#713 Bitcoin Whales Are Taking MAJOR Gains 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.

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. He has quickly become one of my favorite writers in all things Bitcoin, including deep dives on various on-chain analytics. In this conversation, we discuss the Bitcoin fundamentals, the on-chain metrics, what happened this past week, and what the on-chain data is telling us to be prepared for moving forward. I really hope that you enjoyed this conversation with Will, as I always do. Alright, let's get this episode with Will. I hope you guys enjoy this one.

• 0:37Speaker 01

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

• 1:01Anthony Pompliano?

  The young wizard, Will Clemente. What's up, man? How are you?

• 1:04Speaker 02

  Gentlemen, how's it going?

• 1:06Anthony Pompliano?

  Let's get into the on-chain metrics this week. You start off your newsletter with this whole idea around like the Fed announcing the tapering, and then what we're seeing in the futures perpetual funding rate. So walk us through this.

• 1:18Speaker 02

  Cool. So what we're looking at here is A, just some price levels, and then B, Bollinger Bands with the WIC high timeframe indicator over it, it just is looking for these volatility squeezes. So you're essentially looking at where price is getting compressed, and AKA where volatility slows down, and we're primed up for an expansion, because consolidation leads to expansion, expansion leads to consolidation. And so what we're looking at here is this indicator identifies when we're getting ready to have one of these squeezes. And then the bands are, these are Bollinger Bands. I think almost anybody who does TA is familiar with Bollinger Bands, but essentially they're looking at the standard deviation from price. And by definition, when price is at the bottom of the bands,

• 2:03Speaker 02

  price is relatively low. When it's at the top, it's relatively high. And then so, yeah, what we're looking at here is these previous three volatility squeezes. We had one in April, one at the bottom of summer, and then the third one in September. What I want to point out here is a couple of things. A, the amount of, exactly how much time they take to play out kind of varies. Like if you look in April, it took, you know, a good week or two for that to play out versus over the summer, it took about four or five days, right? And then the one over September, in September, took about a week. Um, and then the other thing I wanted to point out was oftentimes these squeezes break out in one direction to grab liquidity from the breakout traders before going the opposite way.

• 2:47Speaker 02

  Um, and so if like, if you look here, for example, in April, we broke out above the bands. So it looked like, oh, we're squeezing to the upside, right? Trapped all the traders that are looking to, you know, trade that breakout, you know, market makers grab the liquidity or whales grab the liquidity. And then we go the other direction. Same thing over summer. It would look like we were breaking out to the downside, grab that liquidity, and then we flipped to the upside. Um, and so right now we're sitting smack dab in the middle between both bands, at least at, at the time of writing. Um, but you know, that's just something to keep in mind if you're, if you're watching this moving forward.

• 3:22Anthony Pompliano?

  When you start to look at how the underlying, um, kind of fundamentals are looking, the first thing that you wrote about was that Bitcoin future perpetual funding rate. How much, before you kind of go into what exactly that's telling us, how much do you look at like the price and things like Bollinger Bands, et cetera, uh, being driven by these underlying fundamentals? Or do you think that there's some reverse, uh, element that people are actually reacting to price? Are they driving price or reacting to price in your opinion, uh, when you're actually looking at kind of like a macro analysis of Bitcoin?

• 3:53Speaker 02

  Well, it's both. I mean, you know, some people sit in like the, you know, efficient market hypothesis and they say everything's priced in. You know, then there's people like, you know, I'm reading George Soros' book, Alchemy of Finance right now, and he's talking about essentially, you know, people aren't making decisions based off of what's best for them. They're making decisions off of what they perceive to be the best decision for them to make. And so like with that being said, I think, you know, when it, when we're talking about like news, I mean, people are just reacting to what they think is the appropriate reaction to the news, not necessarily what's the correct reaction to news. Um, as far as the fundamentals go, I think you're kind of, are you like implying like, like on-chain when you're, when you're saying fundamentals?

• 4:32Anthony Pompliano?

  Correct.

• 4:33Speaker 02

  Okay, cool. Yeah, I mean, so I look at it two ways. When we have like, we're talking like supply and those kinds of things like supply getting locked up that those things or supply, you know, becoming liquid. Those kinds of things tend to be leading indicators, but at the same time, price can affect, um, you know, market participant behavior. Um, you know, if we start to see like prolonged downtrend, you know, people that were previously really strong hodlers, you know, they may, you know, but let's say someone bought in. Five months ago, right? And they've now become a long-term holder. They bought in now, it would be in June. And so they've held since June, you know, they, they, you know, they, they've held through the bottom of the, of the bear, but they pretty much like, you know, just experienced up only.

• 5:14Speaker 02

  Um, and so then, you know, let's say we start to reverse pretty heavily. Well, then, you know, those, what were previously long-term holders, they may say, oh, well, forget this, right? Like, okay, I'm, I'm out and because they were just expecting, you know, some, some major reversal off of the, off of the summer lows. And so what I'm trying to get at is just like. A lot of times on-chain is a leading indicator, but there are certain occasions where, you know, fundamentals are, are affected by price. Um, or if you have news events too, you know, you can, you can see the reaction of that stuff in the data. So it's like oftentimes I don't really look at news too much. I mean, I, I, I do watch news, you know, like major headlines. I have like, you know, like alerts on like market watch.

• 5:56Speaker 02

  But generally speaking, the way I kind of think through that is. You can, you can really get caught up in, in, um, your biases around like news and, and, you know. It's one thing to keep up with the Bitcoin market, but then to try to like become a global macro, you know, expert like that's like, you know, you're just not going to be able to do that. And so what I, what I look for is. What is, what is, what are the market participants actually doing in reaction to the news? And then I can, then I kind of use that as a way to gauge like, okay. Is, you know, is the market completely changing behavior based off this news? Well, you know, maybe that's something actually serious versus, you know. We got China banning Bitcoin for the 20 millionth time. No one cares, right? And you can see that in the data. So I, I would say like.

• 6:39Speaker 02

  I tend to look at the data to gauge what the reaction is from, you know, from the news or whatever.

• 6:44Anthony Pompliano?

  I think that's a great way to to kind of frame it as to as how you look at it. All right, let's talk about future perpetual funding rate. What's going on here?

• 6:50Speaker 02

  Right, so this is based off of the delta between the spot index, so a weighted average of all the the spot price. That's the index and the actual mark price on the individual perp exchanges. So that's that's the mark price and the weighted average of all the spot exchanges. And that's the delta between the two and that's that's used to create the funding rate. So what you're basically looking at is how aggressive are, you know, perp traders relative to the spot market? And so we've talked about this, God, I don't know, for probably months now. But what I really wanted to to show here is that we got this little reset after the after the Fed announced that they were going to do tapering.

• 7:30Speaker 02

  You know, okay, they decided they were going to stop printing and then, you know, as much money as they they were, you know, still printing insane amounts of money. The market, you know, market reset a little bit, got bought up pretty quickly after that correction. We've now seen funding come back a little bit. I mean, it's not like outlandish, you know, it's not ideal. I just, I don't think there's any strong signal from it at the time. Where where, you know, it's in the past, where I think funding really has is actionable is when it's diverging from price action. It's like when you have a dislocation between, let's say, prices grinding down, funding is rising. You know, that's that's showing you that the the effort that the perp traders are trying to exert is is being overwhelmed by selling from spot.

• 8:12Speaker 02

  Or conversely, if price is rising and funding is is decreasing. You know, those are the those are the kind of things that I try to look at in terms of, you know, when when funding is actionable. Just because funding is positive doesn't necessarily mean it's bearish, right? Like if the funding is up, that doesn't mean that we're automatically about to nuke. But with that in mind, where where I, you know, do think it can, it could be kind of like a cautionary thing is when you when you kind of zoom out and look and see that we haven't had negative funding in over a month. We briefly reached negative funding, kind of ironically on the fifth of of last. Month. But yeah, I mean, at some point, we'll probably get a at least a slight, you know, flush of aggregated funding into negative territory.

• 8:57Speaker 02

  And and I'm not, once again, I'm not saying that just because funding is positive that we're automatically going to go down, but it's just something to keep in mind. You know, we talk about this with Soper too, right? Like at some point, it's going to come back down and retest that one threshold. Similar thing with with the, you know, with with funding. At some point, we're going to get a flush back down to negative territory. And it's kind of just something you, you know, look at and say, okay, like with that in mind, you know, we're in a broader context, like we're susceptible to some kind of flush at some point in the future.

• 9:27Anthony Pompliano?

  You have a brand new chart that you included this order book visual. I've never seen this before. So you're gonna have to explain to us what exactly is going on here. Because it looks beautiful, but maybe confusing both to me and to other people.

• 9:40Speaker 02

  Yeah, totally. So this chart actually isn't the the order book stuff. I think I've thrown the order book charts in there before. I use Trading Light for that. But I I've talked about order books because it kind of relates to the bottom section. So to start off with with what I was saying about order books, you see a pretty strong confluence of bids right across 60K across several major exchanges. But as we've talked about before, these orders can be spoofs. And so basically, like you can use these big bid or ask walls to generate liquidity for the opposite, you know. Let's say, I like to use examples to explain things. Let's say, you know, you you think price is going to go higher, but price is starting to run away from you. You're this huge whale where you can set a giant ask wall. This is essentially the sell wall.

• 10:25Speaker 02

  And you can kind of cap off the price, right? And no retail guy is going to want to sell into that because it's a huge order. And so what they're actually doing is is they can use that to actually fill buys on the other end of that because they're generating liquidity right below their their their ask wall in that case. Or conversely, let's say the market's starting to go down and they want to get out of their position, but you know, they can't. They can't start market selling because they'll incur a lot of slippage and price will just start running away from them. What they can do is they can set a massive bid wall and they can actually be filling sells as as they're generating liquidity because retail doesn't want to retail doesn't want to sell into that giant wall buys, right?

• 11:06Speaker 02

  And so they can use these things to kind of get in maneuver in and out of positions. It's not as straightforward as. Oh, you see a bid, bid, a, a large bid. So that means that it's, you know, automatically bullish and there's like a huge wall of bull whales sitting there waiting to scoop up coins. It's a bit more nuanced than that. But with that being said, um, I do think like a lot of traders are staying in these bids in confluence with 60K just being a really strong level. Like Suzu was joking around saying like the great wall of 60K. You know, I think over the last week or so, you've seen that hold up as a pretty strong level. And keep in mind, you know, we're just ranging, you know, the last couple of days. Um, but that 60K level, when you look, you know, and this, this gets to this chart, this chart is looking at all the liquidation levels.

• 11:51Speaker 02

  So we can see, you know, let's say price gets below X number. Well, there's a lot of liquidations there, right? And, and so what you see, and I kind of highlighted this in this little black box is all those, those pink lines are showing you there's a lot of long liquidations, in particular, people who are 25X long. Um, and in that, in that little cluster there, and that's right below 60K. Uh, and so what I'm, what I'm trying to say here, and, and I know I kind of sound like I'm saying, well, price could go up or down, right? Um, and first of all, you know, I don't have a very strong opinion about the price in the short term, other than we're probably going to get a large move because of, we talked about, you know, volatility, the volatility squeeze.

• 12:35Speaker 02

  Um, but with that being said, if we do get below 60K with volume, we see a high volume breakout, then I think you'll probably start to see these long liquidations, um, you know, you'll, you'll start to see like a cascade of longs get liquidated because you can see all those levels set just below um, 60K in that chart there. So this is something that I've started looking at recently, but had never thrown in the newsletter before. But I look at it in confluence with funding. And then also like, uh, we've talked about the convexity that coin margin to open interest has, I look at it in confluence with that. So, you know, like, you know, theoretical bear case would be like an enormous amount of liquidations under the, under a certain price level.

• 13:17Speaker 02

  Um, you know, you're seeing funding rising as price keeps going down and they're all coin margined, open interest, you know, coin margin contracts that are being opened and you can see that in open interest. Like that would be like a theoretical, you know, bear scenario, but, um, yeah, just another thing to use in confluence with some of those other metrics.

• 13:37Anthony Pompliano?

  Before we continue, you're getting better, man. I love it. Let's keep going. I can tell you're learning a ton because you're killing it right now. The adjusted sopra, you and I in sopra, we were just chilling there cheering sopra when you walk into the parties at ECU. Adjusted sopra, what's going on here?

• 13:54Speaker 02

  Yeah, so sopra is our spent output profit ratio. So we're looking at when a coin was last moved and when it's being moved now. So we can look at the amount of profit or loss that that coin is realizing. Coin last moved at 50K, now moves at 40K, just random number. Okay, it's realized, it's realized $10,000 of net loss. Coin last moved at 40K, now moves at 50K, it's realized $10,000 of net profit. And so we can run the ratio of all the coins that are being spent on a given day, and we get sopra, which is spent output profit ratio. And then we're looking here at the adjusted version, which filters out all the transactions or outputs below one hour to

• 14:38Speaker 02

  kind of filter out some of that noise. And then on top of that, I threw a 14-day moving average because that really smooths it out to give us this broader picture. You can look at it in like on the, on like just the regular daily version, which I do that. But we're talking about like in this section of the newsletter, I wanted to kind of navigate from, I should have structured it so like we look at the short-term stuff and then move more, you know, more macro. So here, I'm just trying to paint the picture of what's that broader context, but you can use the daily version. What I'm looking at here is, we're still in bullish territory as long as we're above one, we'll be bearish once we come back down below that one threshold. And then, again, you know,

• 15:19Speaker 02

  if we come back and have a failed retest of that one line. But I remain, you know, I remain macro bullish using sopra as long as we stay above this one threshold because we came back down and retested one as support when we retested 40K, whatever, a month ago or so. Very similarly to, as you'll see after the September correction before the major run-up we had last year, right? And at the beginning of October, it was very similar. We came back down and retested that one threshold right on the dot. So, and then over summer, too, you'll see.

• 15:51Speaker 02

  As I talked about, you know, bearish, uh, you know, bearish confirmation would be coming back up and failing to break above that one threshold after breaking below, which you could see we did over summer. So, um, yeah, I mean, as long, yeah, once again, like as long as we're above it, I mean, I don't see anything to be entirely concerned about.

• 16:09Anthony Pompliano?

  When you look at the short-term holder profit-loss ratio, this seems to be following a similar trend.

• 16:14Speaker 02

  Yes, this was created by David, uh, David Poel, I think in the last couple of weeks. Um, what you're looking at is all the ratio of all the short-term holder, uh, the, the short-term holders in, in profit versus loss. Um, so rather than in Soper, we're looking at all the spent outputs. So we're looking at all the coins, the coins being spent on a given day and the, the profits or losses being realized versus in this chart, we're looking at specifically short-term holders. You can look at short-term holder Soper, by the way, not to get confusing, but we're looking at just the short-term holders and the profit and loss that they're, that they're sitting in, not realizing, if that makes sense. Um, and so it's, it's very similar in the sense, in the sense that you have this one, we have this one threshold that kind of operates as this, this cutoff for bullish or bearish, uh, market trends.

• 17:04Speaker 02

  And once again, very, just like Soper, um, in bullish market trends, you want to buy the dips along one and you want to sell or, or, you know, perhaps, you know, hold off buying, uh, for, for long-term holders, uh, the retests from the underside of below one. And so right now, once again, as long as we're above this one threshold, um, I don't see anything to be entirely concerned about in a broader context.

• 17:28Anthony Pompliano?

  When you start to go ahead and look at the illiquid supply shock ratio out of all the charts today, this is the one I had the biggest question about, it just keeps climbing and climbing and climbing and climbing. Uh, is that good? Or at some point could we cross over into like, no, it's actually gone too high and there's like a negative side effect?

• 17:46Speaker 02

  Yeah, I think, I think there's a couple like confusion, like a bit of confusion around this. A, A that and like, B, people like to say, oh, well, the ratio is now at the same level it was at, at sixty-four K earlier this year, whatever sixty-five K when we topped out, you know, how's that not bearish? And then also, you know, how are we at a higher ratio, you know, than we are now when we were in twenty seventeen at, at twenty K? The way, the way I look at this is you just try to think about what is it showing from first principles? It's just showing that supply is moving to these illiquid entities. So it's moving to these entities who sell less than twenty-five percent of the coins they take in, or they hold at least seventy-five percent. So, you know, they take in four coins, they hold at least three of them.

• 18:32Speaker 02

  And, and so it, it's only factoring in supply versus there's obviously a whole nother, you know, part of the equation, which is demand. And so, you know, to me, this, you know, this doesn't necessarily mean that, oh, we're at a certain level that translates to something in price. To me, it's just showing that more supply is getting locked up. I look at it more of like, what does this mean from first principles? Rather than looking back at a certain value and attaching that to price per se, because we don't have, we don't have the, the demand equation as well. But, you know, one thing to note though is obviously declining a liquid supply shock ratio is, is bearish because it's showing that supply is becoming liquid from entities that were, that were previously illiquid. So, you know, coins that were previously locked up

• 19:17Speaker 02

  are now getting unlocked and, or, or AKA are now being, you know, spent into the market. And so you're like, we're currently getting above where we were earlier this year. We're reaching like twenty twenty-one all-time highs, which also means that we're now at the highest point in the ratio since, since we were in, in late twenty seventeen. It also kind of resembles a similar structure where we had, you know, this, this peak in like, you know, the early part of early twenty seventeen, I don't, I can't tell the exact time. But then, you know, we came back down just like we did over summer and then had another up thrust in that before having this prolonged downtrend. And so I would be kind of looking for something similar if we start to see. You know, this declining for, say, you know, a week or two on end, then I'd probably get, you know,

• 20:03Speaker 02

  pretty cautious, uh, cause it's showing, you know, supply is, is becoming liquid. I, I kinda like to use a liquid supply more than exchange balances, to be honest. Like, if, if you'll notice, like, I haven't really thrown exchange balances in my analysis for, like, a good month or two. The reasoning is just because you're, you're so reliant on the heuristics from whatever, like, data provider you're using, um, whether that's Glassnode, Quinmetrics, and CryptoQuant. And, you know, these guys are brilliant, like, they're excellent data scientists, but it's never perfect because exchanges are constantly shifting how they're, you know, holding custody, or, or, you know, how their, how their transactions are, like, all these different things are constantly changing. And so you can never get it perfect.

• 20:44Speaker 02

  And Glassnode is missing a couple of major, you know, spot exchanges, one being like FTX, which is a big one for me. And so I kinda like to use liquid supply as a better proxy for exchange balances. Because, um, you know, the, the exchange balances are defined, are, are in that liquid supply cohort. Uh, and so like, you can kinda look to see if liquid supply is, is, um, increasing or declining. And so inadvertently seeing the liquid supply shock ratio increasing is also saying that coins are coming off exchanges, if that makes sense.

• 21:15Anthony Pompliano?

  That does make a lot of sense. Uh, we've got this long-term holder supply shock that kinda continues to roll over, as you mentioned. And I think one of the pieces, uh, Dylan Leclerc said this at one point, um, and there's some questions that people have, so maybe you can explain it, which is, when you see the long-term holders holding, increases the illiquid supply, new demand comes in, price has to go up to accommodate everyone. I think most people can wrap their head around that. But when you start to see the long-term holders rolling over, and they're distributing some of the Bitcoin into the, the market, or into, uh, new investors' hands, that's an, as you put in the letter, a natural bull market behavior, but to some people, it feels like that's a bad thing. So how, how do you evaluate it and kind of explain what's going on here?

• 21:57Speaker 02

  Yeah, totally. The way this works is that in bear markets, long-term holders are buying because by definition, you know, they have long-term conviction in the asset. They're looking to buy when Bitcoin is discounted, when there's no, you know, hype and mania around it, and that's when Bitcoin tends to be the cheapest. And that's, you know, in, in, by definition, in the bear market. And so they lock up a large enough portion of supply that we get this supply shock effect in the market. And as that, as that occurs, the incremental demand is going to have to keep bidding higher and higher. And, and as price starts to run up, that kind of initiates the momentum of, of price in the market. And that's, that's, that starts at, at the very beginning by long-term guys locking up a large enough portion of supply

• 22:39Speaker 02

  and, and initiating that, that supply shock effect. But once that, you know, Bitcoin is a highly reflexive asset. And, and so, you know, once, once that momentum kind of takes off, you start to get, you know, outside capital come into the market, speculators come in the market, retail enters the market, and then the, the bull market, basically, the momentum has taken a life of its own, and the long-term holders no longer have to keep locking up supply to initiate that momentum. And so, once that, once that kind of, uh, you know, momentum or reflexivity, however you want to define it, kind of takes a life of its own, then the long-term guys can start to distribute into that strength. And so that's what we see throughout, you know, every major peak throughout Bitcoin's history. Saw it in both peaks in 2013, long-term holders locked up supply in between

• 23:24Speaker 02

  those, those two double pumps, and then sold into the second double pump again. Um, in 2017, you saw the same behavior as well as 2019 and last year. And so, it's, it's, you know, it's very natural to see these guys start to distribute as the, you know, short-term guys or, or the speculators are coming in and buying their bags. And it's also saying that if you're seeing price appreciation with long-term holders spending, well, that means that new outside capital is now coming into the market. Uh, and so that kind of leads us also to the next metric that I pulled up, the spent volume age bands. It's another way of showing the same thing. Uh, and so, we, we've talked about the spent output age bands, which is just looking at the percentage of the outputs on a given day. Uh, but this is actually looking

• 24:08Speaker 02

  The volume. And so this is a bit more, this is a more accurate version of of spent output age bands, in my opinion. You're you're looking at the amount of volume on every on every given day that's like coming from each each denominated cohort. And so when you look at the amount of volume coming from or the amount of coins being spent from one month or older entities, you're starting to see that increase as well. And I put a 14 day moving average on this as well. So you kind of have to. You have to have a pretty strong trend for this to really reflect it in in the chart. And just another way of showing you're seeing these older coins being spent, just like you see in the in the long term holder supply shock ratio.

• 24:47Anthony Pompliano?

  And so when you start to look at this, there's this entity adjusted ASOL, right, which you've got here. And what is fascinating, as I kind of just eye it up, and again, you're much well versed in this than I am. In January of 21, this thing absolutely spiked very high, right? And that's when we went from kind of 10 to 30, and then we continued on from 30 to 60. Why is it that the entity adjusted ASOL would spike between, let's call it like the beginning of November to January, but it wouldn't spike from January to March? Like, what's going on there?

• 25:20Speaker 02

  Sure. So ASOL is the average spent output lifespan. And so we've talked about several of these different lifespan metrics. We just looked at long term holder supply, spent volume, age bands. This is another way of kind of looking at the same thing, except there's no volume weighted to this. You're just looking at all the coins trading on a given day and just the raw average age of all those coins being spent. And so, you know, as as I think we've talked about before, the long term guys don't perfectly time the top. Like, they don't perfectly time the bottom either. They buy, you know, into the into into weakness and they sell into strength. That's why I always say into and I don't say like they sell the top or buy the bottom. They don't perfectly time these things. They kind of average in and average out.

• 26:03Speaker 02

  And so that's what you saw, you know, at the beginning of this year. Yeah, they didn't perfectly time like the 60 K top, but they started selling really aggressively and that's shown by the spike here. Once we had that first up thrust up to like, you know, or I think it was like the earlier or mid 40 Ks. So that's all that's showing. And then, you know, overall, you had like increased spending from these older guys. As we went into the summer, though, you saw this decline. So you saw less spending from from these from these older coins, which doesn't necessarily mean that you see accumulation. It just means that you're not seeing spending. So, you know, high, high spending from older guys is

• 26:44Speaker 02

  is a bearish thing, but low spending from from older guys, when we're looking at this metric, isn't necessarily bullish, because it's just saying that they're not spending. It doesn't say that they're buying. And so that's where, you know, you look at like long-term holder supply, that's where that like comes into comes into play. But yeah, I mean, you've started to see, if you look on the on the right half of the chart, in confluence with the other two charts we just showed, once again, long-term, long-term holders or these older coins are starting to be, starting to be spent. And then two other ways you want, you can look at it too, if you are interested is Coin Days Destroyed, and then also Dormancy, which is the volume adjusted version of Coin Days Destroyed.

• 27:23Anthony Pompliano?

  The last one you have is this on-chain cost basis. What's going on here?

• 27:26Speaker 02

  Yeah, so this is Dylan's metric. I think this is actually one of the, one of the main metrics I'm going to use to kind of look for when, when we're getting overheated over the next couple of months, or maybe into the beginning of next year. By the way, like, often, oftentimes, people like to say, or people ask me, like, my buddies will say, when, when is the bull run going to end? You know, is it, is it December? Is it January? And everyone, of course, wants to know, you know, what's the exact price? I don't really look at it that way, per se. What I'm looking for as like an on-chain analyst is what are the behaviors that are occurring that that have previously, you know, resembled euphoria or exuberance in the market? And so this is one of those oscillators or, or

• 28:09Speaker 02

  metrics that you can use to kind of identify that. So we're looking at the short-term holder realized price, which is the, the capitalization weighted by the last time coins were spent, or last time coins were moved. And so like, let's say you're, you're Roger Vayer, and you bought, you know, 100,000 BTC at a dollar, and you've never moved those coins. Well, although, you know, those coins are now worth billions. If you haven't moved them since then in realized cap terms, it's still only adding a hundred thousand dollars to realized cap. And so you're basically getting like this volume weighted average price via, via on chain. Uh, and so you can then separate that from, from short-term holders and long-term holders and compare, uh, and realized prices synonymous with, with

• 28:52Speaker 02

  cost basis when we're looking at this. And, and so it's just showing the realized price or cost basis of short-term guys measured up against the long-term guys. When the short-term, when the short-term cost basis or realized price goes below the long-term holder realized, uh, realized price or cost basis, it's showing essentially that the, the short-term guys are leaving the market and capitulating at the very bottom of the market. Cause you know, it's no longer fun, you know, Bitcoin's not just going up only. And so that's when the long-term guys really step in and are dominating the market and are setting the floor as we talked about. And then at, you know, along the top part where we have this, this little red line on the screen. And that's showing when, when short-term holder realized price is blowing out relative to long-term holder realized price.

• 29:35Speaker 02

  So you have a lot of new work, market entrants, a lot of exuberance, et cetera.

• 29:40Anthony Pompliano?

  Joe, what questions you guys got for Will?

• 29:42Speaker 03

  Will, what's going on, man?

• 29:44Speaker 02

  Hey, how's it going?

• 29:44Speaker 03

  It's going well, man. Uh, so my question's about, you tweeted earlier about the volatility squeeze, uh, coming up. So we've seen the last three or four, it's not a directional indicator, right? It could go either way, but there's been massive moves. Uh, kind of, how are you looking at this and do you have a prediction on kind of what's going to come, uh, out of it?

• 30:03Speaker 02

  I think I kind of tried to allude to this, but I don't really have a strong opinion about the very short-term price. Um, I think we'll, we'll know more, like, I know this sounds silly, but we'll know, we'll know more once price starts moving in one direction or the other. Um, I do think though, that like, we've seen this pattern where prices started to break out to one, to one way of, of, you know, of the squeeze, grab liquidity and then gone the opposite direction. So based off that pattern, the last three times, I'll be a bit biased to say like, if price starts to break upwards initially, then it probably I'm, I'm going to lean more towards going down. And then conversely, if it starts to break to the downside first, then we'll probably get a, a reversal to the upside.

• 30:43Speaker 02

  Um, but I mean, yeah, Ben, I, I don't really have a strong opinion here about, um, the short-term price. You know, I try to, I try to, you know, just, just be honest. Like if, if I don't know, I just, you know, I just try to say, I don't know, you know? But the long-term hasn't changed.

• 30:58Speaker 03

  I would say what metrics though, are you watching once that break happens?

• 31:01Speaker 02

  Yeah, okay. So funding, first of all, like that, you know, I'm always looking at funding. Um, liquidations as well. Some of these liquidation levels we talked about, you know, if those start to get tagged, you know, are we starting to see a cascade kind of start to initiate? Um, you know, obviously, like if if funding is starting to rise, you're seeing, you know, more liquidation levels pop up below than you're probably going to see further downside. Um, and then also, you know, looking at some of these on-chain metrics like Soper, you know, is Soper bouncing off of one? Um, also, you know, we can look at like what what's going on with the order books, um, or a bunch of bids starting to step in. Um, CVD, the accumulative volume delta, we talked about that last week, you know,

• 31:43Speaker 02

  is is the spot CVD starting to, you know, increase aggressively? So are we starting to see a strong spot bid and people interested in buying? Um, volume too, like if we if if we if we start to break below 60K and we have really low volume, then we probably are going to see reversal like that. You know, that's what happened when we were consolidating over summer. Um, and we had that move down to 29K. It was on pretty much no volume. So no one really wanted to sell down there. Uh, but you know, if you see a really high volume move down below 60K, then that, you know, we'll probably see further downside. That's that's those are some of the things I'm looking at, but volume is volume is definitely, um, important here.

• 32:21Anthony Pompliano?

  Gotcha. John?

• 32:22Speaker 01

  Well, how you doing? Glad to see you safe from Halloween weekend. Can you talk about kind of the whales and then, um, smart coin holders and what they're doing in this bull market and what they've done historically? Like, do we expect to see a lot of long-term holders and whales kind of distribute their coins to those new entrance? Entrance participants, I guess. Um, or do we expect them to kind of just hold on?

• 32:46Speaker 02

  Right. So I I guess we can start with the small guys. Um, when you look at this chart, this is a pretty easy explanation. You just look at it, it goes up and to the right. And the reason is because you have this really hardcore base of people um, that are just DCAing, you know, every whatever couple of days or once a week. Or they're taking a passive amount of their income every so often and just throwing it into Bitcoin no matter what. You know, they're stacking during the bull market, bear market. Of course, you see this uptick a little bit more in the in the in the bull run. But, you know, generally speaking, it is pretty much just up and to the right. No, never any major drawdowns in that sense. With the whales, though, they're a bit more strategic with their positioning. When you really zoom it out, you're, you know, look at like all all Bitcoin's price history and all of their, you know,

• 33:31Speaker 02

  history of behavior throughout that entire, you know, entire existence of Bitcoin. What you see generally is similar to the long term holders. When they start buying really aggressively, that's usually when we start to initiate a multi-month rally. And so you you know, you've seen this in 2017, at the beginning of of the 2019 mini bull run, like at the at the very big, at the very bottom of of 2018 coming coming into 2019, you saw a big uptick in whales holdings. And then also, at the end of last year, you saw that behavior as well. We saw that at the end of July. And so now, with that being said, you had whales buying at the end of summer really aggressively. I forget the number off the top of my head. But you have started to see them distribute a bit and take some profits.

• 34:17Speaker 02

  And then actually, over the last like two or three weeks, they've started accumulating again. So like, over the last, call it, month and a half, they've kind of just been like ranging their holdings, if that makes sense. But they really popped after July. And that that kind of correlates with a lot of the behavior that you see, like historically throughout, you know, Bitcoin's Bitcoin's existence is that they kind of are the ones, well, by definition, they're the big buyers, right? They initiate these these, you know, multi-month rallies. And I wouldn't be surprised to see, you know, whales distributing. I've actually kind of been surprised that they've started buying again over the last like month and a half, to be honest. Because usually you start to see them distribute throughout all of the strength throughout the the bull run. When you when you look at like, we're just talking about like, you know, Bitcoin supply distribution.

• 35:00Speaker 02

  Over time, when you take up, you know, when you take the percentage of Bitcoin supply that's held by the small guys. So we're looking at like 10 BTC and less. And you plot that out. What you see is that retail holds a larger and larger portion of supply over time. And so this this is one way to look at, you know, although Bitcoin is still very young, the supply distribution is heading in the right direction. You get a lot of these people like, you know, they'll come out and and post like bad data, usually based like around addresses that'll say. Oh, well, you know, X amount of Bitcoin supply is held by this small amount of people, which is complete nonsense, right? Because all those those large addresses, or even if they're using like any of these data, but usually these people, you know, by definition,

• 35:43Speaker 02

  because like usually they don't know what they're talking about, they're using addresses. You know, there's like exchanges or custody solutions. It's like, well, yeah, I mean, they're holding Bitcoin for like hundreds of thousands or millions of people when you're talking about like, you know, Coinbase or or Binance. Or, you know, if it's like a custody, institutional custody provider, you know, they're holding Bitcoin for, you know, several different clients with with large holdings. You have like grayscale, right, who holds like over 600,000 BTC. So, you know, it's it's more nuanced than like some of these people who try to say like Bitcoin supply distribution is is so concentrated. It's not, it's definitely not perfect. It's definitely not, you know, completely ideal, but it's trending in the right direction. And over time, I think we'll get there. Just because, you know,

• 36:27Speaker 02

  throughout Bitcoin's monetization, you know, you're going to have people who got in earlier on. And this is, this kind of sounds like a Ponzi scheme. I'm not even gonna lie. But this is just how this is how all markets work. The people who get in earlier, you know, they're going to sell once they're, once they're way up, right? You know, either they're going to reinvest their assets into something else. Once Bitcoin's monetization slows down, then I think, you know, you'll, you'll start to, you'll start to distribute Bitcoin into, you know, stocks or, you know, other like business ventures. Once we have better valuations on these things and like, we have interest rates based off of Bitcoin and not just like manipulated Fed nonsense. But, you know, I think over time, though, you'll, you'll

• 37:09Speaker 02

  see this supply distribution continue to to trend in the direction it is.

• 37:13Anthony Pompliano?

  Cool. Appreciate that. Will, when you think about where we are right now, it seems like you are a short term, question mark, long term bullish, fair?

• 37:23Speaker 02

  Yeah, for, yeah, this week, definitely, yeah.

• 37:26Anthony Pompliano?

  All right. Well, you're smiling like that's like a, is that a good thing, a bad thing?

• 37:30Speaker 02

  I don't know. I just like, usually I kind of have a strong opinion when I come on here. But yeah, this week, not really.

• 37:35Anthony Pompliano?

  I think you're doing a great job, man. All right, buddy. Thank you so much for for coming on. Anyone who who does not follow Will, please go follow him. His newsletter is linked there and his Twitter account with Blockware. Go check out all the great work he's doing. He just continues to do a fantastic job. Will, thanks for coming on today. You brought the All right, buddy. We'll talk soon.

• 37:56Speaker 02

  All right, take it easy. Have a good weekend.

• 37:57Anthony Pompliano?

  Later.