#684: Are We Watching A Repeat of the 2020 Bull Run?

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. ======================= If you haven’t started building your crypto portfolio on Okcoin, there’s no better time. They’re one of the fastest growing global exchanges around and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in BTC with a friend when you invite them to sign up for Okcoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more BTC you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on Okcoin until November 1. That’s no fees at all on your purchases until the holidays. Get started on the web or on their new super easy-to-use app at okcoin.com/pomp ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days. ======================= AppSumo is the leading digital marketplace for entrepreneurs, and a great way to get your product in front of 1M+ entrepreneurs, founders, and small businesses. AppSumo is giving away their entire $1 million Black Friday marketing budget to creators. If you have an ebook, online course, template, or any other digital product — this is for you. List your product on AppSumo between September 15th - November 17th and the first 400 offers to go live will receive $1,000, the next 2,000 to list a product and go live get $250. And everyone who lists gets entered to be one of 10 lucky winners of $10k! Go to AppSumo.com/pomp to list your product today and cash in on this amazing deal. ___________________________________________________

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony 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 in 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. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is AppSumo. AppSumo is the leading digital marketplace for entrepreneurs and a great way to get your product in front of one-plus million entrepreneurs, founders,

• 0:45Anthony Pompliano?

  and small businesses. AppSumo is giving away their entire $1 million Black Friday marketing budget to creators. If you have an ebook, an online course, a template, or any other digital product, this is for you. You can list your product on AppSumo between September 15th and November 17th, and the first 400 offers to go live will receive $1,000. The next 2,000 to list a product and go live get $250. And everyone who lists gets entered to be one of the 10 lucky winners of $10,000. Go to appsumo.com/pomp to list your product today and cash in on this amazing deal. Again, appsumo.com/pomp, or you can click on the link in the description as well. Appsumo.com/pomp.

• 1:27Anthony Pompliano?

  Next up is Gemini. They're a regulated cryptocurrency exchange, wallet, and custodian. Some might say they're actually an industry-leading regulated cryptocurrency exchange, wallet, and custodian. It makes it simple and secure to buy, sell, store, and earn Bitcoin, Ether, and over 40 other cryptocurrencies. They offer an industry-leading security, insurance, and uptime. Gemini is the go-to trusted platform for beginner and sophisticated investors like. You can open a free account in under 3 minutes at gemini.com/pomp and get $20 of Bitcoin if you trade $100 or more within the first 30 days. Again, it takes 3 minutes when you go to gemini.com/pomp and you'll get $20 US of Bitcoin after you trade $100 or more within

• 2:10Anthony Pompliano?

  30 days, gemini.com/pomp. What are you waiting for? Let's go. Last but not least is OKCOIN. If you haven't started to build your crypto portfolio on OKCOIN, there's no better time. They're one of the fastest growing global exchanges around, and they have some promotions happening right now to help even more people start being a part of the future of finance. If you have an account already, you can split $100 in Bitcoin with a friend when you invite them to sign up for OKCOIN. If they buy 100 bucks of crypto in the first month, you invite them, they buy $100 of crypto, you both split a free $100 from OKCOIN. The more friends you sign up and buy, the more Bitcoin you get. And I always recommend dollar cost averaging as a way for investors to have more control

• 2:53Anthony Pompliano?

  over their average price when building their portfolio. Now you can automate dollar cost averaging with completely fee-free daily, weekly, or monthly recurring buys on OKCOIN until November 1st. That's right, those automatic dollar cost averaging purchases are completely free of fees, whether you're doing it daily, weekly, or monthly, until November 1st. That's no fees at all on your purchases until the holidays. Get started on the web or on their super easy to use app at okcoin.com/pomp. Again, okcoin.com/pomp. All right, let's get this episode with Will. I hope you guys enjoy this one.

• 3:30Speaker 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.

• 3:58Anthony Pompliano?

  All right, man, what's going on?

• 4:01Speaker 03

  Not too much. How are you guys doing?

• 4:02Anthony Pompliano?

  We're doing awesome. Thank you for hanging in there with us. We got it figured out. Let us just get a four. Just hold the four up to start the fourth quarter. I know.

• 4:12Anthony Pompliano?

  All right, we're going to move through this. Jeff Lewis is coming on in a few minutes, but there's no way we're doing this show without Will the Wizard on Friday telling us what's going on on Chain Metrics. John already brought it up. Sopra, first chart. What's going on here?

• 4:27Speaker 03

  Yeah, last week, you know, we were looking at this bounce. When you look at this little blue circle, shaded circle that I that I put in there, that's where we were at last week. And so we were looking for, do we start to get continuation to the upside in the ratio? And we have, in fact, as you see on the right hand side of the chart. So this kind of resembles, if you look back to like September of last year, we had this 20 plus percent correction. And then we came back down, retested that one threshold and then started moving up from there. So want to see that ideally, but you know, at a minimum, you want to see that one threshold, you know, hold, obviously, and maybe stabilize above one. But yeah, I mean, ideally, we continue higher.

• 5:12Speaker 03

  What you don't want to see, obviously, is for us to go below and then retest it. And it becomes resistance. But for now, looking really good.

• 5:19Anthony Pompliano?

  Awesome. Exchange supply shock ratio, maybe not as bullish as it's been, but still not bearish either, is my read?

• 5:29Speaker 03

  Yeah, so we have three different things here. The one that the one that's slightly bearish is the highly liquid ratio. So this is looking at the movement of coins from the highly liquid entities to liquid entities. So the the ratio ticking down just means coins are moving to the highly liquid entities. I think you're starting to get some of this reflecting in price. I'm actually kind of short term, I wouldn't say like short term bearish, but I'm a little cautious over the next two days. I think we probably come down in like recess like 53K, partially because of this. Also, exchange flows are just flat over the last two weeks. They're down like 490 BTC, which of course, like, isn't bearish to say. It's just not, you know, strongly bullish. So it's just neutral.

• 6:14Speaker 03

  And then, like, when you look at the derivatives funding, so you look at the perpetual swap funding, we've had a really big spike over the last like 24 hours. And so to me, you know, what that shows is like, traders are basically trying to trying to leverage long the dip. And then oftentimes, like, when you see funding go in the opposite direction of price, it usually resolves in the direction of price. So like, One example would be when we came off that failed breakdown of 30K. I remember we did it, we did one of these and I was saying that we were set up for favorable conditions for a short squeeze and the reason was it was the same kind of setup but the

• 6:55Speaker 03

  opposite. So you had funding going more negative as price was going up and open interest relative to market cap was going up. So in other words, you had people piling on shorts as price was going the opposite direction. And that resolves, of course, we had this massive, I remember at the time it was a huge move to like mid or upper, upper 40Ks off those lows. So I don't think we're going to have a move of that magnitude, but I'm just saying it's, you know, when you, when you start to see, that's just a good example, when you start to see funding go in the opposite direction of price, especially as open interest is increasing as a proportion to market cap, you're susceptible to these moves that oftentimes resolve in the direction

• 7:39Speaker 03

  of price. So I think you have some, some late shorts that hopped in and over the last 24 hours, I mean, you look at like some of the APRs on, on funding, like I'll pull it up right here, you know, we're looking at like on some exchanges up to like 67% APR, like on Bybit, for example, which oftentimes Bybit's wrong, while at the same time FTX is much lower at like 20% and Derivits, Derivits at 38%. So like overall, the, you know, funding, funding is seeing a big spike over the last 24 hours. So I don't know, I'm kind of short-term cautious. Obviously, like long-term picture hasn't changed at all, but just to, you know, for hodlers, like who cares, right? But I'm just saying, you know, just, just be wary. If we, if we

• 8:22Speaker 03

  start to trend down over the next couple of days, come back down, retest that 53K area. And even as low as that, that retesting the break above the point of breakdown from May at 50K, I don't think that's out of the cards, but I think like that 53K is probably a logical area. That's also like the trillion dollar market cap area too. So I just think there's a couple of different things in confluence that, that kind of point to that being a nice little area to maybe scoop up some BTC over the next couple of days. But yeah.

• 8:51Anthony Pompliano?

  Let's give a head to the supply shock ratios. I saw you tweet this out earlier this week and this chart to me seems like one of the most important charts right now in all of Bitcoin, where you've got kind of the historical supply shock and you've outlined it in this like green bar. Talk to me a little bit about like what this chart is really highlighting and then once we kind of go through it the way that we have, what does that mean for kind of future price movements?

• 9:17Speaker 03

  Sure. So what you see is heading into the bull market and the long-term guys begin to sell into strength, heading into, I should say into strength and then heading into weakness, the long-term guys begin to accumulate heavily. So conversely, the short-term guys increasingly hold a larger portion of supply into strength and then they move out of the market into weakness. The speculators all leave. And so what you see here is we're comparing the long-term holder's supply to short-term holder's supply to get the long-term holder's supply shock ratio. And what you see is just, this is illustrating the concept that when long-term holders lock up a certain portion of supply, then you get the supply squeeze effect on the market. Long-term holders

• 9:57Speaker 03

  basically set the floor in a macro sense. And so we've actually reached an all-time high in this metric. So if you look at the little circled area in the top right, you see we're at all-time highs. And so what this is showing is just these long-term guys are locking up a large portion of supply and you're starting to get that effect on the market, that supply squeeze effect on the market. One other thing I find interesting about this though is like, as we've talked about many times, we use a five-month threshold for this. So 155-day threshold for this. When you go back five months ago, well, where were we? Well, five months ago is May 8th, right? And so that was 11 days before we had this initial large drawdown to 30K. So to me,

• 10:41Speaker 03

  that's, that's pretty interesting, right? Because you're, you're seeing that these people are now aging into long-term holders that held the whole way down. And so to me, that's, that's pretty remarkable. It's, it's showing that perhaps, you know, these market participants have a, have a longer-term time horizon.

• 10:58Anthony Pompliano?

  Got it. And then let's go and look at the Bitcoin miners themselves. You've got two different charts. One is just the miners, then one is the miner net position change. Let's start with the miners chart. What is this showing us? And then kind of what is your view in terms of what it's really telling us?

• 11:15Speaker 03

  Yeah, so the first chart with the three different colors, orange, that's hash rate, and then the blue line is difficulty, and then the green line is minor balances. So what you're seeing is that hash continues to come back online, you know, pretty aggressively, and it's come back online so aggressively that we've had six positive difficulty adjustments in a row, which I don't even know the last time that that's happened. It's just, you know, it's just another way of kind of showing the same thing. And then also miners have started accumulating a bit after selling into into that rally all for the all for the 30k lows, they did sell a bit, but now they're slowly buying somewhere. Nothing, nothing is substantial, but you know, they are now back in a positive trend of accumulation, and that's reflected in that minor net position change metric.

• 12:01Speaker 03

  This is just looking at the 30 day change of minor balances. So you can see, we just started creeping back into that green area. I mean, that, that's the second chart up with the, you know, highlighted it with that little blue circle. So yeah, that, that's what's going on with miners also like at the bottom, you'll see the hash ribbon. This is another really interesting metric. This is like probably one of the best macro buy signals, you could say, in Bitcoin. When you pair this with, when you pair this with like moving averages for price, it's been, it's, it's never been wrong, actually. And so what you're trying to capture here is like the, you're looking for these minor capitulation events, and then where hash rate starts coming back online.

• 12:45Speaker 03

  And so from first principles, you're just basically saying like, for example, in 2018, you had this large minor capitulation. Once miners are done puking out their coins, then you can start moving higher. And so we've, we've got this hash ribbon buy signal about a month ago, a month and a half ago. So that, that means that the 30 day, the, the 30 day moving average of hash rate is crossing the 60 day moving average of hash rate, while at the same time, the 10 day moving average of price is crossing the 20 day moving average of price. And so, yeah, like, when you, when you look at this, when you go, when you go from white to light red, that means that the 30 day is crossing the 60 day moving average. When you go from light red to red, you're going from, you're, you're going below, and

• 13:29Speaker 03

  then when you go from light red to red, you're crossing above the 60 day. And then the red to white is when the, when the 30 day crosses the 60 day to the upside, and also you have the, the 10 day crossing the 20 day.

• 13:41Anthony Pompliano?

  So we zoom out. What's your take? Middle of the bull market, still super bullish over kind of the medium term, kind of next 90 days or so? Or has your thoughts changed?

• 13:52Speaker 03

  No, yeah, yeah, still, still staying on my thesis over the next couple of months. Like I said, I think perhaps we get a bit of a pullback because some of the things we talked about, funding spiking, exchange flows are neutral and they had been strongly bullish over the last month or so. So seeing like kind of a cooling off there, some coins becoming highly liquid. And then lastly, we're actually seeing a bit of selling from whales or profit taking from whales, which I don't think is a complete red flag. You know, you're gonna, you're gonna see these active managers, you know, taking profits along the way. Like the, when you know, when you zoom out, if you want to pull that chart up for the audience, I think it's like the third or fourth chart. You'll see like, the broader trend is still that they've been

• 14:35Speaker 03

  in accumulation and they trimmed a bit too as well in early August. So it's not anything that, it's like a red flag, like bull market's over. But I just think perhaps we're gonna have a bit of a drawdown to maybe like 53K. But I don't know, man, like the market hasn't been giving anybody dips. So we'll see what happens. But for those reasons, I would just say like, I'm short term cautious, not necessarily like short term perish, but long term, you know, that outlook hasn't changed.

• 15:01Anthony Pompliano?

  So my, my last question for you is one of the metrics that I'm going to use to know that things are getting crazy is when your friends start asking you about Bitcoin that normally wouldn't. Are you still got a lot of friends who they have no clue what you do? They're not asking anything? Or has that started to happen yet with the price going up a little bit?

• 15:20Speaker 03

  No, not at all. Not enough more than usual. Like, some of my buddies tend to be a bit more,

• 15:27Speaker 03

  you know, nerdy like me, because then, you know, we like geek out about stuff about like Bitcoin or whatever. But so I don't know, I

• 15:35Speaker 03

  When I, when I see people in general, um, like people like, uh, that I haven't seen in a while, like everyone's always like, you know, oh, I see you're doing stuff with Bitcoin. Like what's up with that? But, um, haven't seen any, like, I haven't got any like tax, like, oh, is it a good time to buy Bitcoin or anything like that? Um, I think like this stuff too is reflected in like Google search trends. Um, I think the block has some good like retail related data. Um, so you look at Google search trends, also like Coinbase app downloads is another way to look at it. Um, also you can look at the large Twitter accounts, um, the large YouTube accounts, like some of these things, um, but the Google search trends is, is primarily, I think that and the Coinbase app downloads are probably two of the better metrics for that. Um, and those are both still way down.

• 16:20Speaker 03

  Um, and then also you look at like, you can separate volume into you say, okay, you know, how, what size transactions are dominating, excuse me, are dominating volumes on each given day. Uh, and so what you see is over the last month and a half, really large transactions have completely dominated volume. Like we're talking like $10 million plus transactions have gotten up to like 80% of all the volume on any given day over the last month and a half. So I, there's just another way to look at right now, the, the institutional capital, I think the smarter money, uh, you could say, I think is, is, um, more so in the market. And I, I don't think we've, we've seen, uh, retail come in full force yet.

• 16:56Anthony Pompliano?

  Awesome. All right. We got a whole bunch of shit. We still gotta go through on the show. Will, you're a legend. Will the wizard. Please, if you haven't already, go follow him on Twitter. What you cross over 300,000 followers now on his way to a million. Uh, Oh no, Will passed me. Yeah.

• 17:13Anthony Pompliano?

  Well. Congratulations, Will, on all your success so far. Beast.

• 17:17Speaker 03

  Appreciate it.

• 17:17Anthony Pompliano?

  Congrats.

• 17:18Speaker 03

  Hey, that, that's the real flipping.

• 17:23Anthony Pompliano?

  Congrats, man. That's awesome. Awesome, buddy.

• 17:25Speaker 03

  Appreciate you guys.

• 17:26Anthony Pompliano?

  All right. We'll talk soon. All right. Thanks so much.

• 17:28Speaker 03

  All right.

• 17:28Anthony Pompliano?

  See you guys.