#562: Bitcoin Crashed! Who Was Buying And Selling?! Livestream w/ Will Clemente

Will Clemente is a Finance Major at East Carolina University. He has quickly become one of my favorite writers on all things bitcoin, including deep dives on various onchain analytics. Subscribe to Will’s new email newsletter here: https://btcbywc3.substack.com/ In this conversation, we discuss this week’s price sell-off, on-chain metrics, who is selling and who is buying, and much more. ======================= Revolut is a finance app in the US and UK, that say they're the simplest way to access crypto. Sign up today at Revolut.com/pomp and make 3 card transactions to get $15, which you can exchange for any tokens Revolut supports. As usual, when you move your money from fiat to crypto your capital is at risk. See T&C's for details. Revolut is a financial technology company. Banking services provided by Metropolitan Commercial Bank, Member FDIC. Cryptocurrency services provided directly by Paxos Trust Company, LLC. ======================= Remote makes it easy for companies of all sizes to employ global teams. We take care of international payroll, benefits, taxes, and local compliance, so you can focus on growing your business. Sign up for Remote today and receive 50% off your first employee for the first three months. Check out remote.com/pomp and enter promo code POMP to get started.

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 a finance major at East Carolina University. He has quickly become one of my favorite writers on all things Bitcoin, including deep dives on various on-chain analytics. You can subscribe to Will's new email newsletter in the link in the description. In this conversation, we discuss this week's price sell-off, the on-chain metrics, who is selling, who is buying, and much, much more. I really enjoyed this episode with Will. We did it live on YouTube, and I hope you enjoy it as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up are my

• 0:42Anthony Pompliano?

  friends over at Revolut. Let's go back to the basics for a second. I've partnered with Revolut, a finance app in the United States and the UK that say they're the simplest way to access crypto. They are putting their money where their mouth is. You can sign up and make three card transactions and get $15. Yep, that's right, $15. What can you do with $15? You can exchange for Bitcoin at any of the other tokens Revolut supports. Yep, they are crypto-enabled. These guys have made it easier to get some skin in the game. And as usual, when you move your money from fiat to crypto, your capital's at risk. But sign up now through revolut.com/pomp to get a $15 reward and put them to the test. You can see the terms and conditions for details. Revolut's a financial technology

• 1:26Anthony Pompliano?

  company. Banking services are provided by Metropolitan Commercial Bank, a member of the FDIC, and the cryptocurrency services provided directly by Paxos Trust Company. Go check out Revolut at revolut.com/pomp and let me know what you think. Next up are my friends over at Remote. When you use Remote, you can employ people in other countries legally and easily. They take care of international payroll, employee benefits, tax headaches, and all the paperwork for local compliance. Forget about location and hire the best person for every open role using Remote. Remote's platform is easy to use for full-time employees, contractors, and your HR team. Whether you're a major corporation or a small startup, Remote has the tools and resources.

• 2:10Anthony Pompliano?

  Sources to help you at a price that you can afford. Even better, listeners get a special deal. Sign up for Remote today and receive 50% off your first employee for the first three months. Check out remote.com/pomp and enter promo code POMP to get started. Again, remote.com/pomp and enter promo code POMP to get started. Remote makes it dead simple to employ people around the world. Go check them out at remote.com/pomp and enter promo code POMP. All right, let's get into this episode. Will, I hope you enjoy this one.

• 2:41Speaker 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.

• 3:10Anthony Pompliano?

  Hello, everyone. We'll wait a minute here as everyone gets in and gets started. Will, how you doing, man?

• 3:17Speaker 02

  Chilling. It's been a crazy week in Bitcoin, but hanging in there. Spent a lot of time staring at charts this week, a little more than usual, but doing well. How about yourself, man?

• 3:29Anthony Pompliano?

  I've got no complaints at all. Normally, we've got a pretty good setup, but I am traveling. I'm in New York City, so we're going to do it this way and I stream it live. Hopefully, people like that. Let's just jump right into what happened. So obviously, you have spent pretty much the entire week looking at the on-chain metrics, and it feels like there's some high-level takeaways. Maybe let's just start there. What at a high level happened this week when Bitcoin's price crashed?

• 3:57Speaker 02

  Yeah, so like if we just want to get, you know, the gist of the kind of TLDR of what happened. You know, I think the major points are Before the, you know, before we had this dump, we started to see exchange flows flip kind of bearish. You know, throughout the entire bull market, we've seen coins continuing, you know, moving off exchanges. That's been a big narrative that has kind of been driving this cycle. But in the days before the dump, especially the day before the dump, we saw coins move on to exchanges at like unprecedented levels for this bull market. In fact, like the day before the dump, we had the all time high of coins moving on to Binance ever.

• 4:40Speaker 02

  Like in the history of Glassnode's data recording, the exchange flows. So there is like a swath of coins that kind of moved on to exchanges, presumably to sell, right? I think, you know, a lot of times we assume that coins moving on to exchanges is only selling. It can also be things like, you know, people posting collateral or people, you know, on Binance depositing coins to use derivatives on Binance. But a fair portion of that, it's safe to say is being sold. So we saw, you know, those flows kind of switch around in the days before, especially the day before Wednesday on Tuesday. We started to see those coins come on exchanges.

• 5:24Speaker 02

  Another key takeaway is that coins that were sold were younger, which is a good thing because when you see, you know, at cycle tops, it's usually the the long-term holders that are kind of dumping over at the top and selling it to strength as retail kind of comes in. But what we saw were young coins, specifically whales. So it seemed like perhaps funds that had gotten in and call it the like 10 to 20 K band. The coins that were sold were, and when you look at the age of them, that kind of lines up with where that where that kind of 10 to 20 K band was. And then there were a fair amount that

• 6:04Speaker 02

  Were sold, you know, that had been bought recently, probably, you know, in around that fifty-five K to sixty thousand dollar range. But uh, there were a fair amount that were that were sold at a loss, which we can get into. Um, the the big sudden price drop that we saw, especially that last big WIC down to about, you know, whatever was thirty K, um, got up to the high twenties on some exchanges. That was really driven by the by the liquidations, which we'll get into as well. Um, but but when you see that that big drop, that big sudden drop, a lot of times what that is is it's this cascade of liquidations, which is what happened Wednesday. Um, a lot of leverage has been wiped out now, um, we'll get into that as well, but futures interest

• 6:48Speaker 02

  few bit futures open interest is way down from where it was at the beginning of the week. Um, which is a good thing, um, in terms of the leverage doesn't have the the leverage traders don't have as much impact on the price as spot does. Um, which is, which is generally good to see. I'm sure the leverage will come back, but uh, for now it's it's been wiped out. Um, like one way to look at it is is the funding rates. Um, but the funding rates have been negative since Wednesday, so it's showing the traders are not looking to go long right now and funding is pretty much dead. Um, and then the coins that the coins that are being sold now, you know, I think it's just gonna take a while for

• 7:31Speaker 02

  for the coins to kind of uh sift into new hands that are that are not gonna sell. Um, that process of kind of reaccumulation, if you will, is is gonna take a little bit of time for sure.

• 7:42Anthony Pompliano?

  Yeah. What what is that really kind of um, in in your analysis that uh, to me was super interesting was this idea of uh, the energy value? And I know that this is part of the whole idea of like the bull market still being intact, but maybe explain a little bit uh, about this energy value, um, and what exactly that is, how it works and why it's important.

• 8:06Speaker 02

  Yeah, so this was a um a model created by Charles Edwards. He's famous for creating like the hash ribbons and then he's also created this energy value based on you know, the hashing going into Bitcoin. To be honest, I don't know the exact calculation that goes into creating it, but it's based off of the energy input that's going into Bitcoin, which is correlated with with the hash power going up. So it was interesting, we we touched this energy value that Charles Edwards has created for the first time ever in a bull market. And so he posted something and he said, this is the, you know, the

• 8:44Speaker 02

  the generational opportunity to buy Bitcoin, the best big opportunity to buy in a bull market because we touched this energy price that I think if he was saying if we had broken that, then he would have kind of flipped a little more bearish. But the fact that we bounced off of that, he in his opinion, shows that we're still in this bull market.

• 9:05Anthony Pompliano?

  Got it. And then when you talk about the kind of age of coins and the funding rates, I think that we've covered that in past videos. So I don't want to spend a ton of time on that.

• 9:14Speaker 02

  Sure.

• 9:14Anthony Pompliano?

  But I I do think that the liquidations, I think it was over $300 million in liquidations happened within like 10 minutes and that really drove that kind of deep price. You know, kind of drop. Talk a little bit about that. Is that a big number or have we seen that before?

• 9:33Speaker 02

  Yeah, so you know, what led to that was we saw 59,313 coins moved on to exchanges within four days. And then so that spot selling obviously starts to push the price down. And then traders all have stop losses set. So if I'm if I'm taking an entry into Bitcoin, I'm a trader at whatever. I'm just making up a number here, 50,000. I set my stop loss at 48,000. So that's basically a risk mechanism where if Bitcoin falls below that, especially if I'm using leverage, I want to have a tight stop loss so that if if the trade goes against where I think it's going to go, that I don't I don't lose a lot of a lot of my position. So what happens is

• 10:19Speaker 02

  When when spot starts pushing the price down, especially below a kind of a key liquidation price that's recognized by the by the broader market, you start to get this cascade effect where a lot a lot of traders stop losses or liquidation prices are hit and then they have to sell. They're they're forced sellers and then that that cascades the price even further down. So what we saw was, you know, we had that spot selling that that was driving the price down, but as we were going down, the leveraged traders kept trying to step in and and long every single time they thought it was the bottom, the whole way down. So,

• 11:00Speaker 02

  you know, obviously, in in previous videos, I've been talking about how I've I've been, you know, bullish and just kind of describing this bullish shut up, which, you know, I I still think holds true in the mid to longer term. Obviously, I kind of miscalculated the short term price action a little bit. But, you know, I think it did become obvious, though, that we were going to keep going down once this began. Because what happened was every time the price dropped down, leveraged traders stepped in and tried to go, you know, whatever, trying to go 20x the bottom, and and they thought they were going to ride the thing the way the way up as they they're like, okay, this is the absolute bottom. I'm going

• 11:42Speaker 02

  to go super long leverage here. It kept happening. And so I was like, we're going to need some kind of big flush. And and Wednesday morning, we got that. We got, you know, it was through over 300, I think it was 303 million dollars of long liquidations within a 10 minute period. And the market can't sustain that kind of selling, especially when it's very fragile like it was on Wednesday. So that that was what caused that that big nasty wick that we saw down to 30K or whatever was 28K on some exchanges.

• 12:15Anthony Pompliano?

  Got it. And then in the letter that you wrote yesterday, you talked a lot about like the first real capitulations for the first time since March 2020. And you even talked about kind of Sopra and dipping below one. Maybe talk a little bit about those on-chain metrics and kind of why you think that was kind of true capitulation that we saw earlier this week.

• 12:35Speaker 02

  Yeah, so Glassnode has this metric called NUPL, which is called Net Unrealized Profit Loss. And so the way you kind of think of this is like, when we get to the top of the bull market, people, people stop taking profits because people think that things go into the moon and they're like, all right, I'm not going to sell because this thing, it's done a thousand, you know, a thousand percent, it's going to do another thousand percent and people get very complacent and stop taking profits. And so this metric, NUPL, it kind of, it has these different zones where it kind of identifies the market behavior based off of whether people are taking profits or not. And so you have these different zones, there's capitulation, hope and fear,

• 13:19Speaker 02

  optimism, anxiety, belief denial, and euphoria and greed. And so we got up near, and there's two, there's a longer term NUPL and then the shorter term NUPL. And the longer term one, we actually got near kind of that euphoria greed in, call it, you know, mid February when we were really on a tear, when we went from like thirty K to forty K in like a week or whatever it was, ten days. But now on the, on the shorter term timeframe, we're in kind of this deeper capitulation that we, that we kind of dove into on Wednesday, which meant that, you know, people were kind of panicking

• 14:00Speaker 02

  and then they're starting to sell a lot more than they have at any more, any other time in the, in the bull market. And Soper is, Soper is similar in the sense that Soper looks at, you know, the behavior of buyers and sellers on any given day. And it determines, okay, what is, what is the average, the aggregate profit of the coins on those days? And so for the first time, like I've described Soper in some of the previous letters on, on very short timeframes, but Soper just running a, like a broader seven day moving average, which is taking a little bit more of a zoomed out view for the broader bull market, we actually dipped below that, that Soper.

• 14:44Speaker 02

  On Wednesday, which was the first time we had dipped below sober on a broader seven day moving average. Since September, I think you remember when we had that. That fairly big crash was like twenty twenty five percent towards, I think it was like mid mid September, late September. Um, when we were stuck, kind of, you know, getting the bull run kicked off there, but it was the first time we uh had a solid breakthrough. That that lost threshold um since since then, so. Yeah, the market, the market's definitely underwater. When you also look at um the realized cap, that's another way to kind of look at this. So that we've talked about this before, that the realized cap is uh the market capitalization based off of um.

• 15:30Speaker 02

  I'm sorry, it's the capitalization based off of when the coins move last, so when. When coins, let's say, you know, someone bought at a hundred thousand and they never moved the coins. Well, yeah, those hundred thousand coins are worth whatever three point uh. If they bought them at a dollar, now they're worth three point eight billion dollars, right, but. The only a hundred thousand dollars would be added to realized cap because that was when the coins were moved last. And so. We actually saw realized cap go down um throughout the dip, which means the following, so if we had seen it go up. That would mean that the coins that were selling were last moved at lower prices.

• 16:11Speaker 02

  But since we saw realized cap go go down, it means that the coins that were being sold had last moved at higher prices. So for example, if a coin was um, you know, last moved at uh sixty four K. And now the coin sold at forty thousand, well, all of a sudden.

• 16:31Speaker 02

  Twenty four thousand dollars was removed from realized cap because the coin was last moved. At sixty four K and then now it just moved at forty K, so I think. That that shows that the market was realizing losses pretty heavily on on Wednesday. And it appears to be people that had gotten in and, you know, in the in the last week to month, we saw a lot of selling coming from those those that cohort of coins, probably people that had, you know, just kind of speculatively got in in the last month or so.

• 17:08Anthony Pompliano?

  Yeah, and it feels like as we saw those young coins sell off, we also saw some some movement in whales as well. One of the things that you highlighted is the OTC desk outflows and why that spike. Can you talk a little bit about that?

• 17:24Speaker 02

  Yeah, so, you know, for for high net worth individuals and institutions, they're not going through exchanges. A lot of them are going through OTC desks. And and so, you know, when you see spikes in that, that kind of, to me at least, illustrates that those those high net worth individuals and institutions are buying. And on Wednesday, we saw this huge spike in in OTC outflows, which was a good sign. You saw those institutions come in and buying the dip. You know, on a similar note, I think this is this is interesting to note. When we were kind of bouncing off the bottom, off that 30 K bottom, it seemed

• 18:06Speaker 02

  like a lot of the buying was coming from the US. Because Coinbase, that that's the that's the exchange that the US mainly goes through and then finance is mainly Asia, BiffinX, OKX. Those are more Asian Asian based exchanges. But throughout, you know, when we bounced up, Coinbase was trading at like a $3,000 premium to the other exchanges, which means that whoever was on Coinbase was absolutely smashing the green button. And and I think that that goes to show that there's a lot of US demand around those levels.

• 18:48Anthony Pompliano?

  And so when you start to look at stablecoin flows, I think that's another thing that you highlighted in just the importance of kind of how much capital is flowing in the system, either buying or ready to buy.

• 18:58Speaker 02

  Yeah, so you know, following the dip, we saw a fair amount of Tether moved on to exchanges. And the first hour after the dip, we saw over $500 million of Tether moved on to exchanges. And you know, if you just look and zoom out at kind of the net flow day to day, you know, after, after the dip, we've seen this big, kind of, if you will, dense cluster of inflows, of daily inflows. The biggest spike, I think, was around when Elon Musk bought it, like the beginning of February, the biggest single day spike. But we're seeing continued inflows day after day since, since that dip. So I think that that's interesting, you know, when you look at stablecoins, a lot of times that can help you kind of get a gauge of,

• 19:42Speaker 02

  yeah, maybe that capital isn't buying right now, but yeah, it's sitting on the exchanges and it's kind of waiting to be deployed. So I think stablecoin flows are something you have to look at this cycle that weren't around in, you know, in 2017, obviously, because they didn't exist back then. So it's kind of a, a non-Bitcoin blockchain metric that, that I think is important to take a look at.

• 20:04Anthony Pompliano?

  Got it. And then one of the things that's the most fascinating to me is this whole idea that the bull market's still intact, but there's a lot of data that suggests actually things were starting to heat up and it felt like, okay, we may be getting overheated. Now they're actually cooling off. So things like reserve risk, explain what that is and kind of why that's important.

• 20:22Speaker 02

  Yeah, so reserve risk is another one of those kind of broader cycle metrics that, that you look at to kind of identify the, the bear zones where the market's kind of oversold and then as well, these, these overheated zones. So.

• 20:39Speaker 02

  Reserve risk is, is the calculus for it is price divided by hodl bank. So the way you could just think of this is that when price is low and confidence is high, um, that's when, that's when reserve risk is low. But when price is high and confidence from, from holders is low, um, that's when reserve risk goes up. And so then at the end of the bull market, price is high and confidence is very low. Price is very high, um, confidence is very low. So you get these overheated zones, um, usually over like point, point zero two, um, in, in terms of that, um, of the reserve, uh, risk ratio. But what we're seeing now is, you know, we got up to kind of call it halfway, um, of

• 21:23Speaker 02

  where we've gotten in, in, uh, in terms of, um, overheatedness compared to the previous cycles. And then now we're just in this cooling off period, which shows that, um, price is going down, but, but, um, confidence from the, from the longer term holders isn't moving or is actually going up. So I think this is, this is a good way to kind of show that, yeah, the, the bull market is, you know, we're cooling off here, but it's not over because we didn't reach that overheated euphoric zone.

• 21:50Anthony Pompliano?

  And then what about M V R V?

• 21:53Speaker 02

  Yeah, so M V R V is a, um, it's a very simple ratio of the market capitalization to the realized cap. Um, and so it's another, it's another metric where, you know, you can identify these, these overheated zones. Um, and then there's another kind of a, um, a subset off of this, um, M V R V Z score, which basically adjusted for volatility and gives these very distinct overheated zones. Um, neither of those have we hit any kind of overheated, um, mark and, and what I'm looking at, um, and, you know, we're cooling off a lot on, on both of those. What that shows is, you know, the market cap is going down, um, and the realized cap has gone up.

• 22:36Speaker 02

  And I mean, I'm trending looking this over a, a two to three month period since call it, you know, the end of, end of January, uh, beginning of February, and, and this has been trending down since then. So, um, you know, that, that, that's showing that we're just kind of in this cool off period. And once again, we haven't hit, um, at least a historical overheated zone. Um, so, yeah, I, I, I think that's a, that's just another metric, you know, there's, there's like three or four of these. And I think the key takeaway here is like, We haven't hit overheated zones on any of these, yet we're cooling off. So if, unless Bitcoin does something that it's never done before, the bull market isn't over, based off of Bitcoin's historical action.

• 23:19Anthony Pompliano?

  Got it. And then maybe the last thing is just talk about the volume distribution and then we'll let everyone go. But I think the volume distribution is really interesting, kind of comparing where we are today versus historical bull markets.

• 23:31Speaker 02

  Yeah, so, you know, in each bull market, you see around like 2 to 3x the previous all-time high, this big base of capital kind of flow in this, that we see this big consolidation. And we started to see that, you know, call it around, let me say like mid 40s to call it 58K, especially between 54,000 to 58K. You saw a lot of coins moving hands. Over 25% of supply has moved above the 40K threshold. And what you see at bull market tops is you don't see a lot of distribution. So, you know, if you look in the newsletter, you see, I saw some comments that it looked the same. I mean, I suppose it looks the same in the

• 24:14Speaker 02

  kind of the pattern of it, but the actual density, the percentage of supply moved at each of those levels is not even comparable because especially in that, you know, in that 54 to 60,000 range, we have a lot of distribution there, meaning, you know, a lot of, a lot of coins, a lot of people bought in at those levels, a lot of new capitals flown in between that 40 to 60K band. So, you know, at the top, a lot of coins don't change hands, whereas now we're kind of seeing the opposite in the zone that we're in. So the signature of that, in terms of the URPD, if that was the top, it would be kind of unprecedented as well. And also, you know,

• 25:01Speaker 02

  Two, two other things, you know, the, the stock to flow deflection. I think this is very interesting. Um, you know, a lot of people are calling the, the stock flow model dead, uh, but it's had a bigger deflection than it has before. Uh, this is like the third largest deflection it's had to the downside. Uh, so that, you know, that's, that's one interesting thing to keep in mind. I think I, I'm a, a general proponent of the stock to flow. I, I don't follow it in terms of like the, the exact price, but in a general sense, I think there is a correlation there between, uh, you know, the, the supply and, and price. So I think that'll be interesting to take a look at. And then also Willie Woo's, um, N V T price, which, um, I think it's only been broken, um, for, you know, significant amount of time,

• 25:45Speaker 02

  not just like one daily close, um, one or two other times, I think once in 2017 and, and once in 2013. And we're very, um, undervalued relative to that ratio, which is just like a very basic ratio of, uh, like the network, the, the market cap, um, to the, to the, uh, like the on-chain transactional volume. Uh, and so you can kind of think of that as like, we're undervalued compared to the underlying, um, investor activity that's going on in the blockchain. So I think that's another thing I'm going to be keeping an eye on because that model, um, that model has, has, uh, served as a, as a good pricing mechanism for Bitcoin throughout its history.

• 26:24Speaker 02

  So I think, you know, if, if, if Bitcoin goes into a bear market from here, um, it would be pretty, um, I think a lot of these models that we're all using would kind of be invalidated, which in my opinion, um, isn't going to happen because they've worked for all of Bitcoin's history. So, um, it is something we're definitely going to have to keep an eye on over the next couple of weeks. But, um, based off of the data and the historical, you know, um, action of these different indicators, I remain bullish and I think we, we are still in that, in that bull market. Um, it's just going to take some time at this point for the coins that were kind of panic sold over the last, um, week or so

• 27:05Speaker 02

  to kind of, uh, find their way into, uh, strong hands. But, um, yeah, I would say, you know, kind of base case, e- expect consolidation over the next couple of weeks or so. I mean, this is going to take some time now. Um, I think. This is, this is, we're, we're still in consolidation, but it's just gonna, it's putting a damper on how long that we, we may break out of the consolidation. It may be a while for, um, for that process to happen, but I, I, yeah, it's still very bullish.

• 27:36Anthony Pompliano?

  Awesome. This is fantastic work. Uh, for those that are, uh, listening live, uh, or watching, um, afterwards, I'm putting in the, uh, chat right now, Will's new email. Uh, he's doing a fantastic job, so please go subscribe to that. And then every Friday, he's gonna be writing a guest post, uh, for the Pomp letter. So make sure you're subscribed there. And then, uh, we're gonna do these every Saturday. Sometimes they'll be live, sometimes they won't. Um, but hopefully you guys are all learning from this. So Will, thank you so much for, uh, for taking the time to do this. You're doing a great job and hopefully people are enjoying it.

• 28:10Speaker 02

  Thanks a lot, Pomp. You know, have a good weekend, man. And, uh, I'm looking forward to getting some Bitcoin pizza. You gotta get that out to Raleigh.

• 28:17Anthony Pompliano?

  I'm working on it.