#556 Will Clemente on What Happened to Bitcoin When Elon Tweeted

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 Elon’s tweet, Bitcoin’s on-chain metrics, miner accumulation, NVT, whale purchases, and whether the bull market is still in tact. ======================= 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. =======================

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.

• 0:12Anthony Pompliano?

  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 by going to the link in the description. In this conversation, we discuss Elon's tweet, Bitcoin's on-chain metrics, minor accumulation, NVT, whale purchases, and whether the bull market is still intact or not. I really enjoyed this conversation with Will, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Remote. Do you employ or pay workers in other countries? Even if you don't yet, you might soon. Now that remote work is the norm, employees have more freedom than ever

• 0:55Anthony Pompliano?

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• 1:37Anthony Pompliano?

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• 2:23Anthony Pompliano?

  Next up is Revolut. Revolut is back to the basics for a second. I've partnered with Revolut, a finance app in the United States and United Kingdom, that say they're the simplest way to access crypto. They're putting their money where their mouth is. Sign up and make three card transactions and get $15. Yes, that's right, 15 bucks. What can you do with $15? You can exchange for Bitcoin or 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. As usual, when you move your money from fiat to crypto, your capital is at risk. Sign up now through revolut.com/pomp to get a $15 reward and put them to the test. Again, revolut.com/pomp to get a $15 reward and put them to the test. You can see their

• 3:08Anthony Pompliano?

  terms and conditions for details. They're a financial technology company. Banking services are provided by Metropolitan Bank and cryptocurrency services are provided directly by Paxos Trust. Go check it out and let me know what you think at revolut.com/pomp. Last but not least is Cosmos. They're building the internet of blockchains, marking a new era of interoperability, scalability, and usability. The free flow of assets and data between blockchains with bridges to Ethereum and Bitcoin will unleash the potential of DeFi, NFTs, and much more. You can dive into Cosmos at cosmos.network/pomp. Again, cosmos.network/pomp. All right, let's get in this episode with Will. I hope you enjoy this one.

• 3:49Speaker 02

  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.

• 4:18Anthony Pompliano?

  All right, guys. Bang, bang. Got Will here with me. Thanks so much for doing this, man.

• 4:22Speaker 03

  Hey, Pop. I hope you had a good week, man. It's great to be back.

• 4:26Anthony Pompliano?

  Absolutely. Let's jump right into it. This week was, uh, pretty bullish. It started off, and then all of a sudden Elon decided to, uh, start tweeting and things got kind of crazy. What exactly happened?

• 4:37Speaker 03

  Yeah, so, you know, the past couple of weeks, um, in the newsletter and on these podcasts, we've been kind of describing a, uh, bullish setup, right? Uh, this consolidation that we've been in now for, geez, it's been two or three months, and, uh, we've just kind of been waiting for confirmation in either direction. Um, and then Elon, uh, around 6:00 PM on, on Wednesday, uh, he decided to come out and, and tweet whatever he did about uh, Bitcoin's environmental impact, and that had a big impact on the price in short term. Right after he decided to tweet that, we had $200 million of long liquidations within 10 minutes.

• 5:16Speaker 03

  Um, so just looking at, you know, just what was driving the price, that was what caused that huge initial dump that we saw. Um, but it was very interesting to see before he actually had tweeted that, there were, I think it was 19,500 roughly, uh, Bitcoins that were moved on to exchanges in the hours before. Uh, which is very suspicious to me because then after the dump, you saw this huge, um, outflow of coins from exchanges. So to me at least, it seems like somebody had some kind of information about what was gonna happen.

• 5:50Anthony Pompliano?

  Yeah, and what's really fascinating to me really is here, um, when you see that much liquidation, uh, it's such a short period of time, it almost feels like people felt like the market had bottomed. They then were, uh, putting this leverage on and were ready to kind of return back upwards. But instead, there was kind of this, you know, external event that wasn't, uh, perceived in any of the on-chain metrics, and that's really what drove all those liquidations and kind of caught people not, uh, you know, unexpectedly.

• 6:18Speaker 03

  Yeah, absolutely. And I think this this kind of goes to the whole thing about Bitcoiners are always talking about not to use leverage and just to buy spot because you never know when an event like this is going to happen. And as you just said, I think a lot of the market was expecting a breakout of this consolidation that we've been in for a while. And they were starting to add in some leverage back on. And so when when this happened, a lot of those leveraged traders just got absolutely wrecked.

• 6:43Anthony Pompliano?

  Yeah. And so talk a little bit more about the Bitcoin that got moved on to the exchange. What did you see there? Do we know who that was? And then you said there were some Bitcoin moved off of the exchanges afterwards?

• 6:56Speaker 03

  Yeah, so a few hours before the dump, there were nineteen thousand, I misquoted the number earlier, it's nineteen thousand two hundred fifty nine Bitcoins that were moved on to exchanges. And then afterwards, so this is just running a moving average, anyone can see this in the letter. And then I think we're going to have these charts up on the video as well. But you saw, I just ran a moving average over the net transfer volume. And there's a huge increase before. And then after there's a decrease in transfer from exchanges, actually, people are starting to move coins off of exchanges following the event. But it's hard to know exactly which, you know, which entity it was. But I find that very suspect, because there'd be quite a coincidence.

• 7:39Anthony Pompliano?

  I completely agree. It also looks like about six hundred fifty million dollars worth of tether got printed. What's going on there?

• 7:46Speaker 03

  Yeah, so after we had the big dump, first of all, we saw one of the biggest outflows from exchanges in since February, it was only trumped by one that we saw towards the beginning of April. So in addition, OTC outflows also spiked. So there are definitely some people that stepped in and scooped up some cheap coins. And then, as you just mentioned, there's a lot of tether printed in the 24 hours following, about four hundred sixty million dollars of tether. And then also, we saw just in general, six hundred fifty million dollars roughly of tether moved on to exchanges in the 24 hours following, which obviously isn't signaling Bitcoin buy specifically, like they could be buying other altcoins as well, but. A fair portion of that, it's fair to say, is going to Bitcoin.

• 8:30Speaker 03

  And it also doesn't mean that they're buying immediately. They could be, you know, just moving that capital onto exchanges. And then they're slowly going to wean into a position. But that capital is there on the exchanges, waiting to be deployed for sure. Yeah. And one other thing I wanted to touch on was this metric SOPR. So this is something that we've, we've discussed in previous newsletters and pods. So SOPR just basically measures like the net profit loss of the market on any given day. And during this event, I ran a six hour moving average and a 24 hour moving average over this metric. And on both of those timeframes, we had the biggest drop in SOPR of the entire bull market.

• 9:12Speaker 03

  So, you know, in the, in the bull market, when we have these crazy price runs, not a lot of people are willing to sell at a loss. And so when you see a huge portion of the market, or I shouldn't say huge portion, but a majority portion of the marsh, of the market selling at a loss, that's usually a sign of, of a bottom. And this metric has timed each bottom that we've had throughout the entire bull run. So if we aren't at a bottom here, and at the time of recording, we're about 50,300. If that 46K, that really nasty wick we saw from the, from the long liquidations, if that wasn't the bottom, then we're very close to it. But based off of this, this SOPR metric, which, like I said, has timed most of the bottoms,

• 9:56Speaker 03

  we should be very close to a, a bottom here. And, and also we bounced off two major moving averages that kind of serve as a bull market support. So there's the 128 day moving average, which has never been, uh, uh, there's never been a daily close below that moving average during a bull market. We actually bounced within a hundred dollars off of that moving average. And then we also bounced off the 21 week moving average, which i- isn't to say if we have one daily close under one of these, that the bull market is over and it's time to pack it up and go home. But if we had multiple daily closes below that, I would, I would start to get a little concerned. But we did bounce pretty strongly off of both of those moving averages,

• 10:41Speaker 03

  which, when, when you look at, you know, previous cycles, after we've had those corrections to come back and retest those moving averages, we've had some pretty crazy gains in, in the coming weeks and months following them.

• 10:53Anthony Pompliano?

  Remind us what the funding rate mech uh kind of metric is and then what happened on the funding rates?

• 10:59Speaker 03

  Yeah, so the funding rate is another metric that you can kind of use to time the bottom. I think the, you know, the funding rates and uh SOPR are two of my favorite metrics to use to kind of get a rough estimate about where we are and you know, uh if we're close to the bottom of in these corrections. Uh so the funding rate is used on different exchange platforms um o- overseas where they have um these perpetual swap contracts. So the way you can just think of this is that it's a futures contract that doesn't have any expiration. Um and it's pegged to the Bitcoin price. And so the way it's pegged um is they they have something called an oracle, which takes like a weighted average from different exchanges,

• 11:39Speaker 03

  Coinbase, Binance, Kraken, etc. Um and they're all weighted based off of how the amount of uh volume that they have on their exchanges. And then there's an average price, which is which is what the oracle um gives these uh these trading exchanges, um for example, like Bitmex, right? And um or FTX is another popular one. And so the the contracts, the perpetual swap contracts are pegged to that oracle price through funding rates. So when the majority of the market wants to go long, the funding rate goes up, which means that uh the longs are actually paying shorts to um incentivize people to take the other side of the trade and therefore peg that contract to the oracle price.

• 12:24Speaker 03

  So you know, when the market gets super bullish, it's a uh the funding rates can be a good tool to kind of gauge the sentiment of traders because you start to see that um the traders are paying a high premium to uh sustain those those long positions. Um and and when funding rates go negative, it's showing the opposite. The majority of the market is looking to go short and therefore they're funding longs to take the other side of the trade there. And during the during the uh event after Elon decided to tweet that, um we saw the funding rates go negative. And then what was interesting though is we saw this very sharp bounce back in funding. Rates. We had a decline for, I'm looking at it now, about seven or eight hours.

• 13:07Speaker 03

  And then out of nowhere, we just shot right back up, which I find that very interesting. I don't really know what to make of that. But in the previous corrections that we've had in this, in this bull market, we've seen funding rates just kind of creep back up slowly. It was very interesting to see them come, come right back. But tho- those funding rates going negative in combination with the SOPR, which was, had gone below the one threshold, which we've, we've talked about before.

• 13:36Speaker 03

  That on multiple timeframes, tho- those things are giving me a signal that we're, we're very close to a bottom if we haven't reached one.

• 13:43Anthony Pompliano?

  Got it. And when you start to think about kind of the levers that was in the system, it feels like a lot of that got flushed out here.

• 13:51Speaker 03

  Yeah, absolutely. So, you know, when you just flat out are looking at the, the futures open interest, we had a huge wipeout during this event, about 1.8 billion dollars of futures open interest in total, which is a good thing because, you know, in the short term, price then doesn't have as much weight to speculative traders and, and it's more weighted by the organic buying or, or spot buying that's taking place rather than just speculators jumping in. And the price being driven up through that way. So I, I think that's a good thing to see this leverage get flushed out and, and the greed kind of moving out of the markets in general.

• 14:29Anthony Pompliano?

  Yeah. One of the things that's so fascinating in your analysis is you're able to look at the various wallets and how much Bitcoin they have in them and kind of what those are doing. Maybe talk us through what you would expect to happen in a bull market between kind of small wallets, medium sized and large, and then what actually is happening right now.

• 14:48Speaker 03

  Yeah, that's a great question. So, you know, there's, for the, for the very small wallets, I don't know, like point 001 BTC to 1 BTC. You're seeing those, those very small cohorts have been accumulating steadily throughout all Bitcoin's existence and they continue to do so throughout this bull market. When you look at, you know, some of the higher, the cohorts, you see different things. So. For example, like the um ten BTC to a hundred BTC has been trending down. Um, the hundred BTC to one thousand BTC has actually been trending up, um, especially in the last couple of months. Which I think is something to keep a close eye on, because that it that threshold is kind of the the high net worth individuals, in my opinion.

• 15:32Speaker 03

  Um, and then you have the thousand BTC uh up, which is what like last node likes to just label as as whales. And that's actually peaked out. Um, and I think CoinDesk put an article out about this, um. And uh saying that it was kind of a negative thing. I just see it as is kind of neutral, because you started to see these whales trim out of their positions um midway through each cycle. And in twenty seventeen, they actually, the the peak of whales um that were coming on the network was around six hundred seventy five dollars, which of course was, you know, uh very, very far from the top. Um, and it's just something that you start to see them uh begin to take profits about midway through the cycle. Um, so that's not anything abnormal.

• 16:16Speaker 03

  Um, but it's it's something I'm keeping an eye on, just the behavior of these different uh entities, because obviously um, you know, the larger, the larger entities tend to be institutions or or uh high net worth individuals. And it you can get some signal based off of what they're doing. Um, but I I think that that one hundred BTC to one thousand BTC cohort is an interesting one to keep an eye on. Because although uh we had just mentioned the whales are selling off, that cohort is actually off offsetting the um the decrease in supply coming from the larger cohort. So it it they're offsetting it by, I think it's eighty six thousand. Um, so what what that illustrates to me is

• 16:58Speaker 03

  either, you know, there's just more buying from these high net worth individuals. Or also maybe, you know, some of these, the larger cohorts, let's say they have um, you know, ten thousand BTC in an address, right? And Bitcoin's gone up so much and they want to say, okay, I'm going to de-risk um my holdings, so I'm going to spread um, you know, one thousand into to Ten different wallets and and that would move them into the other threshold into that lower cohort. And then also, if someone's right on the verge, like, let's say they have a thousand two BTC or a thousand five BTC. And they sell off a couple or they throw a couple on to Binance to, you know, mess around with some altcoins, you'll see.

• 17:42Speaker 03

  Um, those, those, uh, specific entities move into the lower, uh, lower cohort. So it's a combination of things, but. I think you need to look at all the different cohorts to get the full picture rather than just looking at, um, one specific one and drawing to any conclusions.

• 17:57Anthony Pompliano?

  Yeah. What are miners doing, uh, this week?

• 18:02Speaker 03

  Yeah, it's a great question. So, you know, we've been talking about how miners have been accumulating and throughout the dip, they have just continued to do just so. Um, there's two major metrics that I look at for this. One is, uh, the miner net position change, which is basically runs this thirty day. Trailing, um, average on, on the net position change of what miners are doing. Are they selling or accumulating? And they've, they continue to accumulate. Um, they've been, the, this metric's actually been in the green for over a month now, which is very interesting because. Uh, towards the, you know, middle to end of last year, from about August to late October. We saw a very similar signature in this metric that they were just kind of accumulating during the consolidation before the next price run up.

• 18:44Speaker 03

  So in my opinion, that illustrates that they're just waiting for higher prices. Um, there's another metric last night has called miner unspent supply. And it's just, uh, basically measuring and, and rather than running an average, it's just literally looking at the raw balance of, of miner wallets. Um, during the dip, we actually saw an uptick in that. Um, so miners, miners, uh, seem like they're, they're still super bullish on the asset and they're expecting higher prices.

• 19:10Anthony Pompliano?

  Got it. And then long-term holders feel like another big metric that we should be paying attention to?

• 19:17Speaker 03

  Yeah, so Glassnode has a metric called, it just looks at the total supply based off of, um, you know, what long-term holders are doing. And they, that kind of bottomed out. We did see them sell off after all-time highs at the end of last year, but it seems to have bottomed out around March, April. And that's actually starting to, um, move up again, which is interesting. You start to see them reaccumulating at these levels. Um, I guess to them, these seem like more attractive levels to start adding on some more to their stack. Uh, perhaps, once again, because they're expecting higher prices. Um, also, there's very similar to the minor net position change. Glassnode has a, a metric called long-term net position change, which is the same thing. It's running an average over the trailing 30-day difference of the, of the, uh, the behavior

• 20:00Speaker 03

  of this cohort, the long-term holders. And that's been in the green for over a month as well. So that's, it's illustrating a very similar picture. Um, one metric I wanted to touch on was NVT. Um, so NVT was the original on-chain metric that Willie Wu came up with. Um, he likes to analogize it to kind of a PE ratio of the Bitcoin network as kind of a way to, um, find a fair valuation of Bitcoin based off the, the fundamental investor activity. Um, and, and it's just a very simple ratio of market cap to the on-chain transactional volume. So, NVT, when, when it, when it's going up, it means that, um, the, the market cap is, um, growing faster than the

• 20:42Speaker 03

  underlying investor activity or, or on-chain transactional volume. And when it's going down, um, it means that the, uh, on-chain transactional volume is outpacing the growth of market caps. It's a very simple ratio. But that ratio has been trending down since January. Um, so to me, that's, that's another indicator of what, what we've been talking about recently, about how we're just in this consolidation. Um, and two other things you can look at, um, realized cap, right? So that's a good way to track capital inflows to the market, because, um, the realized cap is, is similar to market cap, but it's based off of when coins last move. And we've seen, um, this huge increase, the year-to-date, we're over $300 billion added to realized cap, which is showing that there's capital coming.

• 21:26Speaker 03

  Into the network and as that new capital comes in, it's setting this new price floor for Bitcoin. Um, and then if you take realized cap and then divide it by supply, you get realized price. And uh, realized price actually crossed the twenty seventeen all time high market price of twenty thousand dollars this week. Which is, in my opinion, a really good sign that you're seeing capital come in and uh, flow and flow in at these higher price levels and kind of set a new floor for us. And then um, on a very similar note, um, if you just look at the on-chain transactional volume itself, we continue to just build this huge zone of uh, near, you know, this, these forty to sixty thousand dollar price levels.

• 22:06Speaker 03

  Um, especially in the, in that, you know, fifty-four to call it uh, fifty-seven, fifty-eight thousand dollar range. There's a lot of uh, support there, but even as far as um, it just coming down to about forty-five thousand to sixty thousand. There's a lot of distribution in that area. Which is showing to me that we're not at the top. Because when you get to these, these tops, um, there, there's increasingly uh, parabolic moves until finally we have this big blow off top. It's not like we consolidate for, um, you know, granted, this is my first bull run, but I'm just looking at the data. But I'm sure anybody that's been in a bull run before can vouch for this, that there, you don't just consolidate sideways for two, three months and then just fall off cliff.

• 22:49Speaker 03

  Um, you have these, these huge price run-ups. Um, and then when you get to the, when you get up higher, people stop selling, people start to get um, greedy and, and people stop taking profits and you don't have a lot of distribution, a lot of on-chain volume distribution at those top levels. But we're seeing the complete opposite right now. We're just seeing this huge zone of support. Um, which is just another way to, to illustrate that we're just in this big consolidation. I think, um, you know, the, the price action that we saw on Wednesday certainly put a damper on how, how soon that we would break out. But uh, it's, it's nothing that changes any of the on-chain structure. Um, I've been getting a lot of uh, people asking if,

• 23:29Speaker 03

  you know, the, that price dump changed anything. And in my opinion, it changes nothing. It's just a short-term price move. But when you're just now, you know, analyzing the uh, fundamental investor behavior on-chain, uh, nothing that we've been talking about has changed at all.

• 23:45Anthony Pompliano?

  Yeah, it just feels like short term, everyone freaks out. Long term, we're still good to go. Bull market in check and consolidate for a little bit and then we'll see what happens in the future.

• 23:54Speaker 03

  Yeah, and it's a really good thing. In my opinion, I think the volatility is very necessary because you see all these short term speculators or people that haven't done their full research on A, what Bitcoin is or how the price behaves. Anybody that's been in Bitcoin knows we have these crazy price swings. Think in 2017, we had like seven or eight corrections over 30% on the way up and this is just part of the way Bitcoin behaves. And you know, when you have these big price drawdowns, new, you know, the stronger hands step in and scoop those coins up from those weak hands that panicked and sold off. So I think the volatility is very necessary for moving coins to strong hands, which then allows price to move up from there.

• 24:37Anthony Pompliano?

  Yeah. Where can people find you on the internet or subscribe to your email?

• 24:43Speaker 03

  Yeah, man. So right now, for anybody listening, Pop and I started a newsletter on my Substack. It's BTC by WC3.substack.com. And then also we're putting out a Friday letter on POMPS, which I'm sure most of the people on POMPS podcast are subscribed to, but that's kind of a weekly recap. And then of course, we're doing these Saturday podcasts to kind of run over everything from the week. But the ones I'm putting out on my channel are kind of, you know, just a weekend recap if anything's changed. And then I'm doing as well a Wednesday recap of just anything, you know, touching based in the middle of the week if needed. If there's, if nothing has really changed in the on-chain structure, I'm probably not going to put out that Wednesday letter.

• 25:25Speaker 03

  But if we see something happen like this week, I put one out because we had some interesting developments in the on-chain structure. So I'll be putting out two to three of those a week between my newsletter and POMPS. You can find me on Twitter at W Clemente and then three I's at the end because I am the third in my family. But yeah, other than that, I'm, Pop and I are going to keep pumping these out and I'm glad you guys are finding some value in these. I really enjoy doing them.

• 25:53Anthony Pompliano?

  Doing a fantastic job. Keep it up, my friend, and we'll do this podcast again on Saturday.

• 25:58Speaker 03

  Yes, sir. Appreciate you.