#699 Bitcoin On-chain Metrics w/ Dylan LeClair

Dylan LeClair is the Head of Market Research at Bitcoin Magazine. In this conversation, we discuss bitcoin, on-chain metrics, funding rates, Bitcoin Futures ETF, long term holders, bull market price action, and what we should expect through the end of the year. ======================= It’s time to stop paying capital gains taxes on your bitcoin -- and Choice is here to help. Choice is rebuilding the way bitcoiners approach retirement by making it possible to invest in bitcoin and 19 other digital assets inside your IRA. Right now, every time you make a trade, you have to pay capital gains taxes that can be as high as 37%. Choice enables you to trade real bitcoin, other crypto, and stocks without having to pay a dime in capital gains. The best part? They just released an iOS App, so you can open an account in less than 10 minutes and take control of your future from the palm of your hand. Join me and the 20,000 other bitcoiners who have started their tax-efficient stack, and open your Choice Account today. Search ‘stack sats’ in the app store or visit www.choiceapp.io/pomp. And one more thing -- if you want to hold your own keys, Choice lets you do that too. Start stacking tax-efficient sats today and visit www.choiceapp.io/pomp ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit compassmining.io to start mining bitcoin today! ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/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 Head of Market Research at Bitcoin Magazine. In this conversation, we discuss Bitcoin, on-chain metrics, funding rates, Bitcoin futures ETF, long-term holders, bull market price action, and what we should expect through the end of the year. I really enjoyed this conversation with Dylan, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Choice. It's time to stop paying capital gains tax on your Bitcoin, and Choice is here to help. Choice is rebuilding the way Bitcoiners approach retirement by making it possible to invest

• 0:43Anthony Pompliano?

  in Bitcoin and 19 other digital assets inside your IRA. Right now, every time you make a trade, you have to pay capital gains taxes that can be as high as 37%. Choice enables you to trade real Bitcoin, other crypto, and stocks without having to pay a dime in capital gains. The best part? They just released an iOS app, so you can open an account in less than 10 minutes and take control of your future from the palm of your hand. Join me and the 20,000 other Bitcoiners who have started their tax-efficient stack and open your Choice account today. That's right, I'm a user of Choice, and you can too, along with 20,000 other Bitcoiners. Just search "stack SATs" in the App Store or visit choiceapp.io/pomp.

• 1:26Anthony Pompliano?

  choiceapp.io/pomp. That's where you can go to start stacking SATs with a tax-efficient strategy. If you want to hold your own keys, Choice lets you do that as well. You can start stacking tax-efficient SATs today by visiting choiceapp.io/pomp. I think you should go check it out. Next up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, and it's underscored by 100% uptime track record through volatility spikes. Leveraging LMAX Group's liquidity relationships and ultra-low latency technology, LMAX Digital is the market-leading solution for institutional crypto trading and custodial services.

• 2:10Anthony Pompliano?

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• 2:55Anthony Pompliano?

  and purchase plans as the world's largest mining companies. Compass miners own their own machines. They can choose whatever mining pool they want, and they mine directly to their own wallet. Miners who don't want to host their machines can order Asics directly to their doorstep as well. Simple and low-cost hosting agreements, coupled with best-in-class customer service, are the reasons why Compass is the simplest and most popular way to mine Bitcoin. Start mining your own Bitcoin by visiting compassmining.io today. Compassmining.io. Go there today if you want to get in the mining game. Compassmining.io. All right, let's get in this episode with Dylan. I hope you guys enjoy this one.

• 3:31Speaker 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.

• 3:54Anthony Pompliano?

  All right, Dylan, let's start with just, before we get into any sort of slides or anything, can we just talk about where your general sense of...

• 4:02Speaker 02

  The bull market is like, like, how are you feeling right now in terms of the sentiment on Twitter? And how people kind of are thinking about where we are? Yeah, I mean, not much has changed in the last week, except, you know, just the price action, really. But I mean, the bull market is just beginning, you know, one little leverage flush, you know, a little, people get a little excited over extended and derivative markets. That's, that's nothing, you know, fundamentally, nothing has changed with the Bitcoin bull market. And I think we're right at the beginning. All right, so we're going to pull up some of your slides here. We've got this Bitcoin long-term holder supply. When you show this to people, I think they're going to say, wait a second, a long-term holder supply is going down. What does that mean? So describe why long-term holder supply is so important to pay attention to. And then this dip that we're starting to see, what is exactly is this telling us?

• 4:48Speaker 02

  Yeah, so, you know, Will has been covering this extensively. I've been paying a lot of attention to this and covering this myself. And it's somewhat like counterintuitive in the sense that long-term holder supply drawing down is actually a sign of a bull market. So basically, you know, when you're talking about a supply squeeze, a supply squeeze, we keep repeating it, right? On-chain analytics is like, you know, this is, this is what we're covering over and over again, and why is this driving the price action? Well, basically, what you're, what you're doing, hodling, stacking, what it's doing is it's engineering a supply shock. And so that's basically the driver of every single bull market is there's, there's a fundamental imbalance between supply and demand. There's a lot of, you know, new money coming in and they're having to compete against basically, you know, not a lot of the supply.

• 5:32Speaker 02

  So I, you know, a lot of these charts I put together, I showed like a one-month view and then I show like, you know, the entire history of Bitcoin. And right now we see like basically four straight days, three straight days of drawdowns in long-term holder supply. People might think that's bad, but really what you're seeing is that the long-term holders are engineering the supply squeeze. And then when the bull market comes and Bitcoin gets bid up, they'll take a little bit of profit off the table, you know, just a proportion of their holdings they distribute to new market participants, and that's fine. But that, you know, that's kind of, you know, this is one of the telltale signs of the bull market kind of, kind of beginning. So when we look at the second chart you have here, it's still showing this long-term holder supply, but I think this is really where you can see.

• 6:12Speaker 02

  That as the long-term holder supply draws down, that's really where price kind of punches upwards in the market. And I think this is what you're talking about with that long-term holder supply contracting a little bit actually signals the start of that kind of epic move upwards. Yeah, I mean, so the price action is almost like the spark of, you know, why they distribute the new holdings, right? Like you've accumulated during the bear, during consolidation and Bitcoin goes parabolic. You know, it's okay to take a little bit off the table. You know, some people will hold forever. But, you know, you know, if you see an asset that you hold go up 10,000%, 1,000%, you know, double 5X, whatever it is, you're gonna maybe take some, take something off the table. So that's what you see here. Every time Bitcoin goes parabolic,

• 6:55Speaker 02

  just like it did, you know, when it went 6X from September of last year to, you know, March or April, you saw long-term holder supply draw down basically the whole time and new market participants came in and basically, you know, acquired all that Bitcoin. And so now, you know, when you were talking last week or a couple of weeks ago, and every time Will comes on, he's talking about and he's showing you these same charts and he's saying, hey, like, look at, we're seeing kind of like, almost like a bear market dynamic where long-term holders are stacking, are stacking their butt off. And so, you know, now I think we're right at the beginning stages of this next parabolic advance where you're gonna have, you know, a club, a demand of new money come in and they're just gonna, you know, it's, they don't have much to bid. They're gonna have to bid reflexively in a small, super small flow of, you know, free supply.

• 7:36Speaker 02

  And that's really what happened back in October, November, December and into Q1 of 2021, right? Was that there was very little supply available that was kind of liquid. People came in, they were like, hey, I'll buy it at $12,000. No one was selling 15, 20, 25, 30. And then we just ran all the way up to $64,000 because literally it took that much price movement. Or I like to think of it as like, the US dollar price has to move upwards to accommodate everyone in terms of the new demand and then also unlocking, right? It's almost like you have an asset, you really like it, and they're bidding on it, right? Literally, they're saying, I'll pay you a certain price and Bitcoiners are like, I'm not selling, I'm not selling. And then eventually they're like, okay, fine, I'll sell to you $64,000, like idiot, right? And that's where they're actually gonna go ahead and sell. But everyone has a different price that they'll do that at.

• 8:20Speaker 02

  Yeah, the Bitcoin price moves up when the marginal seller is exhausted. And I think that's that's the key. You know, there's there's a few willing sellers in this market and you can see it on chain. You know, a couple million Bitcoin are basically being watched traded back and forth. And the people, these traders, you know, they'll they'll set limit orders, they'll they'll, you know, market sells where they take some profit. And there's obviously there's leverage on top of that. So, you know, when you're looking at certain price action, like just like the last couple of days. Why is Bitcoin going down? I thought all time highs were broken. Well, you know, there's derivatives on top of that, which will, you know, we'll cover in a little bit. But, you know, the fundamental driver of a bull market is you have the free flow of supply is has, you know, gone really, really thin and you're having this new kind of club of demand coming. And so they have to just reflexively bid up the price of Bitcoin. And so when you see long term holders start to distribute a little bit,

• 9:06Speaker 02

  that's fine. And that's just showing you that the new money is coming in and acquiring that that supply. Bitcoin's changing hands. So we have this chart, the long term and short term holder on chain cost basis. What is this showing us? Yeah. So the cool thing about, you know, on chain analytics is we can see basically the average price of these cohorts. We can see the long term holder, you know, basically cost basis, the price that they acquired their coins and the short term holder cost basis. So the short term is the pink and it's basically pretty, it follows price, you know, pretty closely. And the long term holder supply is obviously lags a little bit. And you see, you see during bull markets, you see the short term holder cost basis, you know, get bid up huge while while the long term holder cost basis kind of stays flat, or I mean, rises marginally. And so a bear market dynamic is when is when these two are converging upon each other and a bull market dynamic is when,

• 9:51Speaker 02

  is when one kind of the short term holder cost basis really, really, really gets bid. And so when you put these two in a ratio, you can kind of see over that, over the history of Bitcoin, you can see like a really interesting pattern of bull and bear cycles based on on these two cost basis, you know, for the for the long term and short term holders. Got it. And then we've got a second visualization of kind of the same thing, this cost basis ratio. What is this showing us that's a little bit different from that first one? Yeah. So this is just the the two in a ratio. And so the green in this chart is essentially showing a bull market dynamic where where these short term holders, the price of their, you know, of their holdings is going up a lot. Because you have all this new money coming in, right?

• 10:30Speaker 02

  This is the dynamic we were talking about with the long-term holders and the short-term holders coming in and really trying the new money coming in and really trying to, you know, acquire their stake. They're having to to bid against each other competitively. And so the price of Bitcoin skyrockets, their average cost basis skyrockets. And you can see this with green, right? This is the the green zones are when the short-term holder cost basis is skyrocketing relative to the long term. And so, um, you know, conversely, when when the there's this red zone here, that's when the long-term cost basis is is creeping up against the short term. And so that's kind of like a consolidation or a bear market dynamic. And interestingly enough, the last couple of months over the course of the summer, we saw basically like an on-chain bear market, even though, even though price action wasn't, uh, you know, wasn't too bearish over the last couple of months.

• 11:14Speaker 02

  You saw just basically this is showing like a massive accumulation um, uh, by convicted long-term holders. And so now we're just now like a couple of days ago, we kind of this ratio turned up, uh, and is actually now it's like you can think of it as green. So we're in this, I think we're in the beginning stages of the bull market and a lot of the stuff we look at on chain, uh, and you know, is saying the same thing. And this fifth slide is this is just, uh, zoomed in a little bit right there on, uh, on the kind of that turn up in that green, uh, signal? Yeah, so this is just like the really up close, uh, version of it. And so we can kind of see that that ratio is just starting to turn a little bit. So so I kind of think of this as the reflexive kind of, uh, parabolic phase of the bull market, uh, is just starting up. We, uh, we just kind of entered that entered that zone.

• 11:55Speaker 02

  Yeah, i- it's incredible to kind of just see how clearly you can, uh, you can identify this with the on-chain metrics. Let's talk about, uh, the perpetual fund, uh, futures funding rate. I don't think a lot of people understand how this works. Now all of a sudden, there's a Bitcoin futures ETF. So let's take a little bit of time and really kind of explain like, what is this perpetual, uh, futures funding rate? Yeah, so I it's perfectly, you know, understandable to be a little confused by derivatives. We saw the other week, uh, one of the, you know, so-called greatest traders investors of all time, Michael Berry, legendary, uh, you know, main character in The Big Short, comes out and says, hey, just to short Bitcoin, do you need to be collateralized? How does it work? You have to pay a, do you have to pay a rate? And so so Michael Berry doesn't understand perpetual futures. It's it's okay if you don't. And so we're, you know,

• 12:38Speaker 02

  We're here to break it down. So essentially, you know, there's futures contracts like, you know, what the standard commodity markets have, whether that's for any commodity or Bitcoin, and that's, you know, dated into the future. And then with Bitcoin, Arthur Hayes, a former CEO of Bitnext, came out with a perpetual futures contract. So it's a futures contract that never expires, but it essentially it rolls over about every eight hours. And so what you see is, in order to keep this this market, this derivatives market, where you can leverage up long or short, so you can you can take, you know, a 10x leverage position, which means if Bitcoin goes up 1%, your holdings or your contract value goes up by 10%, it's it's just leverage on your on the market. And so

• 13:19Speaker 02

  to kind of balance these books or to keep the price tethered to the spot market where real dollars or, you know, real dollars are trading against Bitcoin, there's a funding rate. So if if the perpetual swap market gets too overheated and there's too many longs relative to shorts, the longs are going to pay the shorts a percent of their their notional position size every eight hours. And so that's the funding rate. So when when you see the really high green spike, long positions are paying short positions a pretty good amount of money, just just to hold their position. And so this kind of incentivizes the market to stay tethered to what the actual spot price is, because everybody wants to be long Bitcoin, naturally. But if too many people in the derivatives market are long, well, then there's going to be a really strong financial incentive to be short. And so you can kind of see

• 14:03Speaker 02

  based on where these these funding rates are, what the kind of the maybe not the majority of the market, but what's kind of the the bias in the derivatives market, who's long, who's short, and what side of is kind of more over levered. And so you know, this is a kind of a more zoomed up view. And recently, when we were at like 66,000, I I think I posted that chart and said, hey, a little overheated here. I think people are getting getting a little greedy. And so, you know, this pullback, it's it's not anything, anything fundamentally has changed. It's just, you know, derivatives and leverage and human psychology and greed get in the way. And so That's that's kind of the cost for this pullback. Yeah. And so when we look at this kind of zoomed in version, what's fascinating to me is like you could literally just clearly see there was a massive spike in that that futures kind of interest there. I mean, literally it's

• 14:47Speaker 02

  just vertical in that big spike on the far right. And then what you can see is very clearly outlined right afterwards is the price decline. And it, you know, in some ways, almost like, keep it simple, stupid, right? It's like, look, if you start to see this, which you, you know, so clearly called out of like, there is still the possibility that we get these kind of head fakes. It's not a long term or medium term head fake, but definitely day to day price movements can be affected by these futures. And now we've almost added more complexity because you have this Bitcoin futures ETF. You've got more people who are going to start speculating in the market. And if you overlay that with a price break of the previous all time high, everyone just gets levered long real fast and thinks that we're going to go, you know, straight to 100K.

• 15:28Speaker 02

  But of course, you know, the the most entertaining outcome is the is always the outcome. And so we get a we get a little bit of a price depression before we then, you know, most likely go upwards from here. Yeah. And here's like, the interesting thing with with these funding rates, right? Is like, so, you know, most people trading this stuff, if you're in the Bitcoin derivatives market, you're you're most likely a Bitcoin, you're most likely a crypto bull, right? You know where this is going. You have a significant stake in this asset. You're bullish long term. But when funding spikes like this, what you can do, and a lot of people do do this, you can you can go market short with, you know, just a small amount of your portfolio. And you're getting paid like sometimes when when this is, you know, this spikes this funding rate, you can get paid 30%, 50%, sometimes 80% annualized, just by being short.

• 16:12Speaker 02

  And and you're just hedging, right? You're not you're not short your entire portfolio. You're just short with just a small amount of derivatives and you can be almost like in a market neutral kind of way. You know, you're long and you're just short with a small percent of your portfolio. And you're and you're basically harvesting this kind of yield, right? That that the longs have to pay the shorts to keep their position open. And so that, you know, the funding rate is, you know, it's kind of this this, you know, genius invention by Arthur Hayes, like this financial market innovation, but it's just kind of a way for for the speculators to to stay balanced a little bit. Yeah, it's fascinating. We look at Futures open interest. Explain this one. Yeah, so a couple of people I saw on my feed, they were they were saying, hey, well, you know, be wary. Bitcoin broke its all time high, but look, the the futures open interest, it's it's right below its all time high.

• 16:57Speaker 02

  Things are getting a little frothy and and they're correct. The the the open interest is now near at, you know, an all time high. But there's a couple of things under the surface, you know, which which is why, you know, there's a big difference between where we were in April and when where we are today that I think are are kind of significant and that aren't really understood. And the biggest thing is the percent of open interest that's that's margin with Bitcoin, that's collateralized with Bitcoin. So so open interest, you you're basically you pledge collateral to enter these contracts, whether that's, you know, a perpetual swap futures contract. Or just, you know, say, March 2022 futures contract, you have to pledge collateral. And you can do that with Bitcoin or you can do that with stable coins. And so at the top of the market in in April, so even though we're at an all time high at the top of the market in April.

• 17:40Speaker 02

  What you saw was like 70% of that open interest was collateralized with Bitcoin. So as the price drew down, not only was your P and L, your profit and loss in the position drawing down, but what you also saw was your collateral was drawing down. So that leads to like a pretty explosive dynamic where, you know, the long side of the trade gets gets gets wrecked, basically. And so now with CME, this futures ETF coming in and just, you know, the not like not so much like like with Binance, say, you know, there's not as much Bitcoin derivative or Bitcoin collateralized derivatives. And it's more like stable coins like tether. And so this leads to far less kind of, you know, explosive long liquidations and actually more short squeezes.

• 18:18Speaker 02

  So this is kind of, you know, this is fundamentally why the the futures market, the the kind of the dynamic here, even though it's close to all time highs is quite different. It's because like under the surface, the makeup of these these contracts is is a lot different. And and that's that leads me to be bullish, you know, if if we see this this spike in a significant way. It's kind of a sign that things are getting a little frothy, kind of a little a little toppy in in my opinion. When you look at this, one that we have here with the Bitcoin margined futures interest, the 70% and 45%. Is that kind of a good reading of like the band that this trades within normally? Or are those kind of outlier type? Uh, high points and low points.

• 18:58Speaker 02

  Yeah, so it's, I mean, it's still just such a nascent market, um, you know, and, and it's like every single day, um, just like with the futures ETF coming in, right? Um, there's just, there's so much capital that that's coming in and, and really like, we don't have a, you know, a large precedent. Back in the day when, when Arthur launched, uh, the first kind of with Bitnext and the perpetual swap market, uh, basically everything was Bitcoin derivatives because we didn't have, there wasn't really like any sort of stablecoin. There was no fiat onramps to these derivative exchanges. All you had to use was Bitcoin. And so now we're, you know, we're with more regulated stablecoins like USDC. Um, and then increasingly like derivative exchanges popping up all over the world with Tether. Um, you see kind of this dynamic change a little bit. And so this is a very, very healthy development for the market.

• 19:40Speaker 02

  I think the CME futures, the paper futures, uh, we talked about it a little bit when I was on the show last time. Um, even though people think it'll lead to price suppression or all this other stuff, I actually think it's quite good because it means that these, these kind of, uh, drawdowns that you see throughout the history of Bitcoin that sometimes are very, very volatile. Um, I think we're going to see less of that because of, of the, you know, the makeup of this derivatives market. And when you look at the exchange Bitcoin futures open interest, uh, we've got it here kind of broken down across the different exchanges. Is there anything that we can read into this other than just like, where do people want to go? Where, where's kind of the most popular venue? Uh, or there are other kind of takeaways from this? Yeah, the biggest takeaway is, and I don't have a, a chart of the, this over time, but the biggest takeaway is that CME is now the leading, uh, open interest derivatives exchange, futures exchange.

• 20:24Speaker 02

  And this was, this is like a very, very new dynamic. And it just kind of shows you, um, I, I forget off the top of my head what this was looking like a couple of weeks ago. But I think I, at the all time high for CME open interest was like, um, you know, three billion at the market top. And it was trading around a couple, a couple billion. And so this just kind of shows you like in, in a week with just one ETF product. And now the second one's starting to trade today is 5.6 billion. Um, there's so much demand for this, for this product. There's so much, you know, financial demand to come get exposure in any, you know, any sort of way to Bitcoin. Um, and so now that with, with the CME leading, uh, these derivatives markets, um, it's, it's a new interesting development. Um, and it's, and it's also interesting because you can't short, you can't use Bitcoin as collateral on CME.

• 21:06Speaker 02

  And so you can't long with with Bitcoin. You can't long your longs, which kind of led to April and the follow up May crash being just so explosive. That doesn't exist anymore. And when you short, you actually have to short with dollar collateral. So you have to keep pledging collateral, which which is bullish, which is actually leads to explosive short squeezes. So just an interesting dynamic. I mean, I'm going to keep watching it, but CME and, you know, the kind of American institutions are really showing they want Bitcoin exposure. It's true in mining. It's true in trading. Joe, John, what questions you guys got? Yeah, Dylan. Good to see you, man. So my question would be around, we went over the chart earlier about long term holders, kind of offloading some of their Bitcoin and distributing it to new people.

• 21:46Speaker 02

  What levels should we like, should we track that on? Should we be concerned at a certain level? Like, how closely do you watch that going into the new bull market? Yeah, I mean, we can, if we take it like a proportion or like a total of circulating supply, it looks a little different. And you can kind of see these these sort of levels off the top of my head. I'm not really sure, but you know, if anything, this is just a couple of days and, you know, the long term holder supply might continue to tick up as coins kind of age into this, you know, quantification of of long term supply. So I mean, there's no specific level. It's just something that, you know, you kind of have to watch and and it's bullish because, you know, if it means that more of demand is coming in, it's not like

• 22:23Speaker 02

  long term holder selling off means the bull market started. It's that we had this bull market coming in. And so long term holders naturally just kind of take a little bit off the top because there's there's so much capital coming in and Bitcoin trades parabolic because of the supply squeeze. So you know, there's there's not any specific levels that would say, hey, I'm selling my Bitcoin, but you know, it'll be interesting to kind of watch over the coming months and see what happens. Gotcha. John?

• 22:45Speaker 03

  Yeah, Dylan, what's up? Nice to see you again. So last, since 2018, this is the lowest supply of Bitcoin that's actually been held on exchanges. What are your thoughts around that? Is that something you kind of expected to see?

• 22:58Speaker 02

  Yeah, I mean, it's really interesting because you're dead on. It's it's at the lowest point since 2018. And really, in March of 2020, we kind of saw this like paradigm shift of of Bitcoin on exchanges. It had been basically increasing for the entire history of of Bitcoin exchanges. And as more and more exchanges came on and with Coinbase holding like More than a million Bitcoin, but in March of 2020, and I kind of have a thesis that it was kind of sparked by the macro event that occurred with COVID and all of the money printing that followed. But we saw this trend reverse in a huge, huge way. And so I kind of think that we're in this kind of new secular, maybe paradigm, if you want to call it, of lower Bitcoin supply available and the exchange balance is just another kind of way to quantify

• 23:41Speaker 02

  what's happening. You know, more demand, not enough supply. That's just kind of Bitcoin wrapping up for you. Dylan, one of the things that I find fascinating is if you look historically, the plus 50% drawdowns in markets have come after massive bull markets. And they're usually, you know, 75 till let's say 90% type drawdowns. What we saw in 2021 was obviously there was a bull market kind of run up from 10,000 to 65, 64,000. But we got a drawdown of only about 55%. So it wasn't kind of a full 75 to 90%. Do you think that that was almost like a bear market that was condensed into a summer?

• 24:26Speaker 02

  Rather than it be a multi-year bear market? Or is that something that just know there is this kind of external shock in terms of the Chinese ban to miners, et cetera? And that was more of an outlier than we're just getting these tighter cycles in terms of kind of price drawdowns? I think it's a little bit of both. I'm kind of in the camp that I think that the four-year cycle may, the way that people kind of traditionally think of it sparked by the halving, you know, Bitcoin trades goes parabolic and then kind of dies for three years. I think that that era may be coming to an end here and we're kind of in this, you know, age of like the secular adoption where everything's happening so, so fast. And we're going to kind of get these mini boom and busts as, you know, price goes parabolic.

• 25:08Speaker 02

  With derivatives, with all the layered bets on top of it, with just natural human psychology, you're going to see 50% drawdowns. You're going to see 60% drawdowns, especially if there's some sort of macro event, right? Like Bitcoin, if March of 2020 happened again and Bitcoin's at 60K, well, it's going to get cut in half probably. And that's fine because, you know, it's an open, free market and, you know, We know what happens next after that. But I think, I think basically, yeah, we had a bear market kind of condensed in a summer. We saw, you know, minor capitulation, like 50% of the hash rate just had to migrate overnight. We saw, you know, Elon FUD, we saw ESG FUD, we saw all of it. We saw Saylor is going to get liquidated FUD. But ultimately, what happened is that, you know, hodlers and stackers stacked the dip. That that supply squeeze that, you know, doesn't lie, it's open free market.

• 25:52Speaker 02

  Well, you know, we kind of ran it right back. And so I think we're at the start of another bull market. But I do kind of think we're in this, in this new era of, you know, kind of maybe rounded tops and rounded bottoms. Maybe we get a parabolic blow off top, but I don't think, you know, we're going to see another three year 80% bear market. I don't think Bitcoin kind of goes away and dies like it did in the past when it was, when it was a lot, lot smaller and less significant. In 2017, we saw a number of 20, 30% drawdowns as it went from 1,000 to 20,000, so kind of 20x for the year. But there was a bunch of these kind of 20% drawdowns. Usually those weren't considered any sort of like cyclical bear markets. They were more so just like you would get these boom and bust cycles that add up to that 20x upside.

• 26:33Speaker 02

  Do you anticipate as we move higher, once we broke the all time high, that we'll get some of those kind of healthy 20% corrections along the way? Or is this something where it's more so, there's so much illiquid supply that it just goes vertical and, and feels different than maybe 2017 did? Yeah, I think, I think we'll get 20, 30% drawdowns, you know, basically until the dollar's dead. And, and I think that's going to, you know, be 10, maybe 10 years, maybe, maybe 15. And I think by that time Bitcoin's a lot bigger, but just with the way Bitcoin trades in this kind of parabolic manner because of the supply and demand dynamics, and then you layer on top the derivatives, right?

• 27:09Speaker 02

  Like we were talking about, it kind of makes this complex market structure that, you know, you know, with human greed is just kind of, you know, naturally, naturally pretty cyclical. So that's what you're going to see. I don't think Bitcoin won't go straight, you know, to the right. It's going to be, there's going to be volatility and I think that should be embraced. Volatility is, is a pricey pay for, you know, these immense returns. These once in a lifetime pet returns. Got it. And then what do you think is the kind of end of year price of Bitcoin now that we've broken the all time high? You changed anything? Uh, no, I think, I think, uh, maybe 100K is, uh, I mean, I think we pretty much have a great shot at overshooting that. But 100K is kind of been my, my base since, uh, since mid summer and we started to run up again.

• 27:50Speaker 02

  I think, I think it'll get kind of crazy and with like the, the reflexivity of a Bitcoin bull market with it going parabolic and this kind of the supply squeeze we've been talking about, I think it'll happen a lot, a lot, lot sooner. But no free ride. That's why that, you know, this, this recent pullback and the derivative traders, you know, getting caught off sides. We can't let anyone, uh, get a free ride. Dylan, you telling me 100K laughing and smirking like that tells me that you think it's a much higher number than 100K. But you feel like you have to say 100K. Yeah. I mean, I, I have, I have a good amount of, uh, bets, if you want to say on, on, uh, high prices. But, um, you know, I think conservatively I'll say 100K. So I wrote in 2019, 100K, and that's kind of how I felt as well was like, that's a pretty conservative, pretty, uh, layup.

• 28:35Speaker 02

  Like, hey, that'll be a good receipt to pull up when we cross over 100K on our way to something much higher. I think part of what's, uh, uh, very interesting is we had Pete Rizzo, uh, come on the show recently from Bitcoin Magazine. And one of the things he thought, he said that I had never heard anyone articulate it this way is almost that you need a psychological attack on Bitcoiners. Everyone already thinks 100K is going to happen. And so in some weird way, uh, it increases the odds that like the market manifests a certain price. Cause everyone thinks that's going to happen. Uh, so they're holding until it occurs. But nobody thinks, I think the number he threw at at one point was $500,000. And that's like a shock and awe type number, but his point was basically, look, whether it goes to 500 or something in between 100 and 500,

• 29:15Speaker 02

  it's gotta be a number that a lot of what are now deemed hardcore Bitcoiners or long-term holders are like, whoa, this is a big number. And they're willing to actually, uh, sell some of the Bitcoin into the market. And that's where you kind of get that rounded top rather than, uh, oh, we're just going to go to 100K and I'll go to the park for a picnic. And like, no problem, right? Like you almost need to, is to take the breath away from the market in order to actually get the, the top before you get some sort of correction. Yeah. Pete's been around for a while. We talk all the time and he's seen a few cycles and I think he's dead on. I think what he's saying there is just kind of what you see in the data with like during a parabolic bull market when you see these long-term holder supply drawdowns, right? It's just like, it's like a psychological attack. Like, oh my God, Bitcoin is at $200 in

• 29:57Speaker 02

  2015 and now it's, and now it's 20,000? Like, holy hell, I need to sell some, right? And so, like, you know, that's just kind of what you see. And I tend to agree. 500K in 2022 would be, would be pretty wild, but I mean, I'm not going to get out. That's for damn sure. 500K is a number that, I mean, when he said it, I was like, whoa, okay. Like, that's a big number. That's pretty funny. Yeah, like, that's, I mean, you know, it, in some crazy way, it's less than 10x from where we are now. So like, in Bitcoin terms, like, that doesn't sound like super crazy. I think it's the explosive move that would be needed to have it happen in the last 75 days of the month, or of the year, right? It's such a short period of time. We're almost at, you know,

• 30:37Speaker 02

  November 1st. So literally, you're talking about almost 60 days. And to move up in hundreds, if not 1,000%, would be, you know, pretty ridiculous. Yeah, I mean, I think 500K is more of a 2022 thing. I mean, maybe, maybe, maybe 2021, maybe I'm beating a bear. But I think you're just gonna see it rip and you're gonna see, there's, the whole world's short Bitcoin. I mean, you had a, you had a pretty great call with the pension, pension funds. I think back in 2018, that just, we just saw, what was it? Houston firefighters? Am I mistaken there? And guess what? Like, every pension needs to allocate and they're all underweight. And so you're gonna have this huge wall of money come and

• 31:18Speaker 02

  no one's selling. So, I mean, until there's a psychological attack and we're at 500K. So, or whatever it is, right? So, you know, the whole world's short Bitcoin. I'm not, but you're not. We're all, we're all stacking and hoddling here, but everyone else is underweight. And so that's, you know, that's where the fun starts. I think that you're right. Thanks for doing it, buddy. Thank you.