#727 What Is Going On With Bitcoin? 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. This week's interview with Will is guest hosted by my brother Joe from the Best Business Show.

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's quickly become one of my favorite writers on 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.

• 1:00Anthony Pompliano?

  Alright, Will. People are freaking out. Alright, people are saying, "Hey, look, Bitcoin, Bitcoin's down from 69. We had an all-time high, whatever, 7 to 10 days ago. It's below 60." So just on a general, before we dig into the charts and the on-chain analytics, like, where are you at from a sentiment perspective?

• 1:17Speaker 02

  Yeah, I mean, generally, like, Twitter sentiment can, can be faded. It's kind of plus EV. Yeah, I mean, right now, Twitter sentiment's absolute garbage. You go on there, everyone's like depressed and stuff, and you zoom out and you look and we're at, you know, we're in the upper 50Ks and everyone's panicking, you know, it's, it's kind of funny how, you know, you lose perspective in that sense. You know, we've been pretty much up only since September with no correction. You know, we get, we get our first correction since then and all of a sudden, everyone panicked. So, you know, I think it's, it's easy to kind of, you know, lose sight of the, the bigger picture as well as kind of get caught up in these kind of short-term fluctuations, which are all part of Bitcoin.

• 1:59Speaker 02

  You know, markets trade both ways. You have to trade up to trade down, you have to trade down to trade up. It's just part of how markets move. And so, you know, I think... Through what we'll get into in a second, you know, I think, um, in my opinion, the, the kind of broader thesis that we've been talking about, uh, of in the sense of being in a bull market hasn't changed. Um, and until we start to see those, those behavioral, you know, trends in the data change, I'm not going to change my outlook either. Um, you know, I kinda, I kinda follow the data and, you know, see what it says and I, I try to stay, you know, unemotional and and objective as possible.

• 2:36Speaker 03

  Yeah, I think that's the beauty of the on-chain analytics, right? And the metrics, which is everyone just saying, hey, let's remove the emotion from this. Let's look at what the data says. Let's look at what the numbers say. So let's dig into it. Let's look at, uh, the future perpetual funding rate chart to start. What's going on there?

• 2:49Speaker 02

  Yeah. You mind if we just back up and touch on this first chart real quick? Just the, the top price chart. Um, I just want to point out something real quick. So first of all, like, um, what, what we had talked about about two weeks ago was we are entering this volatility squeeze, which is highlighted by this kind of yellow shaded area. We were smack dab in the middle of these two, uh, Bollinger bands, which are essentially looking at the standard deviation from price. And what we said was that in the last three squeezes we had, we, we faked out in one direction to grab liquidity from breakout traders before reversing. And so this actually happened a fourth time. Um, and so like, as we were kind of breaking out above that top band, I sent out a tweet and basically said, is

• 3:29Speaker 02

  it happening again? Um, and of course everyone was like, no, no, no, like we go to the moon, blah, blah, blah. But you know, it's like, you, you look and see kind of patterns repeat. Uh, and so based off of that, I was, I was kind of cautious as we broke above, um, this upper Bollinger band. And we did in fact, get a fourth fake out, uh, essentially of, of, you know, a fake, a fake, fake out or break of, you know, fake breakout, um, uh, you know, to the upper side of the bands before, before reversing now to the, to the downside. So it's just something I wanted to point out. Um, you know, we, we were kind of watching for this and, you know, just moving forward, we'll be watching for that again, because this has been a pattern that's now occurred several times in a row, where you kind of

• 4:11Speaker 02

  have, have seen, um, you know, whatever special force at will that you want to call it, that's, uh, you know, behind price, uh, kind of leading, leading into. You know, kind of this fake out to grab that liquidity. Everyone, everyone's like, okay, you know, we're squeezing to the upside. And then, you know, reverse the market and that, and that's kind of what we've seen. And not, not to get like, like into like any kind of conspiracy theory and say there's like the Illuminati behind the price. But that's just generally how markets trade is. They move to where the liquidity is. And so I'm not, I'm not fully surprised to see this move that we've seen because we were, we were prepared for this. And, and some of the stuff we'll get into in a second. You know, we've, we've been kind of due for a reset on some things like funding and SOFR.

• 4:55Speaker 02

  And this is stuff that we've talked about for a while. So, you know, not, not all, not all surprising per se.

• 5:02Speaker 03

  So basically the way I read that chart is if it breaks out to one way or the other, that at least the last three or four times it has gone the other way. And it's basically like a pump fake or a head fake and it goes the other way. Which people were excited to see the first time and then it went opposite again. Right? So that's the way to read that chart. And then Will, so let's move on to the perpetual funding rate. What do you got here?

• 5:21Speaker 02

  Yeah, I think we talk about this every week. So funding is essentially based on the premium. Or the, the delta, which just means the difference between the mark price. So whatever the perp is trading at on an exchange, as well as kind of the weighted spot, the average spot price. Which is called the index price. So you look at all the major spot exchanges and give them kind of this weighted average by volume. And so funding is essentially the mechanism that pegs the perp to the actual weighted spot price. And so funding can have some signal because, you know, it, it, it's essentially tracking the, the aggression of, of the perpetrator's relative to, relative to spot, as we just mentioned.

• 6:02Speaker 02

  You know, generally speaking, prolonged positive funding is, is kind of a, a signal of caution. Although we can see that occur for, for longer than, than you'd expect. Like earlier this year, we had prolonged positive funding for two or three months. Where funding really has actionable signal, in my opinion. Is when we see price going one direction, meanwhile, funding is going the opposite. And so this happened on Tuesday of this week. We saw price was grinding down. Meanwhile, we had rising funding, as you can see, right between 15th, November 15th and November 16th on the bottom, on the bottom axis there. You'll see funding was rising as price was grinding down. So, you know, that wasn't all entire, you know, entirely surprising to see us kind of get this little wipeout.

• 6:46Speaker 02

  But in general, this move has been more driven by spot than than like a leverage, any kind of like leverage wipeout. I think since since funding is kind of like been more widespread in terms of knowledge on on Twitter or whatever like platform. People generally now have been like blaming like the leverage for every single down move, which isn't always the case. Oftentimes, it's the case in the in the short term, because we have, you know, massive liquidity on these perpetual swap exchanges. And we have massive leverage compared to anything in traditional finance. But, you know, sometimes, believe it or not, some people actually sell their Bitcoin. And that's what we've seen over the last couple of days, especially from Biffenex.

• 7:29Speaker 02

  We've seen Biffenex trading at a discount to several other major exchanges. And so, you know, overall, you, I think, a lot of that selling pressure has come from Biffenex. But in in general, you've just seen, you know, heavy, heavy spot selling paired with some liquidations. You know, I think we saw like 100, 125 million dollars of liquidations, of long liquidations yesterday. But yeah, I mean, in in general, this is this the down move just seems like, you know, some some profit taking since we haven't really had any kind of major correction since we retested 40K in September. And, you know, I mean, it's it's not just fully like a, you know, kind of a leveraged liquidation kind of move.

• 8:09Speaker 03

  Yeah, Will, you can't introduce common sense on Twitter, man. Don't try that, all right?

• 8:13Speaker 02

  Yeah, right.

• 8:13Speaker 03

  And then, all right, so let's move to Sopra. You got a bunch of analytics here to Sopra, the family of metrics. Let's start with the short term holder one.

• 8:20Speaker 02

  Yeah, so just for anybody who doesn't know, so Glassnode identifies short-term and long-term holders using this 155-day threshold, which is five months. Reasoning is behind, they've done some statistical studies. What they find is that over time, the longer a coin is held by an entity, the more likely, I'm sorry, the less likely it is to be spent. But right at that 155-day cutoff, that's where that likelihood really kind of drops off the most. And so what we're looking at here is Soper, which is our spent output profit ratio, which looks at all the profit and loss realized on any given day, but then we normalize it just looking at the short-term holders in this case. And so what you can see is that, first of all, well, first of all, you need to identify what the broader

• 9:05Speaker 02

  market trend is. And we do this through other metrics that we've covered, you know, for the last couple of months, and a few of which we'll touch on later in the letter. But once we've identified that broader trend, we can use Soper, specifically this short-term holder Soper in this case, to look at opportunities to A, buy the dip along one, and then in bear trends fade the rallies or underside tests of one. And so as you can see, you know, during the end of last year, beginning of this year, every time we kind of came back down and retested that one threshold, those were good opportunities to buy whenever we slightly dipped below. And then as well, you know, you could see, over the summer, we were just in, we were kind of in this mini bear market phase. And so then we kind

• 9:50Speaker 02

  of had this prolonged period where we stayed below. And every time we came back from the underside and tried to retest that, that was rejected. And so right now, we've had a nice little, you know, move below one here. And so, you know, given that, we think that we're in a broader bullish trend, which we've kind of built a case for using other metrics, you know, if that, if we do believe that is the case, well, then, you know, this dip below one should present a good buying opportunity and also means that we're likely bottoming out if we haven't already.

• 10:21Speaker 03

  Yeah. And so I think what's fascinating is when you look at it on the seven day average, which is your next chart here, we already got confirmation of the bull market a couple of months ago or a month ago. What are you looking at now on the seven day moving average chart?

• 10:32Speaker 02

  Right. Yeah. Like, like you mentioned, we got confirmation at the end of September. Very similar actually to the end of September of last year where we also got confirmation and then just began trending upwards. Yeah. I mean, what I'm looking for is are we going to come back down and retest that one threshold? If we do, I'd happily buy there just because given other metrics, like I said, are showing that we're kind of in this broader, you know, bull market structure. You know, I'm not, I'm not betting that we do get this reset just because it's, it's the weekly version. So generally, you know, you have to see a pretty significant move for us to come back down and retest that. But it is nice to at least see us kind of reset a bit. And I wouldn't be surprised for us to come back down and, you know, touch that, touch that one threshold again and get a second, you know, second confirmation,

• 11:17Speaker 02

  if you will. But yeah, well, I mean, what you don't want to see obviously is us to break below one and then failed retest from the underside, you know, as we mentioned. But yeah, I mean, for now, we're sitting pretty close to one. We've gotten a nice little reset over the last, you know, call it two, three weeks. And so, you know, I mean, even if, even if we don't come back and get that confirmation, which we already got at the end of September, you know, I like that we've gotten a bit of a reset here.

• 11:42Speaker 03

  And are you looking at kind of the same thing on the next chart, which is the short term holder profit and loss of just looking to see if we get reset, if we go towards one again and bounce off?

• 11:50Speaker 02

  Yeah, yeah. Same concept. You're just looking at here instead of with Soopra, you're looking at all the spent outputs, you know, in the definition spent output profit ratio. But here, what we're looking at is the, just the aggregate state of profit. So if, instead of looking at the, the coins that are actively being spent or traded on a given day, you're just looking at, okay, you know, these guys are sitting in profit, unrealized profit and unrealized loss. And you're running the ratio of the two of those things. So it's very similar, same concept in the sense that you have this kind of one threshold that you look forward to kind of get confirmation for, you know, whatever market trend that, that we're in, as well as, you know, when we get a break below that,

• 12:32Speaker 02

  you know, that's, that's a, you know, bearish, you know, it's a bearish break or when we break above this like a bullish break, just like Soopra, you know, if you're looking for the same dynamics that you see in Soopra, it's just a different way of, of, you know, calculating it, I guess.

• 12:45Speaker 03

  All right, cool. So then let's, let's go to the on-chain, the on-chain cost basis, right? And maybe just talk through kind of how this has confirmed bull markets in the past and what you're seeing here now.

• 12:54Speaker 02

  Yeah, so, so you can call this a couple of different things. You can call it the cost basis, or realized price, or VWAP. And so it just, you know, it's all saying the same thing. So you're, you're looking at VWAP is a volume weighted average price. You're looking at realized cap, which we've talked about several times is the market capitalization of Bitcoin, based off of the last time that coins were moved. And so we can kind of track the amount of capital inflow coming into the market. And then we normalize this for just looking at short-term holders in specific. As we mentioned, we can, we can look at things based off of that, that cutoff that Glasson has 155 days to look at short-term versus long-term holders. And so what we see is that like, historically, the short-term holder

• 13:39Speaker 02

  cost basis, or realized price, or VWAP, sorry, I know I'm throwing like, three different things in there. It's all saying the same thing. They've all kind of served as, this is served as kind of the support band in bull markets. So if you go back and look at 2017, you can see these like, four different retests, where we came back down during a correction and tested this and bounced really nicely off of that. As well as, once we broke below that, in, in, you know, at the end of 2017, that would have been, you know, time to, time to be cautious. And then once you had this kind of failed retest from the underside, that would have been your, your confirmation that, you know, we've, we've kind of broken the trend. And so it's, it's, you know, similar to, it's similar to Sober. And then a lot

• 14:22Speaker 02

  of things, what you can look at is, you know, when you break below, some people will say, okay, you know, that's enough, that's enough signal for me to, to, you know, change my, my market outlook, right? Because we haven't broken below this, you know, throughout the entire bull market. Now we've, we've clearly broken trend. But some people who are a bit more conservative, look for, okay, do we have confirmation? And then they'll, they'll base their opinion off of, once we get that, you know, failed underside retest. And but, you know, you would have, if you did that, you know, let's say you sold, based off of this, you would have kind of gotten out at the same price point. You just basically sold at the dead cat instead of, instead of, you know, as soon as it broke. I personally stand in the camp of, I'd be looking for kind of this failed underside retest, because I think, you know,

• 15:06Speaker 02

  Kind of the, it's really difficult to time the exact top. You know, you kind of had these kind of red flags and caution signals that I think you can, you can be given. But the, you know, the, the last, the, the last week or two of parabolic moves are where the largest portion of that move are made. And so it's, it's really difficult to like time that perfectly. But where, where I do think it's reasonable to kind of, um, to, to look for an exit is, is on that dead cat move. Uh, and so this is just one of the, you know, example of that where, you know, we, we had that failed retest, uh, from the underside of that band. And then as we headed into, you know, the 2018, uh, bear market, we had like three failed retests from the underside of that.

• 15:47Speaker 02

  Once we finally broke above, that's when we came out of the bottom of the bear, uh, heading into that mini 20, you know, 2019, uh, bull market, whatever you want to call this. Uh, there's a lot of that was driven by, uh, the plus token Ponzi where they were like artificially locking up coins. Uh, but that's like, that's a conversation for another day. Uh, but then we had this failed, once we broke below, we had this failed underside retest. So that's where you would have become cautious again, until we once again broke back above, um, after March 2020. Uh, you know, you could see in, in September of last year, we once again bounced off, uh, bounced off of this, uh, and then broke below, um, heading into May, which would have, you know, would have been time to, to become cautious as well. Uh, and then recently we've bounced back above this, uh, you know, at the, at the end of September.

• 16:30Speaker 02

  So, um, two things, A, you know, notice that we've gotten back above and, and bounced off of this conversely to the end of 2017, where we had a failed underside retest of that. Right? So it's, it's showing you that, you know, at the end of 2017, that was confirmation we were heading into a bear market. Whereas here, as we've retested, uh, at the end of September, showing that we're confirmation that we're back in a bullish trend. Uh, and, and notice too, that we have confluence of a couple of things that we, that we keep talking about the end of September. Confirmation at the end of September. Notice there's several metrics that are all kind of pointing to that same, that same concept. Um, and, and that's, that's what I really look for. You know, you can see one metric and say, okay, you know, this is telling you something.

• 17:12Speaker 02

  But when you have three or four different things, all pointing to the same thing through something that we call confluence. Um, you know, that's, that's where you can really feel strong about your opinion when you, when you kind of see that across the board.

• 17:24Speaker 03

  Yeah, so that's super helpful. And the next chart you have, I think, is interesting because when you look at the short-term holders and the realized price of the short-term holders compared to the long-term holders, it provides a pretty symmetrical view of like when you should start accumulating and when you should be cautious. Like, how do you think about this chart?

• 17:40Speaker 02

  Yeah, one thing I just want to touch on the last one, I just completely forgot to say was just it's at, just so people know, right now, it's at 53K. So that's kind of my bear market floor. I think we can go below as 50 to 53K, you know, and still hold bull market structure. And that also aligns with the technical level as well as 53K is the $1 trillion market cap threshold for Bitcoin. So I think that's a really important level for Bitcoin to kind of hold is that 53K level. You know, we could wick below, but I generally kind of stand in the camp of as long as we're closing, daily closes above 53K, I don't really see anything to be concerned about. But yeah, so sorry, to get into this chart, you're looking at what

• 18:22Speaker 02

  we just looked at, which is the short-term holder realized price or cost basis. And then you're comparing that to the long-term holder realized price or cost basis. And so you get this really clean oscillator where what you see is that whenever the short-term holder realized price, you know, overextends the long-term holder, AKA when short-term holders are kind of dominating the market, you can kind of get these signals of caution or kind of overheated signals for kind of the broader market structure. So you see that happen in, you know, the two 2013 double pumps as well as in 2017. And then conversely, whenever long-term holder realized price goes below short-term holder realized price, that's a good time to accumulate because showing long-term holders are dominating the market,

• 19:05Speaker 02

  the speculators are leaving. And so as you can see, whenever we kind of cross below that kind of green area that I highlighted, that's a good time to kind of average in buys. We're sitting in kind of this funky spot, right? Where we're not, we're very close to the, very close to the accumulation zone, never quite, you know, tapped that as well as we never really reached the overheated zone earlier this year. And this is kind of a similar signature to 2013. You know, I think completely different market structure to 2013, but just in the sense that, you know, we kind of had this parabolic advance, came back down. Almost fully reset that and then kind of reversed. So that's why that's what I highlighted with those two blue circles.

• 19:46Speaker 02

  But do note though, it only took three months for for this oscillator to go from that kind of reset between the 2013 double pumps to coming back above that overheated zone. So you know, this, this can happen quicker quicker than than perhaps that, you know, you'd you'd expect. But for now, we're sitting in a healthy territory and we're far from overheated in that sense.

• 20:04Speaker 03

  And it looks like we've turned the the corner back towards kind of where we're headed towards that caution area, or at least, you know, a fraction of it. Do you think that we could go lower? Right? Because it looks like it's already made that cut back towards that other zone. Do you think that we could go further over the next two or three weeks?

• 20:18Speaker 02

  I mean, anything is possible, but you know, I think, I think it would it would take a lot to, you know, this this looks at like the real macro kind of trend, if you will, or broader trend. So it's going to take a lot to kind of see any kind of reversal in this. I generally kind of stay in the camp that we'll probably just see this start to start to tick up into the future. Yeah.

• 20:37Speaker 03

  Gotcha. Okay. All right. So let's move on to M V R V Z score. That's a mouthful right there, but tell me what you're seeing here.

• 20:44Speaker 02

  Sure. So, you know, this is once again, looking at realized price. So you can't tell realized price is a is a really important metric to kind of grasp. And if you're trying to get into on chain. It was originally conceptualized by Pierre Richard, who's like a Bitcoin OG, wrote about like the speculative attack on the dollar before that was even, you know, a thing. You know, now, now Michael Saylor is actually doing that in real time, but you know, Pierre wrote this back in like the very early days of Bitcoin. So you know, he's kind of a visionary thought of thought of this concept. Nick Carter actually put it into action and then presented it at this conference. At that conference, David Puel and Murad Mahmudov both saw it and and thought of the idea to kind of compare

• 21:27Speaker 02

  the the realized price to market to the market price to kind of get this nice oscillator, kind of macro oscillator. And then this this on chain analyst awe and wonder, he he Z scored it, which essentially means that you're you're adjusting it for volatility. And that's what that's what we're looking at here. So we're looking at the ratio of market cap to realized cap. And then the Z scored, AKA the volatility adjusted version of it. And so once again, like, very similar to the last chart we looked at, but instead you're instead of comparing the short term holder to long term holder realized price, you're comparing just the overall realized price to the market price. And so what this is essentially trying to capture is like,

• 22:06Speaker 02

  When the speculative bid or you know, the, the, you know, uh, uh, greed in the market, the, the speculative market participants are coming in and aggressively bidding the, the price of Bitcoin up relative to the amount of cow, uh, capital inflows that are actually supporting that, right? So the, so, so market price is that speculative bid I'm talking about versus realized price is the actual capital that's coming into the network. Um, and so, yeah, whenever, whenever you see the speculative bid kind of overshoot that when that's basically showing you a really strong over exuberance or, or, you know, the market is overheated, uh, we break above this kind of red zone at the top. Uh, we kind of tapped into it earlier this year, never really broke above it and had this kind of euphoric signature that we've had historically. Uh, and then we had a really

• 22:51Speaker 02

  nice reset, um, over the summer and we're kind of just chopping around in the middle, uh, on the, on the lower half, but you know, kind of smack dab in the middle there. Um, and so, you know, as long as, as long as we're not, you know, kind of in this overheated zone, I think this, you know, especially given that we're, we're below the, the upper half of, of, you know, if you were going to cut this chart right down the middle, I think we're kind of still in this kind of healthy area where we're still far from, from overheated, if you will.

• 23:15Speaker 03

  Gotcha.

• 23:16Speaker 02

  So essentially the capital inflows are still supporting the price of Bitcoin. That's kind of the T, T, T, T, TLDR.

• 23:23Speaker 03

  Yeah, I appreciate the full explanation too. Um, so let's go to the, uh, liquid supply shock, uh, chart you have here. I think the thing that's fascinating about this is you talk about it in your email, which is, hey, if it declines for a couple of weeks in a row, a steep decline, that's kind of a, a reason to be cautious. And we saw that in 2017 and then we saw that earlier at the peak of this, uh, this bull market earlier this year. What are you seeing here and what has it done over the last few weeks?

• 23:46Speaker 02

  Yeah, exactly. So I created this metric back in, uh, summer with Willie Wu. So you're essentially just comparing the, uh, highly liquid and liquid guys to the illiquid guys. Um, so highly liquid guys, let's say they take in four coins, they hold only one out of those four. So they, they hold only 25% of the coins they take in. Uh, liquid guys, 50/50. So they take in half, spend half the coins they take in. And then illiquid, they take in and hold at least 75% of the coins they take in. So for every four coins they take in, they hold. At least three. So you're running the ratio of the highly liquid and liquid guys to liquid to the illiquid guys. Essentially, what this is, is the, in layman's terms, you're running a ratio of the weak to strong hands.

• 24:28Speaker 02

  To kind of get this, what I call, supply shock oscillator. So you're tracking where, you know, supply moving to these entities that historically have a high behavior of selling. Or are they moving to entities that have a low behavior of selling, or history of selling? And so what you see is, in bull markets, this this trends upwards as supply is getting locked up. In bear markets, this trends downward as supply is becoming liquid. And so like you said, this is kind of a leading indicator in two ways. So A, you know, over the summer, this was, this was probably the the main metric that I kind of used to to call the reversal over the summer, if you will.

• 25:05Speaker 02

  And and so like, we had this divergence where this was trending up, meanwhile, price was grinding down. So you had like these long-term holders with with low, you know, history of selling, that were locking up supply. And and, you know, getting in the market, buying, actively buying coins. Meanwhile, price was grinding down. And so then, once that resolved, we had this large kind of supply shock effect in the market where we had ten straight up days off of the lows. And so that, you know, this is kind of a leading indicator. As well as, I didn't have this metric back at the beginning of May. Also, I got into on-chain analytics like two weeks before the Pico top, which was great timing. But, you know, if if we were looking back, that looking at this back then, what you would have seen is a decline in this for about a week or two.

• 25:47Speaker 02

  Before we, before we had that major correction on May nineteenth. As well as, if you go back in twenty seventeen, if you, if you kind of zoom in, you'll see that there is a clear decline in this in the week or two leading up to that decline heading into the into the bear market. So. We're right now at twenty twenty-one all-time highs, and you can see recently, we've had this really large leg up, which means that strong hands are currently buying this dip. And and, you know, we're at the highest that the oscillator's been since twenty seventeen. But what what we'll look, what we'll be looking for to kind of become cautious is, you know, once, once this starts to decline. As well as, last week, we looked at the RSI of this, so I I took this kind of.

• 26:26Speaker 02

  A step further and created like a 60 day RSI and what you see like is is is you in like 2017, we had this bearish divergence between this. So essentially like the momentum of supply shocks was slowing down as price was grinding up. And you saw the same thing at the beginning of this year, that we had this bearish divergence between the RSI, which I put in the last newsletter, if anyone wants to see what that looks like. Um, you know, we had this bearish divergence between that and price. So, once, once we start to see that bear div as well in the RSI, that's, that's just another way to kind of utilize this metric to kind of signal when, when to become cautious. And I think you can make an argument as well in 2017, that in, in, in not the RSI, but just in

• 27:10Speaker 02

  this, in the, in the version we're looking at here, that you had a bear div, where like the, the oscillator made a lower high compared to like, if you look at like January 2017 versus like January 2018, we made a lower high versus now, as I mentioned, we're reaching 2021 all time highs. So we've actually, you know, made a higher high in that. So, I mean, that, that's at least a good sign that we aren't seeing a bear div in that. But, um, yeah, tho- those are some of the things I'd, I'd be looking forward. Um, so A, to see like a week or two decline in this, as well as in the RSI version of this, um, starting to see that like bear div kind of forming.

• 27:43Speaker 03

  Yeah. So the, the next chart you have is a long-term holders net position. I know this is something that you watch a lot, right? This is something that you constantly talk about. Just talk us through the idea of, uh, long-term holders buying into weakness and selling into strength, because I think that initially confuses a lot of people.

• 27:58Speaker 02

  Hmm. Yeah, yeah. Um, so it's kind of counterintuitive. So, you know, when, whenever you see red, generally you think red is bad, right? Humans just think red, bad, green, good, right? Uh, but in, in terms of, in terms of this metric, um, it's, it's actually kind of the opposite. Because long-term holders are kind of the smart money in the market. So they kind of buy into weakness. They don't perfectly, you know, buy the absolute pico bottom, but they scale into weakness and they scale out into strength. Um, and so you see this, this behavior between long-term and short-term holders throughout all of Bitcoin's history, throughout every single major rally in Bitcoin's history. Long-term holders have sold. Meanwhile, short-term speculators have come in and bought their bags the whole way up.

• 28:40Speaker 02

  And then heading back into the bear market, you see A, the short-term holders leave, or they age into long-term holders, which by definition is going to decrease the short-term holder supply as they then age into the long-term holder supply. And so, like I said, when we're in bearish trends, I'm sorry, when we're in bullish trends, you start to see those long-term guys begin scaling out into strength. As you can see on the left-hand side of the chart, they started scaling out in October 2020, which was obviously far from the top, but that was just the beginning of the distribution, right? And we saw them kind of peak out their spending in January earlier this year. And then them starting to accumulate, you know, kind of in April, that was actually kind of a bearish signal because generally, you know,

• 29:25Speaker 02

  these are the smarter market participants in Bitcoin. So they know that weakness is coming. So they, you know, them starting to kind of scale back in, it's kind of actually a caution sign, although it's kind of counterintuitive, because that's the trend that you see throughout Bitcoin's history. Now, recently, over the last two weeks, we've started to see some red prints, which means that they've now started to distribute again. So, you know, this isn't meaning that the bull market is over. Like, I remember when I posted this, there was a lot of confusion about that. What's just meaning is that, like, the distribution has begun. This is natural bull market behavior. And, you know, where we'll start to become cautious is where we have like a massive distribution print like we had in January of this year. But right now, we're just in that same territory that we were in like November of last year.

• 30:10Speaker 02

  Coincidentally, it's in this November, but not that the timing necessarily matters, just that the trend matters, that we've just started this distribution, as you can see on the left, comparing to where we are now.

• 30:21Speaker 03

  So I have a couple of questions real quick. One, it seems like that's a leading indicator by at least a few months. Is that correct?

• 30:27Speaker 02

  Yeah, I would say that, yeah.

• 30:28Speaker 03

  Okay, cool. And then, uh, two, my second question would be like, is there any evidence or what are you going to be watching to see how long that distribution can last for, right? Because I think people would be curious of, hey, is that selling going to be occurring for a month, two months, three months, four months? Or does it really just depend on kind of what market structure we're in?

• 30:45Speaker 02

  This is something that we've, we've talked about, like, I feel like every, every couple of weeks where I don't, I don't think necessarily looking at the market in the sense of timing is useful in saying the market is going to peak out in December or the market is going to peak out at this price. Uh, what I look for as an on-chain analyst specifically, you know, there's other forms of analysis you can do, but just being, you know, solely from an on-chain perspective, what you want to look for is just these behaviors. And so, you know, tomorrow, we could see all of a sudden, I, I highly, highly, highly doubt this, but we could see all of a sudden a massive distribution print like we saw in January, right? And it, it just, it just depends on, on, um, you know, what, what we see from, from these, uh, market participants. And I just track the behavior. So it's like,

• 31:30Speaker 02

  we know what, what behaviors to look for. When those happen, it's hard to say. We can kind of get a gauge as to generally this kind of plays out over two to three months, right? Generally, when you start to see these certain supply dynamics that we've seen since summer, that usually means we have continued price appreciation over the coming months. Uh, but that's not to say that, you know, th- those things could all of a sudden occur in a matter of weeks. So what, what I'm trying to say here is look for, and just for listeners, look for, uh, you know, look for behaviors rather than time. Um, and, and so, you know, just continue to monitor this stuff. And I will, and if you don't want to get a Glass Note subscription and, you know, I'll, I'll send it out in the newsletter every week and

• 32:12Speaker 02

  watch it for you, but, you know, watch the behaviors rather than the timing. Um, because, because the behaviors don't necessarily have to, have to occur in a specific amount of time, although perhaps we can kind of get a rough estimate as to how long they've taken historically.

• 32:27Speaker 03

  Gotcha. All right. That's helpful. Thank you. Uh, let's check out the last chart, which is dormancy flow. What's going on here?

• 32:33Speaker 02

  Yeah, so similarly above, we looked at the long-term holder supply. And so kind of on a similar note to that, we have other on-chain metrics that kind of look at the lifespan of coins that are being spent. So we have coin days destroyed, which are looking at, you know, if you move a coin to a wallet, stays there for 10 days, you have 10 coin days being created. You then move that coin out of that wallet, well, now 10 coin days are being destroyed. And then just for some people that may say, well, what if I move a coin to another address, right? That's where Glassnode's entity-adjusted version really comes into play because then you then you aren't subject to those to those movements as well. But also, you can look at the average spent output lifespan, which is the average age

• 33:15Speaker 02

  of coins, spent volume age bands, which is looking at the amount of volume coming from different age cohorts that's being spent on every given day. And in this case, we're looking at dormancy. These are all things, I'm just trying to make the point that these are all different ways that you can look at kind of these lifespan behaviors. And so dormancy is looking at coin days destroyed, which we just described, and then it's adjusting it for volume. So essentially, you're just getting the raw, the raw amount of dormancy that, you know, that that's taking place or destruction that's taking place. And then what we look at here is we're dividing, we're comparing the market cap to the USD value of the USD annualized value of dormancy.

• 33:59Speaker 02

  So we're looking at dormancy, multiplying that by price, and then looking at that times 365, and then we're comparing that to market cap. So essentially, we're getting this oscillator of like kind of this broader behavior of, you know, what, what's, what's the trend of spending from older coins in the market? And what we kind of see is that this, this kind of a black line that we have here, that that threshold has kind of been a, and a really interesting kind of level that this is historically interacted with. You see like in 2013, we broke below that. At the end of 2013, we broke back above the line in 26, heading into 2016. That was confirmation we're coming out of the bear market. This served as support in the 2017 bull run.

• 34:41Speaker 02

  Once we broke below, that was confirmation, we kind of had broken bull market structure. We bounced off of this in 2019 during that mini bull run, as well as earlier this year. And then as well, you see at the bottom, we kind of had this green area where that's generally been a good time to kind of accumulate or scale in some buys at the bottom of the bear. So we kind of got this bounce just above that that threshold where, you know, it was a great time to accumulate historically. We got a bounce right above that over summer. And now we're just kind of hovering in this kind of neutral area where we're we're not quite fully at the bottom. So like the asymmetry isn't quite, you know, really isn't isn't insanely skewed, but it's, I think it's still there in the sense that you still have a lot of runway to go before you kind of approach this kind of overheated area.

• 35:26Speaker 02

  Whether you want to say that that's at the black line or above, which which occurred in 2013, 2017, but even if you want to make the argument that, okay, well, we topped out in 2019 and earlier this year at the black line, we're still, we're still, you know, below halfway between that and the accumulation zone. So no matter how you want to kind of dice it up, we're still kind of far from this exuberant signature or overheated level, if you will.

• 35:48Speaker 03

  Gotcha. All right, Will. So I know I really appreciate everyone in the chat. Certainly appreciate you coming on here every week, dropping bombs, dropping knowledge. It's amazing. But if you had to, these charts are super helpful, right? But if you had to just zoom out for a second, knowing everything you know, from an on-chain analytics perspective and give like a two-minute summary or a minute summary of where you think the market structure is right now and what it'll be over the next few months? Like, what is your general take or your general analysis on this?

• 36:15Speaker 02

  Yeah, so in general, I think we're still in a bull market. And what we're watching for is all these different behaviors, you know, go on my, go on my Twitter, kind of, not to show my Twitter, but look at the pinned thread I have. I have like 20 different tweets on there in that thread that are all looking at all these kind of macro behaviors to look for moving forward. But in general, I think we're far from overheated. The timing exactly of when the bull market ends? I mean, who knows? I mean, I'm not going to sit up here and lie and say that I know. And, you know, I think a lot of people have said that the bull market is going to end in December just because it's historically ended. I think there's a really strong case to be made that we kind of extend out into into the spring of next year. But, you know, as long as, as long as these behaviors that we've

• 37:00Speaker 02

  Historically been been watching are are far from that kind of exuberant signature. And I think we're still in a bull market. What we're currently in, in my opinion, is just a correction that we historically have seen during all, you know, bull trends in Bitcoin. Volatility is part of Bitcoin. You know, you you essentially get paid for the risk that you take on through volatility. You know, for for for there's two sides of the same coin is is risk and reward, right? You know, the the risk being the volatility in this sense. And so I I look at this as just another buy opportunity. I've been scaling in buys, not financial advice, since since we got under 60K. I think we could go as low as 53K on a on a daily close. But, you know, I'm not gonna, I'm not gonna sit up here and say I know exactly when the bottom is and lie.

• 37:46Speaker 02

  But, you know, I I I've been scaling in buys and I think I think we're still in, you know, favorable territory in terms of this is likely just a correction in a in a broader kind of bull market that that, you know, I've been kind of trying to trying to illustrate for the last couple of months since summer. So, yeah, I mean, I kind of stand in the in the same camp that I that I have. I'm not, I'm not concerned. I see a lot of people getting really concerned, like the fear, the fear grade index is like pretty deep in the fear zone now. Which is great, because that's that's, you know, you want to be buying the blood. You want to be buying when everyone else is freaking out. So, you know, I would just say for for like any people listening, you know, just follow the data, right? And, you know, if if the data isn't telling you to be worried, then don't be worried.

• 38:29Speaker 02

  If the data is telling you to be worried, then it's time to be cautious, right? And and so like, we'll just continue to to follow what the data tells us.

• 38:36Speaker 03

  Yep, I think you have the advantage of removing the emotion from it, right? By looking at these charts all day, which really helps. So if you had to look at timing, though, I think most people were saying kind of north of 100K by by the new year. Do you think one that will still get there? Or do you think we'll push out a few months into the into 2022?

• 38:54Speaker 02

  Um, I mean, A, I mean, I don't, I don't think, no disrespect to Plan B, like Plan B is a really nice guy. Um, I talked to Plan B, I'm like, I'm like fairly on the regular, but you know, if we, if we hit 98K by the end of the year, I'll get a Plan B tattoo.

• 39:09Speaker 02

  I, I don't know, it's, it's, it's hard to say, uh, in terms of like price levels. I mean, I know I keep saying that I keep reverting back to the same thing, but I look for the behaviors more than anything. I mean, I have some price models that, uh, my, my kind of top model currently sits at like 125K and that'll, it's based on mean reversion and the, and realized price, which is the cost basis of investors. So like that'll, that'll slope up, um, if price starts to slope up because it's partially based on mean reversion. Uh, but for now that sits at like 125K. Um, in terms of how fast we get there, I mean, who knows? I mean, it's, it's, it's hard to, it's hard to kind of make that conclusion, but I, I do think, I do think, um, that, that there's a, there's a strong chance we kind of extend out into, into the beginning of next year, partially because everybody is

• 39:54Speaker 02

  expecting us to top out at the end of this year. So in general, I think when everyone's kind of expecting the same thing, the opposite happens. And that was also kind of like illustrated by like this, this correction we had during summer, like everyone thought we were going to be at like 150K by, by June, July. Uh, you know, when everyone's looking at the same thing, I, I generally kind of think, uh, I generally kind of think that, that doesn't, that doesn't happen. So like, given that everyone, everyone and their mom thinks that we top out by the end of December, I think there's a, there's a strong likelihood we probably extend out maybe into the first couple of months of next year.

• 40:28Speaker 03

  Yeah. And, and I think the thing with Plan B to remember too, is he has a bunch of different models, right? And people love one of them because he's literally giving monthly price targets. And it's like that emotional connection of seeing the price and saying, oh, it's going to get there by the end of this month. And he's been right a few months in a row or whatever it is. Uh, but his, his base stock to flow model still says, you know, 100K average for the, for the having cycle. So we'll have to see some fireworks.

• 40:48Speaker 02

  And there's no time variable too. So that's the other thing people miss too about this stock to flow model, which, I mean, I don't, I don't watch the stock to flow model on a day to day basis, but I, you know, I do think like anyone who's like, Criticizing Plan B just needs to keep into account that A, like the 98, then I know I'm busting his balls a little bit a second ago, but like the 98, the 98K price target is based on A, his like on-chain floor, which I have no idea how he's calculating that. He says it's proprietary, so I have no idea, but the stock to flow model is, is, there's no time variant to it. And so it's just, you know, it, it could also mean that we extend out into next year and, and reach the price levels that stock to flow is saying. It doesn't necessarily mean that we have to reach it by December. I think that's a bit of a misconception around it.

• 41:30Speaker 03

  Yeah, exactly. I mean, he tries to clarify it, I think, here and there, but it's never, never easy on Twitter.

• 41:34Speaker 02

  But you know, when you, when you got 1.4 million followers, like you're, you know, you're going to get some people that are, you know, miss the nuance, miss the nuance there.

• 41:43Speaker 03

  Of course.

• 41:43Speaker 02

  I mean, yeah, I, I've been, I've been, uh, I've been, uh, kind of bearing with that as well with some of this, some of the stuff I put out, you know, you really kind of have to not dumb things down and like, because that sounds like really condescending, but you know, you kind of have to like spell things out for, because some people are just new, right? I mean, you know, people just get confused because, you know, not everyone is, is like watching this stuff all day. So, I mean, yeah, I, I, I think, uh, I think there is a, a bit of a like kind of misconception or misunderstanding around that for sure.

• 42:10Speaker 03

  Well, I think, uh, well, I think you're doing just as good of a job as anyone, if not better. You're, you're putting tremendous content out on Twitter. You do the newsletter. You come on the show. You do a bunch of podcasts and stuff, uh, and you're doing a really good job of breaking it down. So people that are either new or old can understand it in a simple way. So I think that's great. I highly recommend, uh, everyone follow you on Twitter. Everyone knows that's been watching the show. Will passed me, uh, in the Twitter follower account a few weeks ago, uh, and he's, he's, he's blown by me now, but Will's a tremendous follower. He's almost at 420,000 followers now. Uh, he's proudly displaying.

• 42:42Speaker 02

  I gotta get that screenshot at 42069.

• 42:44Speaker 03

  Yeah, you gotta try to grab it. Hopefully, uh, I'm sure that'll happen in the next week or two here, hopefully. So make sure to try to grab that one that happens. But, uh, Will, where, is the link to your newsletter in your bio? Is that the easiest place to go sign up?

• 42:57Speaker 02

  Yeah, it's in the bio if anyone's interested. Um, it's free. Just, you know, you click the link in the bio and sign up for the email. If you don't want to get emails in your inbox, I just posted on Twitter too. So you can just click the link in the tweet every Friday.

• 43:08Speaker 03

  The email is worth it. He, uh, he does the same charts. Glass note is expensive for an individual membership. So, uh, Will is breaking it down. He's giving you kind of what you need to know about each chart and doing a really good job. So highly recommend that. Will, thank you for coming on. We appreciate you, man. You got anything good going on this weekend?

• 43:25Speaker 02

  Oh, no, I'm just chilling, uh, cause Thanksgiving next week, I'm gonna, I'm gonna just kinda take it easy, lay, lay back, keep you chill. But, uh, yeah, thanks, thanks Joe for having me on, man. You're, you're a good host. Up and run for his money.

• 43:36Speaker 03

  I appreciate that, man.

• 43:37Speaker 02

  Better watch out, man.

• 43:38Speaker 03

  He better watch out. I was telling him yesterday, don't let this get, don't let me get too comfortable up here.

• 43:43Speaker 02

  Yeah, you crushed it, man. And, uh, yeah, I'm gonna hit you up about the sweater. I wanna get one.

• 43:47Speaker 03

  For sure.

• 43:48Speaker 02

  I'm sure, I'm sure DCU will have like some like ugly sweater parties or something. People, people like have all kinds of like weird themes for parties. So I'm sure that'll be one. I'll, I'll rock the Bitcoin ugly sweater.

• 43:57Speaker 03

  Definitely, dude. I will send you the three options. You tell me which one you want, we'll send you one.

• 44:01Speaker 02

  All right, man. Sounds good.

• 44:02Speaker 03

  Thanks, Will.

• 44:03Speaker 02

  All right. Take it easy, brother.

• 44:04Speaker 03

  You too.