#831 Bitcoin Market Is In A Trendless Chop w/ Will Clemente

Will Clemente is the Lead Insights Analyst at Blockware. He has quickly become one of my favorite writers on all things bitcoin, including deep dives on various onchain analytics. In this conversation, we discuss the bitcoin fundamentals, on-chain metrics, what happened in the past week, and what the on-chain data is telling us to be prepared for moving forward. WIll joins us every Friday on "The Best Business Show." To see the video with the corresponding charts that Will references throughout the interview, go to "The Best Business Show: LIVE" YouTube Channel ======================= Today’s episode is brought to you by Coinbase Wallet, your key to the world of crypto. Crypto wasn’t made to just buy, sell, and hodl. With Coinbase Wallet, you can do so much more: Collect more NFTs, earn more with DeFi, and trade more than 4,000 tokens. Whether you’re looking to play, stake, spend, or just explore a trending new protocol — Coinbase Wallet is your key to more. Long-time HODLers already know that wallets are a must-have if you want complete control of your crypto. That’s why Coinbase Wallet makes self-custody simple, while providing the safety and security of the most trusted name in crypto. Visit coinbase.com/wallet to learn more. ======================= Unstoppable Domains is THE #1 provider of NFT domains. These aren’t traditional domains, these are domains with superpowers. With your unique NFT domain such as pomp dot crypto or pomp dot nft, you can replace your long complex wallet addresses, verify ownership of your NFTs and join the 10’s of thousands of people who are now using their NFT domain as their Twitter and Discord usernames. Go to unstoppabledomains.com and get YourName dot crypto, dot x, dot nft or a range of other endings for as low as $5 and never worry about gas or renewal fees because with Unstoppable Domains you pay once and own forever! ======================= Cryptocurrencies offer boundless potential, but how will you protect your crypto? Arculus is the next generation crypto cold storage wallet that combines the world’s strongest security protocols on the Arculus Key Card with an easy-to-use Arculus Wallet App. With over 20 years of experience developing leading-edge secure payment technologies, CompoSecure created Arculus to give you the power to protect your financial future. You can buy, store, swap, send and receive your crypto with a simple tap of your Arculus Key Card to your mobile device. Your private keys are encrypted on the Arculus Key Card and they never leave it. Stay safe from hackers with no cords; no charging; no Bluetooth. The only person accessing your crypto... is you. Buy yours at Get Arculus.com today =======================

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. Will Clemente is the Lead Insights Analyst at Blockware. In this conversation, we talk about Bitcoin, the market structure, on-chain analytics, and where we go from here. I really enjoyed this weekly conversation with Will, as always, and I hope you do as well. Before we get into this episode, I want to quickly talk about our sponsors. Today's episode is brought to you by Coinbase Wallet, your key to the world of crypto. Crypto wasn't made to just buy, sell, and hold. With Coinbase Wallet, you can do so much more. Collect more NFTs, earn more with DeFi, and trade more than 4,000 tokens. Whether you're looking

• 0:46Anthony Pompliano?

  to play, stake, spend, or just explore a trending new protocol, Coinbase Wallet is your key to more. Longtime holders already know that wallets are a must-have if you want complete control of your crypto. That's why Coinbase Wallet makes self-custody simple while providing the safety and security of the most trusted name in crypto. Visit Coinbase.com/wallet to learn more. Again, that's Coinbase.com/wallet and learn more today. Today's episode is brought to you by Unstoppable Domains. Unstoppable Domains is the number one provider of NFT domains. These aren't traditional domains, these are domains with superpowers. With your unique NFT domains such as Pomp.crypto or Pomp.NFT, you can replace your long, complex wallet addresses, verify ownership of your NFTs, enjoy the tens of

• 1:31Anthony Pompliano?

  thousands of people who are now using their NFT domain as their Twitter and Discord usernames. Go to unstoppabledomains.com and get your name.crypto.x.nft, or a range of other endings for as low as $5. And never worry about gas or renewal fees because with Unstoppable Domains, you pay once and you own it forever. Head on over to unstoppabledomains.com today to check out more about what they've got. Again, go there and you can get any domain with any ending for as low as $5. UnstoppableDomains.com. Today's episode is brought to you by Arculus. Cryptocurrencies offer boundless potential, but how will you protect your crypto? Is the next generation crypto cold storage wallet that combines the world's strongest

• 2:13Anthony Pompliano?

  security protocols on the Arculus key card with an easy to use Arculus wallet app with over 20 years of experience developing leading edge secure payment technologies. Compo serve created Arculus to give you the power to protect your financial future. You can buy, store, swap, send and receive your crypto with a simple tap of your Arculus key card to your mobile device. Your private keys are encrypted on the Arculus key card and they never leave it. Stay safe from hackers with no cords, no charging, no Bluetooth. The only person accessing your crypto is you. Buy yours today at getarculus.com. All right, let's get into this episode. I hope you guys enjoy this one.

• 2:51Speaker 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.

• 3:14Anthony Pompliano?

  Well, what's going on, man?

• 3:16Speaker 02

  Hey, brother. How are you?

• 3:17Anthony Pompliano?

  I'm doing fantastic. It's just me and you today. The, uh, the union is not here, just like, didn't show up to work today.

• 3:25Speaker 02

  Oh, God, they left you all alone. You're going lone wolf today.

• 3:29Anthony Pompliano?

  Hey, life goes on. Life goes on, right? Um, all right, let's, uh, let's start with, um, uh, I have a question before we get into some of the charts here, but my main question for you is just, uh, when you wake up every day, where do you go look at information and like, what is your process in the morning to get a sense of here's where we're at?

• 3:50Speaker 02

  Yeah, great question. Um, so I don't have like a specific regimen, although I'm actually in the process of writing that out because I think it's important. It's just something that I haven't done just because honestly, I've just been lazy in doing it. I have kind of a general process that I go through in my mind. First things first is I wake up, I read a couple newsletters that I'm subscribed to. I'll go in and obviously check Bitcoin's price. See what's going on in the futures market if I if I wake up early, if I wake up late and the stock market's already trading. Hopefully, I generally don't wake up that late, but um, you know, if I do, I'll just check what the stock market's trading at. If not, I'll check futures.

• 4:29Speaker 02

  Before nine thirty, I'll just read some, you know, headlines on like MarketWatch and some major kind of news providers to see if maybe anything crazy that's going to change the world. Happened while I was sleeping. And then I'll go in and the first thing I'll check Bitcoin specifically aside from price is I'll just go in and start looking at derivatives data. So I'll look at several things. I'll look at, you know, funding. Lately, I've just been looking at the premium or discount of spot and perps. Look at what Open Interest is doing. And then as well, also go in and look at the order books, see if any orders came in and are out overnight. Especially across several different exchanges and look for confluence and some of that behavior across. Different exchanges.

• 5:14Speaker 02

  And then last thing, I'll I'll go in and just look at, you know. Some on-chain stuff overnight. Generally speaking, that doesn't fluctuate much. So like Glassnode, for example, their data updates are like eight thirty every night, Eastern time, because I'm on the East Coast. So, you know, overnight, there's not like too much actually changing there, but sometimes in like some hourly things like Sober. Or exchange flows, I'll look at some of those things on like an hourly basis, but. That's that's pretty much the high level. And then the other one, I guess, to throw in is just checking Twitter. And seeing if there's any, you know, crypto native news events that came out overnight. You know, sometimes you can, sometimes you can gauge what happened with price just by doing a quick scroll through your feed overnight.

• 6:00Speaker 02

  You know, you just gotta check sentiment real quick. But yeah, I mean, just like looking through to see if any like, you know, Twitter personalities. Like you or whoever have posted any kind of big news events crypto related as well and then. That's pretty much it. It's not, you know, I need to create a checklist for myself because I know that's something that, you know, like more sophisticated traders do is they have kind of a regimen that they go through. Like I talked to Abi Feldman from Block Tower and that was one of my biggest takeaways from him was like, not just the information he was providing, but basically like, you know, how structured his mind was and, you know, orientation to the market and basically how organized his approach was to the market and how consistent

• 6:43Speaker 02

  he was staying with it. One other thing I'm thinking about starting to do is like journaling. So this is something that several of the traders that I've talked to on my podcast or just privately do is, you know, just jot down your thoughts every morning, what your thought process is, your emotions at the time, how you're feeling, and then you can go back and kind of resort to that. I kind of do that with the newsletter, but it's on a weekly basis rather than a daily basis. So I might start doing that on a daily basis. But the newsletter, you know, I like that I can kind of go back, see where my thoughts were at the time, you know, kind of look for patterns and different metrics or price action as well and kind of see what my thought process was at the time. And that really kind of helps you, you know, master your emotions. I'm definitely not a master of my emotions now,

• 7:27Speaker 02

  but I'm, I like to say that, you know, I'm getting better in that sense and, you know, journaling and writing down your thoughts even on a weekly basis like I've been doing for the last year or so. It's definitely been helpful.

• 7:38Anthony Pompliano?

  Yeah, it's super interesting when you start to think about the clarity of thought, the information inputs, but then also going back and revisiting, hey, what was I thinking then? How? One of the big things is for me, writing is, you know, it's not a private journal, but writing every morning allows me to go back and, you know, kind of be intellectually honest about like, hey, what did I get right? What did I get wrong? So that makes a lot

• 8:03Speaker 02

  Yeah. And, and the other thing as well is like lately I've been doing these like educational videos on my YouTube channel or not to show the YouTube channel, but also like on Twitter, I'll do these little threads and where I'm going with this is not to tell people to go, to go look at them, but just that like selfishly by going through and doing this, I have to go back to the basics a lot of times and either, you know, I'll have to revisit things that maybe, you know, I, I forgot about or as well, you know, maybe by going through that process, I, you know, come to new understandings by like revisiting, you know, the fundamentals of things. So like overall, just that again, like as you just said, that process of writing as well

• 8:44Speaker 02

  as like creating educational content and going back to the basics and like solidifying that, I find that like super beneficial for sure.

• 8:52Anthony Pompliano?

  Yeah.

• 8:52Speaker 02

  And you find holes in your thinking and all that kind of thing. So.

• 8:55Anthony Pompliano?

  Completely agree. All right. Let's get into the market itself. You recently described it as a trendless chop. Explain what that means in terms of what's happening right now.

• 9:05Speaker 02

  Yeah. So this first section is actually written by our equity analyst, Blake Davis. I think he always does a great job, but I think he's generally just talking about broader markets, you know, not really seeing any trend, albeit like moving averages or just price structure in general, just kind of just seeing like, you know, as he said, trendless, trendless chop. I think that's, that's also pretty true for, for Bitcoin as well, but definitely with all kind of the macro uncertainty and, you know, we've got everything going on with like Russia and Ukraine. I think that's kind of translating into price action and drive by. But yeah, that's personally, that's definitely not my area of expertise. So you'd have to ask Blake exactly what he meant there.

• 9:44Anthony Pompliano?

  And do you think that that is the same thing for Bitcoin as like the broader market right now?

• 9:52Speaker 02

  In, in what sense? You're saying like the trendlessness?

• 9:54Anthony Pompliano?

  Yeah, the trendless chop.

• 9:57Speaker 02

  Um, yeah, I think, I think, you know, we've been in a downtrend for three months. And, um, you know, as we get further into this, I'll highlight a couple of levels that I think we kind of need to get back above to, you know, definitively say that we've kind of broken out of this downtrend. Um, you know, we've, we've seen some, you know, promising, um, you know, behavior over the last like two weeks, but I still think we need to get back above 47K. That's kind of my, uh, line in the sand from like a high timeframe perspective. I think there's a lot of, uh, confluence there, albeit with on-chain as well as price structure. And if we can reclaim that, uh, I think, you know, we've, we've regained, uh, momentum.

• 10:37Speaker 02

  So like, I think, I think there's, in this market, there's like value buyers and there's momentum buyers. And this is a mental framework that I stole from Avi Feldman at Block Tower, but I really like it. Um, and I think value is kind of in the low thirties and momentum is getting back above that 47K area. Um, and so, you know, for people that are, you know, kind of just looking to get in the market on like high timeframe momentum. I think that's kind of the, the area that you should be watching.

• 11:04Anthony Pompliano?

  Makes sense. Um, I saw that you were tweeting about and you included in the newsletter, uh, hash rate and just kind of the explosive recovery uh, of hash rate. Uh, talk to me about what, why is that so telling to you?

• 11:16Speaker 02

  Yeah, I think, you know, it's, it's really incredible. This is one of the, I think, biggest accomplishments of the Bitcoin network. Uh, maybe, I mean, in recent history, but maybe in all of its history. Reasoning is because you had one of the, you know, largest global superpowers being China banning Bitcoin mining. We saw a massive exodus of hash rate, um, coming off the network as you can see in the chart, uh, between May and July. Um, during that time, uh, I think this is actually, you know, a fundamentally, uh, bullish event in the moment because now all of a sudden you have all this hash that's moving out of China. And that was one of the, the big, you know, uh, FUDs, if you will, that you would hear from people. Oh, all the mining, you know, hash power is concentrated in China. Uh, so now that, you know, that argument is gone.

• 12:00Speaker 02

  And with that as well, over the last few months, we've seen a complete recovery of that hash, uh, back on, coming back online. And what this basically means is that all these machines have been migrated across the world in a completely decentralized way, both the physical and human capital around the world and replugged in. And just, you know, in several months, we've seen that not only come back to where it was prior to the, prior to the drop, but actually we've seen this continue to ramp up over the last few weeks. We've seen a really aggressive move up in hash. And here at Blockware, we continue to be very bullish on, on hash. We think over the next year, we'll continue to see this, this, this trend as more just entities in general continue to be interested in getting involved with Bitcoin mining. You know, I

• 12:45Speaker 02

  think, yeah, again, it's, it's, it just kind of goes to show, you know, the resiliency of the Bitcoin network. And currently the network's more secure than ever as, as hash continues to grind up.

• 12:55Anthony Pompliano?

  Yeah. Talk to me about the kind of derivatives market. Obviously, there's been a lot of activity there as we go sideways that looks like it's kind of lining up with a lot of the price movements.

• 13:06Speaker 02

  Yeah. So on screen, I think we have the Bitcoin price chart with the perpetual basis indicator below. So first, we can just like talk about price briefly. So again, I think kind of the low 30s are a value area for BTC. I think 47K is that area that BTC needs to reclaim to kind of establish momentum, especially from a high timeframe perspective. These are some of the, just the four kind of major price levels that I think we've, we've got for Bitcoin on a, on a daily level. I think we're currently sitting at an important kind of pivot level. If we go back and look at where 41 to, I'm sorry, 40 to 41K, we've seen a lot of kind of reaction from price from that throughout the, throughout the

• 13:49Speaker 02

  last year. So that basically defined the whole summer range. We bounced off that at the end of September, bounced off that in January before finally breaking through. And as well, you know, recently, we've, we've seen some reaction of the last day or two with this price area. I think if Bitcoin can flip this 39 to 40 area, then you're probably looking at continuation back up to 47 at a minimum. If we get back below that, well then, once below, then 40K becomes expensive. So I think. Think you start closing below forty, you probably see BTC retraced back to these local lows. But for the next day or so, I'm just kind of watching to see this reaction in this area. Uh, I think, you know, if if it can hold, then it's quite bullish, probably see a, you know, move back up to forty forty seven K.

• 14:34Speaker 02

  If we start closing below, probably see a retracement back to those local lows. So, you know, with this stuff, you know, it's always probabilities. It's always speaking in if then statements, right? No one knows exactly what's going to happen. We just identify the setups. And we set up, you know, probabilistic statements based on that information. And so with that being said, again, I think if we can hold this area, see continuation to forty seven K. If we start closing below the forty K area, I think we probably see a retracement back to those local lows. Um, onto the derivative stuff. So at the bottom, you'll see this indicator called perpetual basis. So if anyone's been listening to me on this channel or just in general, um, and Pomp as well as when you've, when you've gone through the newsletter, you've probably talked about this as well as the funding rate.

• 15:19Speaker 02

  Um, this is something that I still think is extremely important. But I've, I've kind of veered away from looking at funding and instead of looked at something called premium or discount. So why, why do I say that? When we're looking at funding, what we're essentially trying to gauge is the difference in activity between spot and perps. And so with that, you know, the funding rate is calculated differently on every single exchange. Some way, you know, different exchanges, uh, more than others, as well as just the, you know, the math behind the actual funding rate is different on, on others. And so with that being said, you know, when you kind of just think of like from first principles, like what are you trying to gauge here? Well, you're trying to gauge the difference in activity again between spot and perps.

• 16:03Speaker 02

  So instead of looking at funding, why not just look at the raw difference in price between spot and perps? And so that's what the premium discount is. Um, and so that's what I've started to look at recently. And that's, that's what you see on the bottom is that whenever, whenever you see the, the indicator getting into the green area, it means that perps are trading below spot. So you basically take a, you know, weighted average of all the perps. Based on open interest and then you take the weighted average of all spot BTC exchanges based on volume, compare the two and you get the difference, which is either a premium or discount based on whether perps are trading above or below spot. And so you want to be buying BTC or averaging into BTC when spot is trading at a premium

• 16:48Speaker 02

  to perps. And then conversely, you know, you probably want to be a little cautious whenever perps are trading at a premium to spot, especially when you see a prolonged regime of that. With that being said, I think you can look at two things very similar to what I always say about funding. So first of all, you know, we can look at discrepancies between, you know, the indicator and price. Second of all, we can look for regimes or prolonged period of times where we're in periods of time where we're in, you know, one area, whether it be a premium or a discount. And so the kind of general rule of thumb that I personally see with this is that the longer and the more aggressive a trend is in the indicator, the more likely the move is likely to be once it, once it reverts.

• 17:32Speaker 02

  So an example of this would be going back to like early 2021, we had a prolonged premium of perps over spot. I think funding was at like 250% APR or something absolutely crazy like that. And so for months, we persisted with this, with this premium. And so what that's basically telling you like the, from the psychological aspect is that, you know, leveraged traders are just getting, you know, basically conditioned to keep leverage longing all dips, right? Because they just get bailed out by these spot buyers throughout all of early 2021. A lot of that was, you know, great scale coming in and buying BTC consistently. And as you have a, you know, prolonged conditioning of that behavior, once the trend finally

• 18:17Speaker 02

  changes, you see a really massive move to the other direction. It's almost like a pendulum swinging, right? When you get people really conditioned to one behavior, then once that, once the underlying trend changes, they're so used to participating in that one behavior, it's difficult to all of a sudden change your bias and adjust to the new trend. And so, so basically, I think that's kind of the psychological aspect that kind of baked into that big move, you know, wipeout in, in May. We had a move down to about forty K. And then all of a sudden, you had a bunch of leveraged buyers step in. And then that caused that final flush down to thirty, because basically, everyone was trying to catch a falling knife when price had initially moved down to forty. And so that's just an example of when you have a longer regime of either, you know,

• 19:00Speaker 02

  premium or discount, I think the more aggressive and the more prolonged that regime is, the larger the move is once it reverts. And so you saw the same thing at the end of, at the end of summer twenty twenty one, or last year. You know, initially, traders were cashing in by fading every rally up to forty K. And then towards the end of the range, they were cashing in by fading every single rally up to thirty five K. They got extremely complacent in shorting every single move up. And so, once that, that, you know, new regime finally came, we started to grind up off the lows, we had that failed breakdown below thirty. Well, they were so conditioned of shorting every single pump, that that behavior, that, you know, conditioning of behavior allows for more fuel once that trend finally reverses.

• 19:42Speaker 02

  And so with that being said, I think currently, we're in a pretty prolonged regime of spot premium over perps. And as well, what you, what you also want to see is that going further negative. So if you'll see, when we swept the kind of thirty three K lows, we actually saw this going further negative and further negative. So that's another thing you can look for. Basically, whenever you go back and see the discount going, you know, further negative, and when I'm saying discount, I'm saying discount of perps below spot or premium of spot above perps, it's either way you want to, it's saying, you know, two of the same thing. You know, whenever you see that going further in one direction, in this case, you know, further negative, that's another, that's another, you know, way you can look

• 20:25Speaker 02

  at this as well, is you're seeing the trend get more and more aggressive, people are becoming more and more conditioned for one, one type of behavior. But overall, though, you know, we're in this prolonged regime of, of spot premium, which is just something that even at a minimum, you can just consider as kind of a backdrop for other market behavior and put that in. Context with it, but you aren't seeing any type of froth and derivatives. You're actually seeing the opposite. A spot is leading the market currently.

• 20:51Anthony Pompliano?

  Got it. And so if we take a look, one of the things that I'm not as familiar with, but it sounds like you've been doing some work on is these order books as well, right? And you talked a little bit about kind of the spot buyer stepping in. And we start to look at the visualizations of these order books. It seems to tell a very similar story. Is that a fair way to look at this?

• 21:11Speaker 02

  Sure. So kind of going back to that like value momentum mental framework. So again, I think 47K is the area to reclaim momentum. I think for value buyers, that that area is kind of 30 to 35K. And so the reasoning behind that is kind of several reasons. And so I'll tie this into the order book thing in a second. So first of all, just like price structure. So if we go back and look, BTC is basically just in a very large range between 30 and 60K. And 30 to 35K is the bottom of that range. It's the bottom extreme of that range. Second thing is this chart here, which is looking at order books. In particular, I like to look at the spot order books over the futures order books.

• 21:55Speaker 02

  Just because you tend to see less spoofing in the in the spot order books. You do see some, but not, not as much, at least from what, what, you know, my experience in monitoring them. And in particular, I have Coinbase on the screen currently. But across, you know, kind of across the board, based off of several major spot exchanges, you're seeing kind of confluence as well. The same thing of just spots and spots bids in that kind of 30K area, low 30s area. And so to me, that's showing that, you know, there's large buyers that are kind of seeing that as an area of interest, as an area of value in their minds. The third, the third thing that makes me think that kind of the low 30s is a value area is when we kind of go to the next chart, which is looking at Wales Holdings.

• 22:39Speaker 02

  What's interesting is that you saw them kind of uptick when we swept the low 30s, when we had that move down to the 30 to 33K. Very similar to the massive uptick we saw in Wales Holdings off the lows over summer. And so to me, that's showing you that there's there's some entities or market participants that are interested in doing business in the low 30s. Especially because as we've moved off the low 30s, after the last, it was like two weeks ago that we swept the low 30s. We've seen their holdings just kind of flat. So you see on the right hand side, like on the very right hand side, you'll see an uptick, pretty substantial uptick as we move down to that 33, 34K area. We talked about the Coinbase buyer that had been stepping in at the time, and we also talked about this chart, which was whales holdings were moving up.

• 23:24Speaker 02

  You know, since then, we got to move up to about 45K, but we haven't seen any fall through in whales over the last two or three weeks since we last spoke. Since then, we've just kind of seen their holdings flat. And so to me, this is interesting because it's it's showing you that, you know, large, large market participants or large entities on on chain are interested in adding to their holdings in the low 30s, but so far it doesn't look like they're interested in doing business in the in the low 40s. Until proven otherwise, but this just kind of adds in confluence to the other two factors that I mentioned, price structure and order books. And it seems like the low 30s are kind of an area of value seen by larger market participants.

• 24:03Anthony Pompliano?

  What are whales doing?

• 24:04Speaker 02

  Yeah, so that's basically the chart I was just just pulling up. So, you know, they had been in a downtrend since September. They kind of bought, they bought the whole way up from kind of the end of 2020 up to about, you know, February, early March of 2021. Basically distributed all the way down into the summer, reaccumulated at the summer lows, bought all the way up until about September. And then from then, they had been distributing up until, call it, you know, three weeks ago. They had bought kind of the 33, 34K area when we swept that area.

• 24:37Anthony Pompliano?

  Yep.

• 24:38Speaker 02

  And again, since then, they've just kind of kind of been flat.

• 24:41Anthony Pompliano?

  And one of the things that's interesting to me is whales, I think a lot of times are used as a proxy for experience, right? Do you? Agree with that? Or is that a little misleading in that the folks with the largest holdings may not actually be the longest term holders or the most experienced in the market?

• 24:59Speaker 02

  Yeah, I don't, I, yeah, I don't necessarily think so. It, to me, it seems like based off of like historical kind of data from, you know, on-chain perspective, you know, it seems like whales are more momentum buyers than, than anything. We kind of, you know, following whale behavior has, you know, generally, you know, has generally been productive, but they don't perfectly, you know, time the, the macro bottoms like they were, you know, like buying extremely heavily and like the end of the bottom of, of 2018, for example. But we did see long-term holder supply increasing at the bottom of 2018. So I think there's just a bit of a, you know, kind of nuance there and like a bit of a distinguish between whales doesn't necessarily always translate to longer

• 25:44Speaker 02

  term market participants. These could just be, you know, momentum buyers in the market. And I think especially over when you look at this data over the last kind of year or so, it kind of illustrates that as well, that you start to see whales kind of buying momentum and then distributing into that, you know, final push up into strength.

• 25:59Anthony Pompliano?

  Got it. And so you've got these charts in here on the quarterlies. Explain what these two are showing us.

• 26:06Speaker 02

  Yeah. So we're basically looking at the spread between spot and three-month futures. So you can go, you can buy spot, short the three-month future, capture the difference. So this is, you know, when everyone was talking about at the beginning of the year, the cash and carry trade, where everyone learned about, including myself, what contango meant, when the futures curve is trading at a positive slope out to the future. And so like in early 2021 or kind of mid 2021, this got all the way up to 45% annualized, which is absolutely insane. And so I don't think we'll ever get back up to those levels because I just think the market is going to become more efficient over time. I think you have more capital coming into the space that's going

• 26:48Speaker 02

  to look to do these type of arbitrage opportunities. Maybe that will funnel into directional BTC positions. It's hard to kind of make that speculative conclusion, but I do think over time. You you will never get back up to those forty forty five percent, you know, crazy euphoria levels. I think I think there's more capital looking to kind of art that away as the market kind of becomes more efficient. With that being said, though, I do still think this is kind of a good gauge for euphoria or depression in the market, just basically kind of what what trader sentiment is. As we can see, this got extremely low at the bottom of at the bottom

• 27:28Speaker 02

  of summer, got pretty low at the end of September as well, and got fairly high when we had that push up to sixty seven K. So you know, it just kind of follows price and just basically is kind of a gauge for what sentiment amongst derivatives traders. This actually broke below five percent, which means, you know, it's still more than what a treasury is is going to yield you. But

• 27:51Speaker 02

  but you know, it's it's it's still relatively low compared to where this has been over the last, call it a year or two. Historically, though, just something to like keep an eye out for is whenever quarterlies go into backwardation, that's historically been a great buy opportunity. So if you kind of go back and back test whenever quarterlies have gone into backwardation, that's that's been a a good opportunity for kind of like a longer term horizon buy. And then like, kind of going off of that as well, I have this next chart. I literally just like threw this together while I was making the newsletter. I was just like tinkering around with it. I think it's interesting, basically comparing the seven day moving average of quarterlies, as well as the fourteen day moving average of quarterlies.

• 28:36Speaker 02

  These large spikes are basically when we like the the seven day moving average is trading substantially below the the fourteen day. And so that's kind of offered these these good, at least, you know, kind of local, local buy opportunities, especially when you see like crazy substantial spikes like, you know. At the end of September 2020, for example, and it's interesting. Some people would say you like shouldn't like draw trend lines on this stuff, but I do think it's interesting. It almost looks like this is kind of coiling up. We'll see. I don't know. I just, I just had created this to be honest, but I think it's something to look in for confluence with. You know, if you, if you see quarterly, this is the main thing though. If you see quarterly, let's go backwardated, that's almost always a great buy opportunity.

• 29:18Anthony Pompliano?

  Let's jump ahead to the mayor multiple, which I think is a pretty simple metric, but one that has been pretty accurate over time. What, what are you seeing here?

• 29:28Speaker 02

  Yeah. So in the letter this week, from an on-chain perspective, I tried to just like write this out for long-term investors because that's really my kind of mental approach right now. Is I think there's just so much going on with macro and it's just, you know, very murky times that I think, you know, I'm not trying to do any short-term trades currently. I'm just looking at this in a very broad sense. And with that, I'm looking at some of these kind of macro, what we call macro oscillators from an on-chain perspective. Basically oscillators that track historical Bitcoin behavior for market participants. And I think, you know, these are best used to, I don't think there's certain values that you can say, oh, this is a, you know, this is the Pico bottom and this is the Pico top.

• 30:09Speaker 02

  But I think you can look at these things to basically gauge where's the asymmetry. Right. And so you probably want to de-risk when the asymmetry is, you know, to the downside. And you probably want to risk on a bit or, or, you know, start averaging in when the asymmetry is, you know, drastically to the upside. And currently looking at several of these charts and the first of, first of which is, is the mayor multiple. And there's three others that maybe we'll, we'll take a peek at. I think that's kind of the, the point I was trying to make in the newsletter this week is that there's kind of confluence across the board of, yeah, not every single one of these metrics, although several of them are at like very historical lows. But, you know, across the board, they're not all at like Pico bottoms, but they are, you know, in the kind of the lower 25th,

• 30:51Speaker 02

  you know, percent percentile of where they've historically traded. So generally speaking, I just think especially the low 30s, as we said a few weeks ago. But generally, you know, uh, the, these areas are, are good to kind of average into BTC. And I think anyone trying to time the, the absolute bottom, I think that's kind of a fool's game. You know, I think kind of averaging into these, these lower areas, lower extremities of these, of these metrics is, is probably a good idea. And historically has been. The mayor multiple just compares price to the 200 day moving average. And so basically, you know, it shows you where price is trading relative to what the broader trend has been. Uh, and so as you'll see, we're, we're trading near that kind of green line at the bottom.

• 31:34Speaker 02

  It's really kind of arbitrary, just showing you like where, you know, where Bitcoin is like historically kind of bottomed out in a broad sense. And, uh, we are trading very close to that after being below that when we swept 33K, it's still very close to that. Then again, that's just kind of showing you that the asymmetry is, is not to the downside in a broader sense of my mind.

• 31:54Anthony Pompliano?

  Got it. And then if we go ahead and we take a look at, uh, dormancy flows, I know that this is something, uh, that you've started to pay more and more attention to. It seems like we've seen, uh, Tim Rova at Fidelity, he put out a whole piece on this as well, that I think, uh, either you, you had some influence on, or it seems like he had, uh, been learning some stuff here as well. How, uh, how are you thinking about dormancy right now?

• 32:14Speaker 02

  Yes, it's pretty cool to see dudes at Fidelity looking at on-chain stuff and, uh, hopefully, hopefully we've seen more of that. But, um, yeah, so this, this one out of all the charts that I'm, I'm looking at, like these broader oscillators. This one definitely got like the most engagement on Twitter because it looks the best. Like, let's just be honest. And, you know, like when we look at this, it's at the fourth lowest value, uh, in Bitcoin's history. We look at, you know, 2011, 2012, 2015, at the bottom of the bear, bottom of 2018 bear, COVID dump, uh, summer of last year. And now those are all the times that we've seen this dip this low. So this is just again, um, showing you that kind of in a broader sense, I don't think that the asymmetry is skewed to the downside, uh, versus the potential upside.

• 32:58Speaker 02

  And, you know, kind of a six to nine month time horizon. This is basically comparing the USD value of destruction relative to the 365 day or yearly moving average. So it's basically showing you the spending of older coins relative to the yearly, uh, kind of trend of, of that behavior. And so at this time, you're seeing a decrease in spending from those, from those older coins.

• 33:21Anthony Pompliano?

  Got it. And like, when you start to look at this, if we go back to the summer of 2021, you and I spent a bunch of time talking about just constant increase in the illiquids circulating supply. It feels like we're kind of inching more and more and more in that same kind of trend as we were. Obviously, there was a pretty large price movement towards the end of the summer and into Q3. Is your least directional thought process of like, that's kind of what we're seeing happen. It's happening slowly. There's like a grind, but it's somewhat of a repeat when we saw when Bitcoin had dropped down to the low 30,000s or so back in summer 21?

• 33:59Speaker 02

  Yeah, I think the big difference is the following. So yes, like, supply dynamics look great from an on-chain perspective, and they have for a month or two. So it probably sound like a bit of a broken record in that regard. When we look at, again, a liquid supply, we look at a metric like this, which is based off of Coin Day's destroyed, showing you a decrease in spending from older coins, long-term holder supply, hodl waves. I mean, several different measures from an on-chain perspective are all kind of showing confluence of strong holding behavior. And basically, that, the qualitative aspect of Bitcoin's float looks strong. But of course, that's one side of the equation. And so with that

• 34:40Speaker 02

  being said, I think like, summer of last year was a bit different from now, although liquid supply and some of these other metrics did look very similar. You saw an aggressive trend of holding behavior and all those as well at the end of summer 2021. I think the big difference, though, was the macro backdrop, right? So at the time, you still had a dovish Fed. And so basically, from 2020 all the way up to the end of last year, every single time that on-chain had shown strong holding behavior, that had translated to price action. And so people were, I think, like, the peak of on-chain's popularity was like, the end of 2020, early 2021, because basically, every single time that you had

• 35:25Speaker 02

  supply start to get constrained from an on-chain perspective, that translated to price action. But why? Because there was constant demand, because we had, you know, the whole inflation hedge narrative going extremely dovish fed, just very strong, uh, you know, monetary and just monetary conditions is just general macro backdrop uh for Bitcoin. And so with that being said, when you had that one, you know, the one end of the equation cooking, which was the demand that was constantly steady. Every time the supply end got constrained, you saw that translate to price action. Um, and so I think recently over the last few months, yes, and and kind of since the end of November, yes, we've have continued to see um strong holding behavior. But I think the demand has been lackluster because of the macro backdrop.

• 36:09Speaker 02

  Uh, and so with that being said, I think the way I kind of view this is the following. Um, I think Lynn Alden worded this well that uh she she's, we've talked a bit in in the DMs about this kind of exact phenomenon, basically that. You know, you have the fuel laid out, but you just kind of need a spark to ignite that fuel. Because the the float of Bitcoin from a non-chain perspective looks very strong. You again, you're seeing, you know, uh, hollering behavior coins moving to entities who have a low spending history. Uh, but I think again, that that demand is the demand side of the equation is has just kind of been been lackluster. With that being said, though, you know, I think um over the next six to nine months, uh, you know, I think you will most likely see that demand step back in once.

• 36:52Speaker 02

  Kind of, uh, you know, the uncertainty in the market cools off in the legacy markets. Uh, maybe that just means that we need to get through March after the FOMC meeting and and see, you know, what the Fed actually does. And then people feel more comfortable making decisions just because nobody really knows exactly. There's still a lot of people that are kind of think the, you know, the Fed is just jawboning, uh, jawboning. Some people think that they're going to raise rates six, seven times. I'm not a macroeconomics expert and I'm not going to lurk like I am one, so I don't have the answer for you, but I think once we clear that uncertainty. Um, or if we have some type of catalyst for BTC that would cause idiosyncratic or unique flows into BTC. That would be another potential catalyst of demand. Um, and you know, there's several potential things for that.

• 37:37Speaker 02

  And maybe like an over subscription to the El Salvador bond. Coming up or another country following El Salvador, you know, a spot ETF surprise, which I think that the likelihood of that is low, but several different things that you can make a case for a potential catalyst. But if not that catalyst, then I think the other thing that's gonna that's gonna be needed to happen to kind of draw in that demand would be kind of a decrease in the macro uncertainty generally in legacy markets.

• 38:04Anthony Pompliano?

  Yeah, it makes a lot of sense. It gives us a lot to think about. Last chart I want to go over is the on-chain cost basis, which, speaking of looking pretty, anytime people see kind of big swoops and drops, I think they say, okay, what's going on here? What are you seeing here?

• 38:19Speaker 02

  Yeah, sure. So this one was created by Dylan. Basically, what he did was compare the the short-term holder realized price, which has been a historical level that prices interact with from like a high timeframe perspective. It's also partially why I think 47K is such an important value, that short-term holder realized price, which sits right around 46, 47K. And then you look at long-term holder realized price, which is the same thing. It's the cost basis of long-term holders on chain. And so then you just run a simple ratio of the two and compare them. And so that's what this blue line is. It's the ratio of short-term holders and their

• 39:00Speaker 02

  cost basis and long-term holders cost basis. And it's very interesting to kind of see how historically, like the psychology of how this has kind of been embedded into the market. Whenever your short-term holder realized price goes below long-term holder realized price, it's been like historically a good buy opportunity. And the reasoning is just basically because you have short-term holders capitulating, or they age into long-term holders. And then at that time, the long-term holders kind of set the floor at the bottom of the bear. And then conversely, whenever we reach the top extremia of this of this oscillator, we get above the red area, that's historically signaled that long-term holders are distributing very heavily. And so again, I don't look at these, you know, the red line and the green line is like definitive

• 39:45Speaker 02

  values. They're just arbitrary numbers based off of historical context. But what I What I do think again is interesting as, as we talked about is just looking at where's the asymmetry, right? And again, like the other metrics that, that we just looked at as well as, um, I know we're short on time, but there's two others as well. Um, you know, we're in the bottom 25th, you know, percentile of, of this metric as well. And so with that being said, again, just trying to make that point that I think the asymmetry isn't currently to the downside with a six, nine month kind of time horizon.

• 40:19Anthony Pompliano?

  When you take a look, uh, and you just zoom out bullish, bearish, short-term concerned, like, how do you think about short-term and long-term? I think long-term you and I both, you know, very, very bullish. Uh, but how do you think about the short-term? Uh, and are you trying to trade any of this? Are you just saying, hey, you know, uh, maybe there's some buying opportunities in the future, but, but ultimately not necessarily trading? Or what are you doing?

• 40:44Speaker 02

  Yeah. Um, again, so like, I kinda, I'm kinda looking at this as the following. I think that, you know, it's very murky with kind of the, the backdrop for BTC. So I'm not making any like short-term trades currently. I'm actually just averaging in. Um, and if we go down to the low 30s, I'll average in, uh, fairly heavily. Again, um, you know, I think that's again, the kind of a, a value area. And given a lot of these like broader oscillators that are useful for someone with a longer time horizon, uh, six to nine months, year plus time horizon. Uh, I, I do think kind of these, these, you know, low 30 areas, um, with the overall kind of 30 to 40K area in general will be seen as a value area, you know, after a year, a year, you know, plus

• 41:27Speaker 02

  time horizon, especially after we clear some of the, the things that, that we just talked about. Um, but yeah, currently I'm not, I'm not making any, any, uh, any trades. I think, um, sometimes it's, it's as simple as just looking at like, what's the, what's the profile of potential downside versus upside? And again, I think like with the, with the broader kind of, uh, um, you know, timeframe, I, I think that that's not to the downside at this time.

• 41:54Anthony Pompliano?

  Yeah. I think that's a, uh, very measured, sober view of the world. I love it. Um, all right. I appreciate you taking the time to do this. You got any, uh, weekend plans?

• 42:04Speaker 02

  Um, yeah. So tomorrow I find out uh about which puppy I get.

• 42:10Anthony Pompliano?

  Oh, puppy action.

• 42:12Speaker 02

  Little puppy action.

• 42:13Anthony Pompliano?

  What kind are you getting? Do you like, do you have a specific type and they just, you just don't know which one yet?

• 42:18Speaker 02

  Yeah, it's a, it's a golden doodle.

• 42:21Anthony Pompliano?

  Oh.

• 42:22Speaker 02

  Yeah, they're a little fluffy. They look like teddy bears, dude. They're really cute. They're like.

• 42:27Anthony Pompliano?

  How big do they get?

• 42:28Speaker 02

  So there, so there's mini, medium, and then there's standard. And so I'm getting the medium, which is like thirty, thirty-five pounds. So yeah, whenever, whenever I pick them up, I'll definitely have to have them on the show.

• 42:41Anthony Pompliano?

  We, we've never had Ranger on the show, so maybe we'll do like a Ranger and your dog. Do you have a name picked out yet?

• 42:46Speaker 02

  No, not yet. I feel like um I'm brainstorming it a little bit, but I feel like you gotta see the dog and then like you'll, you'll get a, that's how it was with my last two dogs at home.

• 42:56Anthony Pompliano?

  Yeah, you gotta definitely see the dog.

• 42:58Speaker 02

  Personally, but yeah, you gotta see it and then you're like, okay, like you gotta feel out his personality a little bit.

• 43:02Anthony Pompliano?

  Well, well, don't, don't tell anyone. I named our daughter before I ever met her. So, you know, that's, that's human, that's the human game with dogs. I feel like it's different. You gotta see.

• 43:12Speaker 02

  Yeah, yeah, yeah, for sure. Yeah, for sure.

• 43:14Anthony Pompliano?

  The uh, okay, so when you name it Satoshi, well, we won't be scared.

• 43:20Speaker 02

  I don't know, I don't know about that, man.

• 43:22Anthony Pompliano?

  No, please don't do that. Please don't. Save yourself the uh, the, the headache later when uh, when people are like, of course your dog is named Satoshi. Like uh, my, here, here's, here's a piece of advice my dad gave me. Uh, and I've heard him tell many people who've had uh, kids this. He said, the whole key is to uh, set your child up for success. Like, don't set your kid back a step with their name. Uh, I think a dog is the same thing, right? Is like, you know, just have a name that everyone likes.

• 43:49Speaker 02

  Yeah, exactly. Yeah, I feel you. But yeah, I definitely have to have him on.

• 43:53Anthony Pompliano?

  Will.

• 43:54Speaker 02

  What'd you say?

• 43:54Anthony Pompliano?

  Don't name the dog Will. So Satoshi's out and Will would be weird too.

• 43:58Speaker 02

  Definitely, definitely not.

• 44:00Anthony Pompliano?

  If you name it Joe, I won't tell him.

• 44:02Speaker 02

  Yeah, that's not happening.

• 44:06Speaker 02

  We'll see. I don't know, man. If, if you get ideas, if you got ideas, text me and I, we'll, we'll brainstorm a little bit. But our girlfriend's on it though. She's, she's been like texting me names every two seconds for the last like. Two weeks, so she'll probably come up with something if I don't.

• 44:21Anthony Pompliano?

  Well, listen, here's how girlfriends usually work is if you don't come up with the name quickly, she's definitely going to come up with the name. So if you want any say in it, you better hurry up.

• 44:31Speaker 02

  Yeah, I need to get out and stop looking at the charts.

• 44:36Anthony Pompliano?

  All right, buddy. I appreciate you coming on. We will do this again in a week or two and best of luck out there to everyone. But I think that the data is pretty clear. What do we have 585 now? Will, by the way, are you 19 or are you 20?

• 44:53Speaker 02

  I'm 19.

• 44:55Anthony Pompliano?

  I was gonna say your birthday is coming up soon, right?

• 44:58Speaker 02

  In the next two months.

• 44:59Anthony Pompliano?

  Two months. All right.

• 45:01Speaker 02

  Everyone always says you've been 19 for 10 years.

• 45:04Anthony Pompliano?

  Nah, listen, listen, listen, listen. As somebody who's 33, stay 19 as long as you can. If you can slow down time, let me know what the secret is. That's the key. It's just stay young forever.

• 45:15Speaker 02

  20 blows because then I got a whole another year before I can drink, but we'll see. Do I get facial hair and legal drinking before the next bull run?

• 45:26Anthony Pompliano?

  Nah, I think that I think that you're fine. People are like, yeah, it just felt like 10 years because of all the volatility, but.

• 45:33Speaker 02

  Yeah, exactly.

• 45:34Anthony Pompliano?

  I think you're good.

• 45:34Speaker 02

  It's like, it's like that movie Interstellar. You're on the planet for one day. It's like a year that that whole. That's how it is in this market, man. But all right, brother. Well, thanks again for having me on. I'll talk to you soon.

• 45:46Anthony Pompliano?

  All right, later, buddy.

• 45:47Speaker 02

  All right, see you, man.

• 45:48Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.