip out that logarithmic scale because it's going to go parabolic.

• 4:50Anthony Pompliano?

  We like parabolic around here. Every single one of us likes parabolic. All right, let's get into these charts that you've got. We've got nine slides today. First one, the short-term and long-term holder cost basis. What are we looking at here?

• 4:59Speaker 02

  Yeah. So, um, I've came on here a couple of times and showed this chart. Um, and essentially what you're looking at here is that, um, on chain, we can see, uh, what UTXOs or what Bitcoin have moved and at what price point that, you know, they've last moved. So we have short-term and long-term holders, uh, and the short-term holder, their cost basis is about 50K. Uh, and long-term holders is about, uh, 17K. This is a log scale. So it looks a little, you know, the, the scale looks a little off. But, uh, essentially what you see in bull markets is that, uh, you could see, you know, in the, in the late months of 2020, is that price gets bid up at the margin as new, new capital, new money comes and looks to allocate and to secure their position. And so essentially that, that cost basis for short-term holders continues to just get bid up with the price because,

• 5:41Speaker 02

  you know, there's not enough for sale and there's, and there's all this new capital that's looking to secure an allocation. Um, and so, you know, we kind of see this, this trend starting to play out again, uh, where that pink line, which is the short-term holder cost basis is starting to bend up again. Uh, and prices, you know, front-running it, uh, that that's just like a key kind of characteristic we see in bull markets.

• 5:58Anthony Pompliano?

  So when I think about this, if we go, pull up the chart, uh, for a second here and we look at, uh, what is this, like October, November of last year? It just went parabolic, right? Literally from October to November up until March, we went from about 10, uh, $15,000 all the way up to 64,000. Uh, a lot of the same market dynamics seem to be at play. One, we know that there's lots of illiquidity in the market, but two is when you look at that short-term, um, kind of price, uh, is there a thought process as to how to measure the severity of the move? Like, could this just be a 20, 30% move or is it much more likely to be, um, you know, kind of hundreds of percent upwards?

• 6:33Speaker 02

  Yeah, so I guess I would just think about it, you know, when Bitcoin breaks its former all-time high, it's just kind of a sends a message to the market, it sends a message to the world that this thing isn't dead. And whatever kind of preconceived notion you've had about Bitcoin, or it's a Ponzi scheme, or it's worthless, or or anything else, uh, you know, you see someone like Jamie Dimon come out and harp on it for years, and all his clients are beating down his door demanding it, uh, he's gonna, you know, he's gonna have to enter the market. Um, and so that's just one example, but that's, that's happening across the world, that scale, across industries, whether it's energy, banking, uh, technology, everybody's interested in it. Tim Cook just casually was like, "Yeah, I think it's good for a diversified portfolio." You know, stuff like that, where Apple has a couple hundred billion dollars of cash, right? I'm not saying Apple has bought any Bitcoin, but, uh, the whole world's essentially short this asset class.

• 7:16Speaker 02

  And so, you know, they all, everyone's looking to get off zero. Um, not everyone here is, uh, in the world is Bitcoin evangelists like ourselves. Um, and so they need to get it, you know, they need to get off zero. They have, you know, basically zero allocation. And so they're the ones that are on the bid when Bitcoin's 67, 68 grand.

• 7:33Anthony Pompliano?

  Yeah, well, they're, uh, they're gonna keep buying for sure, I think. Uh, all right, you take the short-term and long-term holder cost basis, you have this ratio. Explain what's happening here.

• 7:42Speaker 02

  Yeah, so this is just the same data, but it's just, it's just put into a ratio. And so basically what you see, what is the, the trend? The green highlights are bull markets, but what I'm really highlighting is when that ratio is going down. So when that ratio is going down, that's saying that, uh, the short-term holder cost basis is, is trending against the long-term holder cost basis. So, you know, that, that short-term holder, uh, you know, it's essentially, the realized price is the technical term for it. Uh, the average price of, of all these UTXOs moving, uh, on-chain. But, uh, during that green, you know, the green highlights there, what, what's happening is that, that short-term holder cost basis is bidding against the long-term, uh, holder cost basis. And that's happening because long-term holders essentially are cornering the market. Um, and so right, you know, you can see if you go to the next slide there, we're just entering that kind of that green phase,

• 8:27Speaker 02

  which is, which is, uh, you know, basically a telltale sign of a reflexive bull market.

• 8:32Anthony Pompliano?

  Got it. And so when we think about cornering the market, one of the things that I think people don't understand about this is this happens in all asset classes, right? So if you think of like the art market is probably the one that people talk about the most where there's an auction house, the auction house knows that, hey, Joe is an amazing artist. And so he has 25 pieces that are out in the world. I'm going to go buy 22 of them and I'm going to hold them and then go tell everyone in the world that Joe's an amazing artist. There's only three pieces of art that are trading kind of liquid in the market. And then over time, since I've cornered that market, what I'm going to do is I'm going to slowly sell into the market as the price goes ahead and increases for his art. So that's an idea of cornering the market, very illiquid market, very kind of inefficient market because in art. If we go to the stock market, I always use the example, there was a stock years ago,

• 9:17Anthony Pompliano?

  or maybe not even years ago, maybe two years ago called Tilray, it was a cannabis stock. And literally it went absolutely parabola. It was one of the first cannabis stocks to actually trade on the stock market. But the other thing about it was that they only floated a very small percentage of the stock in the market and the rest was held back by investors and the team. And so naturally, a bunch of people were bidding into the market, there was a little bit available and the price exploded. The same market dynamics right here in Bitcoin, right? We don't think of it that way because all the Bitcoins in the market, but essentially the long-term holders are holding everything illiquid. There's a little bit of float out there. Now you have a bunch of demand increasing because prices essentially operating as like a marketing function. It's telling the world, like you said, hey, Bitcoin's going, Bitcoin's going, more demand comes in and then that's that reflexivity that you're talking about.

• 10:02Anthony Pompliano?

  Is that like a fair way to categorize this?

• 10:04Speaker 02

  Yeah, 100%. I mean, basically like what you have is the 21 million hard cap. I mean, we're not there yet. It's like 18.9 million, but essentially it's this game theoretic, you know, it's this game theory where holders around the world, the hodlers of last resort are saying, you know, I'm a buyer at any price. I'm just going to acquire this thing because I know, you know, like you can't fight this economic reality. And so, so I'm just going to, I'm just going to hoard this thing at any dollar price and understand that, you know, there's a lot of people around the world doing the same thing. So, you know, with absolute scarcity and with fiat currency, you know, constantly debasing, the supply constantly increasing. We know where this is going long term. And so that's what you see over time, you know,

• 10:45Speaker 02

  through the 80% boom and bust through these parabolic cycles, essentially Bitcoin's monetizing.

• 10:50Anthony Pompliano?

  All right. So we've got the slide for Bitcoin vertical institutional accumulation. And I know that you and others that have been looking at on-chain metrics, Willie Wu, Will Clemente, David Puel, et cetera, you guys are, you guys are in your bag right now. Cause every time you guys are sending out charts, now it's overlaid with tweets like, yep, I called it. Here's the receipt. So walk me through what's going on in this chart.

• 11:11Speaker 02

  Yeah, I just, I just, you know, linked some of these tweets there to, I guess, you know, maybe hindsight is 2020. But if you're just looking at the chart, right? So this is since the middle of the summer, it's just up and to the right. And yes, there are dips. Sometimes the market gets over leveraged, but it's pretty clear what's happening. And yeah, retail is participating. But for the most part, I would say I'm pretty confident this is big money allocating capital. You just kind of see just basically a relentless bid, you know, up and up and to the right. Any, any dips that come are pretty, pretty short-lived. And they just, you know, just kind of get the, the wicks just get eaten right up. And I think that's a telltale sign of institutional capital is just in the market every second of every day. Right? You know, you have retail plebs that will, you know, buy 10 bucks a day, 50 bucks a day,

• 11:54Speaker 02

  100 bucks a day. Well, I think there's billions of dollars of capital that are, that are buying, you know, that have bots that are buying every single second of the day. And, and you know, it's, it's going to be a lot harder for the next Michael Saylor to come in and acquire 100,000 Bitcoin without, without really mooning the price here. So, you know, I think that's what's occurring and that's what's been occurring since, you know, the summer at around 30K.

• 12:15Anthony Pompliano?

  Yeah. The other thing that people forget is that a big portion of the price movement in October, November of 2020 through March of 2021 was a ton of these Wall Street organizations and financial firms were trying to arb the grayscale premium. And they were just pouring capital into the private placement of grayscale's GBTC product. They were going into the market. I think at one point they were buying like 150 to 200% of the daily miner revenue. And so if you think of that product, it essentially was acting as the most illiquid holder on the market, right? It was just buying Bitcoin, putting it into that fund. There's no redemptions. It can't come back out. It's almost like a black hole on the market. Market. And so when you get, you know, those types of functionalities, plus also the illiquidity

• 12:57Anthony Pompliano?

  from long-term holders, it provided this explosive upward movement. It seems like maybe the dynamics are a little bit different in terms of what's driving it, but the same actual structures here in terms of that illiquidity.

• 13:08Speaker 02

  Yeah, 100%. I think, you know, Grayscale doesn't get enough credit for, you know, how much they drove that bull market earlier in the year. You have that GBTC product, which trades in the secondary market, and it doesn't trade at net asset value. It's a trust. So, you know, if there's a premium, because people are just buying it in their retirement accounts or whatever, you have basically Wall Street funds that came in to try to take advantage of this and capture basically what they thought was a risk-free 30%, 20%, you know, whatever. And so they would, they would go send 100 bucks to Grayscale and they'd get 120 bucks of GBTC shares. And then a lot of these funds, I imagine, really didn't even care about Bitcoin at the time. They were just looking for that yield. And so there was a six-month lockup period there, but Grayscale purchased, I think,

• 13:48Speaker 02

  about like 250,000 Bitcoin in a year. And so they were like a huge driver of this bull market. And I think that it was a little bit of, over the summer, there was, you know, they contributed to some of the weakness. There's a lot of these same funds that maybe thought about allocating to Bitcoin, we're just going to buy GBTC shares at a 20% discount to now. And so that's, that's come in a little bit. But I think you're seeing, you know, somewhat of a similar dynamic with the futures product, with CME and what they have now in the futures ETF. There's, there's an arbitrage opportunity there to just capture some yield. And so you're going to have capital allocators that maybe don't care about Bitcoin, maybe they do, but they're just looking to capture maybe a 10, 15% spread between the futures product, the, you know, the front month futures and the Bitcoin spot price. And so I think, you know, that's somewhat similar, a little bit

• 14:32Speaker 02

  different than the GBTCR, but, you know, similar market dynamics allocating to spot.

• 14:37Anthony Pompliano?

  Before we continue, you want to hear a wild stat that you probably don't know, even though I know you spend all day, you're, you're just like in the weeds every day. You want to hear a wild stat for you?

• 14:45Speaker 02

  Yeah, give it to me.

• 14:46Anthony Pompliano?

  On July 12th, we started the best business show. The price was 32,000. Now it's at 67,000. I'm not saying there's correlation, but hey, you know, math is math, buddy.

• 14:55Speaker 02

  I think, I think, I think that's a leading indicator.

• 14:59Anthony Pompliano?

  All right. You got the Bitcoin market capitalization chart here. What, uh, what is this showing us?

• 15:03Speaker 02

  Yeah. So I guess this is just like a broader trend of what's playing out, right? We're talking about institutions allocating billions of dollars. You have, you have all of, you know, we're, we're just, you, you cover it every day. Will and I, you know, on chain, we're covering this stuff every day, but what's, you know, when you're zooming out, what's actually occurring? Um, and I think realized cap, when you're looking at it's the price that every UTXO, every Bitcoin last moved, um, this is like the most pure form of, of kind of, um, mapping out Bitcoin's monetization process. Um, so realized cap is essentially, it, it has gone down, um, you know, marginally in the past, but it's basically only up and to the right. And you see during bull markets, it starts to bend up.

• 15:39Speaker 02

  Um, and so, you know, volatility aside with realized cap, there's not really much volatility. Um, it's just basically just the average price or with, with the cap, it's the, the sum of every single UTXO and the price it's last moved. Uh, it's like just, you know, it's, it's really just showing, uh, in the most basic form, what's actually occurring, which is this new monetary asset was kind of airdropped in, in 2009 and, and the world's coming to collectively realize it's the best form of money we've ever seen.

• 16:03Anthony Pompliano?

  The part to me that, uh, I really like about, uh, this chart is no matter how you look at it, it just keeps going up. It just keeps going up. And sure, there are, uh, kind of these drawdowns in the market cap, but that realized cap, uh, unless, you know, it's hard to eye up, there's almost never a time where it goes down. And I think that that gives people a lot more kind of patience, uh, in, in terms of, uh, sure, the market cap may move, but that realized cap, as long as that trend continues, we're in good shape.

• 16:32Speaker 02

  A hundred percent.

• 16:33Anthony Pompliano?

  All right. We've got the perpetual futures funding rate. What's this?

• 16:36Speaker 02

  Yeah. So let's, let's, uh, dig into some derivatives. Um, it's kind of one of the most misunderstood parts of the Bitcoin market, uh, definitely contributes to a lot of the volatility. Um, but what we see here, so perpetual futures is essentially, it's a futures contract that never expires, but rolls over every eight hours. And so you can have, uh, people longing and shorting betting on Bitcoin to go up or down, uh, with leverage. And so, uh, to keep the kind of the order books balanced, to make sure that, um, this, this perpetual swap contract, which is on various derivatives exchanges around the world. stays tethered to the spot Bitcoin market with no leverage, just you know, dollars for Bitcoin, euros for Bitcoin, whatever it is, there's a funding rate. And so this funding rate just kind of incentivizes this perpetual price to this perpetual futures price to stay tethered

• 17:20Speaker 02

  to the spot somewhat. And so right now, we kind of see the futures funding rate for this eight hour span is averaging at 0.035%. So on an annualized basis, that's that's actually, you know, 38%. So what that just means is that, you know, there's a little bit of leverage in the market, the long bias. And so, you know, any sort of pullback, I think right now we're at somewhere in 66,000. It's nothing but a thing. And it's just, you know, this kind of volatility is what is what washes out any sort of, you know, over leveraged longs or shorts. And right now, there's obviously a long bias in the market.

• 17:51Anthony Pompliano?

  And if we look at this next chart, it's basically just, I think, a zoomed out version of this, where you've got the large spot market inflows, allowing high levels of long leverage to be sustained. Is that what, explain just a little bit more in terms of what you're seeing on this one?

• 18:04Speaker 02

  Yeah. So, you know, that first chart I just showed you was was kind of the zoomed in week, week view of the funding rate. But right, if we zoom out of the last year, leverage, you know, the funding rate in, you know, after we broke that all time high in 2020, the beginning of the chart there is right when 20, the 20,000 all time high broke, leverage was pretty high throughout that run, but it could be sustained because there was such a large inflow into the spot market. So, you know, all these, these over leveraged longs were not bailed out, but essentially that leverage was, you know, was able to be sustained and maintained because there was such a large spot inflow. Where it goes wrong, and where you can kind of see a massive liquidation occur with that, with that red candle right in the middle of the, in the middle of the chart, is that when there's not a spot market bid, when there's not money coming in and buying spot Bitcoin and taking

• 18:49Speaker 02

  it off the market, and you're, and you see all these over leveraged longs, essentially it all unwound and they all got wiped out. And so, you know, when we break this all time high moderately high funding, you know, long leverage or long bias in the derivatives market, you know, be cautious a little bit, but essentially, you know, it's, it's not too much of a worry because, you know, I suspect, and I think a lot of other people suspect there to be pretty large inflows into, into the spot markets, you know, of new capital allocated to this asset.

• 19:16Anthony Pompliano?

  I know for a fact there are, and I think you know that for a fact there are as well, but we can't say who it is yet. But uh, yeah, it'll be a fun end of the year. You got percent futures open interest, Bitcoin margin. What is this?

• 19:29Speaker 02

  Yeah, so this is just a breakdown of what kind of collateral is being used in the Bitcoin market. And so you can use stable coins as collateral or Bitcoins as collateral. And so earlier in the year, we saw 70% of this market was was using Bitcoin as collateral for Bitcoin derivatives. So, you know, when the market is has a very large, long bias, betting on Bitcoin to go up and using Bitcoin as collateral to do so, there's a really, there's a really big potential for that all to unwind. As as your P and L, as your profit and loss, your position draws down in value and the collateral draws down in value as well. So you don't see this dynamic with stable coins. If you're longer, if you're long Bitcoin with stable coins, your collateral doesn't draw down in tandem if the market goes down, especially with say CME,

• 20:11Speaker 02

  you can use Bitcoin as collateral. CME is now the leading futures open interest exchange for Bitcoin around the world. And so these kind of market dynamics, it's a lot more healthy than last time. A lot less potential for, you know, these massive liquidations and cascades. And so, you know, just from a, from a broad perspective, it's a lot more healthy.

• 20:29Anthony Pompliano?

  All right, we've got hash price, the minor revenue per tera hash. What's going on here?

• 20:33Speaker 02

  Yeah, just, you know, switching it up a little bit, talking about Bitcoin mining hash prices. Basically, it's minor revenue in dollars divided by the hash rate. And so what we see here is over the last year, you know, the mining industry is killing it, especially with with all that hash rate coming off from China. What you see is that miners are are Forex more profitable than they were a year back. And so, you know, this is just kind of another catalyst. Miners don't need to sell. They also have access to, you know, public capital markets where they can go and and access cheap debt or maybe collateralize some of their Bitcoins. So, things like this are just, you know, another kind of catalyst for an explosive bull run. Miners don't have to sell. They're deep in the money. Profit margins are high, you know, bullish all around.

• 21:11Anthony Pompliano?

  All right. What questions you two geniuses got?

• 21:13Speaker 03

  Thank you for that compliment. What's going on Dylan?

• 21:16Speaker 02

  How's it going?

• 21:17Speaker 03

  I saw you dunking on some people. Well, not dunking on people. You were just celebrating your victory when it came to some, uh, some options you placed on Bitcoin's price previously, uh, this summer. Does that change? Has your, has your price prediction for the end of the year or how you're thinking about price going into year end changed at all?

• 21:32Speaker 02

  Yeah. So, um, I mean, I guess I would just say like with those options, I had a lot of people like reach out over DMs and stuff. Uh, for the most part, like I'm, you know, 99% allocated just bought Bitcoin, but during the summer took a little bit of, of leverage bets in the form of, um, kind of these option plays. Uh, I think at one point like there was an implied probability of like 1% uh, for a hundred K at the end of the year. Um, so I, so I bought some hundred K calls and some other strike prices, but essentially it was just kind of a way for me to access some sort of leverage. So, I mean, I guess my thinking hasn't really changed. I think, uh, under K is most definitely in play and, and, you know, potentially a lot higher. Uh, we'll see what happens with, with, uh, you know, leverage and, and, you know, maybe some dynamics in the legacy markets, but

• 22:14Speaker 02

  I think hundred K is, is, uh, you know, definitely in play and, you know, maybe a lot higher, if not December, then, you know, shortly thereafter.

• 22:21Speaker 03

  Dylan's giving out free alpha on his Twitter.

• 22:25Anthony Pompliano?

  Well, but I think this is an important thing, right? Is, uh, Dylan, how did you think about when to actually put that, uh, kind of bet on? Was there a specific thing that you remember kind of in hindsight that triggered you wanting to do that?

• 22:36Speaker 02

  Yeah. So, I mean, I guess I buy Bitcoin every day. So I was, I was stacking the 64K top, uh, buying all the way down and essentially at, you know, 29, 30,000. I was sitting on some, you know, some UTXOs that were, that were, you know, at a pretty solid loss. So, uh, with, with the tax regulations, it's going to, you know, completely legal to just wash sell. So I, I sold, rebought, harvested a capital loss, and then with, with that, uh, capital entered some, some options contracts as just kind of a synthetic form of like leverage. Uh, there's no perpetual swap market or, or other sort of leverage in the, in the U.S. Um, and some of the, you know, the collateral stuff with Bitcoin is still being built out.

• 23:14Speaker 02

  Uh, and state by state regulations aren't too favorable, uh, especially where I live. So, you know, those options were kind of a way for me to, to bet on, on Bitcoin's upside volatility. And so I, you know, I just took a pretty small percentage allocation, I think two or 3% at the time. Um, and, you know, that's risen a lot, but, uh, you know, just kind of a way to, to get a little bit of leverage on, on Bitcoin when I was looking at, at, uh, you know, the derivative markets think super bearish and, and on-chain accumulation is really, really strong. So it just seemed like a, you know, an asymmetric bet.

• 23:42Anthony Pompliano?

  Got it. John, what do you got? What's up Dylan? I absolutely love the charts with tweets on them. I'm saying you're right. That's awesome. Keep doing that. Good for you.

• 23:51Speaker 02

  Thank you.

• 23:52Anthony Pompliano?

  Can you talk about like, what wallets are you seeing acquire Bitcoin? I'm asking because I'm more thinking about the adoption of Bitcoin over time. Like, are we just seeing whales just continue to accumulate Bitcoin? Or are we seeing kind of new wallets be either created and acquire at least some Bitcoin? Can you talk about what you're seeing there?

• 24:08Speaker 02

  Yeah, so I mean, essentially you're seeing, I think during, during times of weakness or, or just, you know, it's really bullish when bail, I'm sorry, it's really bullish when whales are coming in and buying large amounts of Bitcoin. That's kind of, you know, they're kind of perceived as smart money. And so we're seeing, I think, most of this run up over the last three months has been, have been big money coming in and allocating and, you know, wallet metrics on chain aren't always the best because, you know, sometimes using custodians or keeping it on exchanges or, you know, any sort of kind of heuristic there. It's a, it's a little complicated, but I mean, for the most part, you know, the Bitcoin distributes over time. So long-term time horizons, you know, the average user is getting less and less sacked.

• 24:50Speaker 02

  You see, you see, you know, wallets would say 0.1 Bitcoin and below continue to increase their, you know, their overall market share. So, so that's that kind of trend over the long term. But right now we're seeing some pretty big, some pretty big whales and, and, you know, large, large allocators scooping up some coins.

• 25:05Anthony Pompliano?

  People buying fixed supply. You know what that means?

• 25:10Anthony Pompliano?

  Dylan, one, one big question I think a lot of people have is what are you going to be looking for as we get deeper into the bull market and prices goes up even higher? Are there one or two metrics that you're like, this is the one that is really going to be the, the thing that I focus on and will give me a sense that we're kind of topping out to some degree?

• 25:26Speaker 02

  Yeah. So last week I just announced, I was joining UTXO management as their kind of senior research analyst to kind of help navigate their Bitcoin denominated fund. So to kind of help to navigate the market and essentially with, with UTXO, the goal is to not, is to not, it's basically to outperform Bitcoin, but you know, I think in the most bearish scenarios, it's really just kind of your spot market Bitcoin, you know, like you don't want to, you don't want to. Sure, and then watch Bitcoin rise another 200%. And so in terms of what we're looking at, it's really derivatives is one of those things. It's, you know, derivative weakness in tandem with a lot of these long-term holders and these accumulation metrics that were so strong this summer and this fall, I'm kind of reversing,

• 26:11Speaker 02

  right? So that, you know, hodler engineered supply squeeze we're talking about, well, after the market goes up by, you know, 2, 3x, maybe 4x, 5x, whatever it is, even though I'm very bearish on the dollar and I'm extremely bullish on Bitcoin over the next decade, this, you know, we kind of see ebbs and flows in this market. And so I would expect a lot of these, you know, coins that were scooped up at 10K, 20K, 30K, may take a little bit off the table if we're at 200 or 300K or whatever the number is. And so just from an on-chain perspective, you can see those coins changing hands. And so that in tandem with, you know, a very like maybe long bias in the derivatives market, or just, just looking at the chart, right? You can see if there's a, you know, a big rejection or some sort of blow off top, you

• 26:54Speaker 02

  know, we're going to be looking at a lot of these things as kind of local top indicators because long-term, there is no Bitcoin top.

• 27:00Anthony Pompliano?

  Man, it is, it's pretty exciting right now. I feel like this is something where over the summer specifically, there's a lot of people who got kind of their head twisted around, right? There was folks, you know, we forget back in March and April, there was levered longs, everyone thought we were going straight to 100K, got a little bit of a head fake all the way back down to 30, and here we are back again. And, and the excitement, I think, is actually a little bit more tempered in terms of people are like, they're optimistic, but they're cautiously optimistic, but you can feel it starting to bubble up. And it feels like if we break 70K, like to me, that's the psychological barrier is that not only did we come back, establish a new all-time high, but 70K, it's like game on.

• 27:45Anthony Pompliano?

  And I think you'll see people going nuts all the way from 70 to 100. What do you think?

• 27:50Speaker 02

  Yeah, I think it's set on. I think also, you know, the narrative has changed around the macro environment. And even since March or April, in terms of inflation is, you know, transitory to, or, you know, inflation, there's no inflation to now inflation's transitory to, okay, inflation's a good thing. And the Fed's still printing, what is it, 120 billion, billion a month? And, and, you know, we have people talking about trillions of dollars of stimulus and how it's going to cost nothing. And a lot of people that maybe didn't notice the asset inflation over the last 10 years are starting to go to the grocery store and scratch their head a little bit. And then when this is, you know, at the same time, coupled with the price of Bitcoin, just smashing new highs on a daily basis, which I think we kind of believe is coming, you know, it's going

• 28:33Speaker 02

  to be a really, really tough to kind of dispute that there's not something really, really big going on. And I think that's what's exciting is that the macro narrative around inflation, around the monetary system, around the, you know, the legacy financial system and its stability has never been, you know, has never been in a worse place. And not that I'm rooting for anything bad, but it just highlights that, you know, this alternative system that that's fair and that anybody can participate in, and that's, you know, completely open and decentralized is, is, you know, the superior choice.

• 29:03Anthony Pompliano?

  What, uh, what are your last words for folks going into this week? We've hit three all time highs yesterday. Anything that you want people to know or pay attention?

• 29:13Speaker 02

  Yeah, I would just say, you know, just focus on stacking your stats, true yourself, true yourself, right? It's going to get, it's going to get crazy. Keep a level head, stay humble, stack stats. I mean, this is a long game. I like looking at the market on an hour to hour, day to day, week to week basis as much as anybody. But understand the long game, understand that Bitcoin is programmed to go up forever. And that, you know, the only winning game is to play, accumulate.

• 29:38Anthony Pompliano?

  All right. I just dropped your Twitter account into the chat. Anybody who wants to go follow Dylan? We're, we're, let's get a little, we're 72? 72 now. Yeah. What were we at last week? Because we were at like 55 last time you were on Dylan?

• 29:51Speaker 02

  I think so, yeah.

• 29:52Anthony Pompliano?

  Oh, okay. Just casual 50%. Can we get 100K by the end of the month, do you think?

• 29:57Speaker 02

  Maybe. I think, I think, you know, the Dylan follower to Bitcoin model is, is looking good.

• 30:02Anthony Pompliano?

  Yeah. Don't worry. That's for, that's for everyone. That, that's, uh, there's a direct correlation between followers and Bitcoin price. So as long as Bitcoin keeps doing its thing, I think you're going to be in good shape, my friend. 100K by the end of the month. That's, uh, that, that's my, uh, bet for Dylan.

• 30:17Speaker 03

  It would help if everyone listening went and followed Dylan.

• 30:20Anthony Pompliano?

  Yeah. I mean, yeah, that would be a good idea. It's all right. Well, how's, uh, how's, uh, Joe's follower count going?

• 30:26Speaker 03

  I'm, I'm all good. Don't worry about me. I don't need you tracking my stuff. All right.

• 30:32Anthony Pompliano?

  All right. All right. Just, just checking, just checking.

• 30:33Speaker 03

  Mind your own business.

• 30:34Anthony Pompliano?

  All right. Dylan, I appreciate you coming on today. Uh, everyone, make sure you go follow him on Twitter and, uh, you're doing amazing work. So keep it up and then we'll, uh, we'll talk soon, my friend.

• 30:44Speaker 02

  Peace, bomb bros.

• 30:46Anthony Pompliano?

  Later, buddy.