#1065 Will Clemente On Why He Feels Optimistic About Bitcoin

Will Clemente is the Lead Insights Analyst at Blockware. He is 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, on-chain metrics, what happened in the past week, and what the on-chain data is telling us to be prepared for moving forward. WIll joins us every Friday on "The Best Business Show." To see the video with the corresponding charts that Will references throughout the interview, go to the Anthony Pompliano YouTube Channel. ======================= The number one name in NFT domains and the world’s most powerful wallet are teaming up to bring something new to the crypto and Web3 world: That’s right, Unstoppable Domains and Blockchain.com partnered to create NFT domain names ending in . Blockchain. It’s the perfect ending to show that you’re a believer in a decentralized future. The Blockchain.com community can get one, for free by signing up for the waitlist here. Free NFT domains provide all the benefits of premium Unstoppable Domains, including fee-free, lifelong ownership. Don’t have a Blockchain.com wallet? No worries, these new domains are available to everyone for as low as $5. Either sign up for a free blockchain.wallet or visit Unstoppabledomains.com to buy your domain today. ======================= Valour (formerly DeFi Technologies) represents what’s next in the digital economy -- providing simplified, trusted access to crypto, decentralized finance and Web 3.0 investment opportunities. Institutions and investors can gain diversified, secure, compliant, and easily tradable access to a diversified set of industry-leading equity products and protocols, through a single stock purchase on a regulated exchange. Currently listed on U. S. (OTC: DEFTF) and Canadian (NEO:DEFI) exchanges. For more information or to subscribe to receive company updates and financial information, visit our website at valour.com =======================

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 analyst at Blockware. In this conversation, we talk about Bitcoin, the market structure, on-chain analytics, and why Will is starting to become optimistic. I really enjoyed this conversation with Will, and I hope you guys enjoy it as well. Before we get into this episode, though, I first want to talk about our sponsors. This episode is brought to you by FTX US. FTX.us is the safe, regulated way to buy and sell Bitcoin and other digital assets. You can trade crypto with up to 85% lower fees than top competitors. There are no fixed minimum fees, no ACH transaction fees,

• 0:45Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:10Anthony Pompliano?

  unstoppabledomains.com and get your NFT domain with humanity check today. This episode is brought to you by Valor. Valor represents what's next in the digital economy. They provide simplified trusted access to crypto, decentralized finance and web three investment opportunities. Institutions and investors can gain diversified, secure, compliant and easily tradable access to a diversified set of industry-leading equity products and protocols through a single stock purchase on a regulated exchange. They're currently listed on the OTC at DEFTF and on the Canadian NEO exchange at DEFI. For more information or to subscribe to receive company updates and financial information, you can visit their website at valour.com. That's V A L O U R dot com.

• 2:55Anthony Pompliano?

  valour.com. Go check them out today.

• 2:58Speaker 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.

• 3:21Anthony Pompliano?

  All right, we got Will Clemente. Will, what's going on, brother?

• 3:25Speaker 02

  Yo, yo. How's it going, man? I am, uh, I'm back at the parents' house for two weeks and I got a pimple. So it's like, it's like old time.

• 3:37Anthony Pompliano?

  Back at the parents' house and you got a pimple. What a, what a opening line. All right, let's jump right in. We've got about 20 minutes or so. The Fed, they announced they raised rates by 75 basis points. Bitcoin goes up. What's your read?

• 3:54Speaker 02

  Yeah, I think, you know, just the general perception from like a high level is that, you know, as the Fed continues to raise rates and as this week we've gotten, you know, a second negative GDP print, essentially the market is kind of approaching this as well. You're getting to the point where the Fed is going to have to, you know, kind of take their foot off the gas pedal in terms of at least the pace and aggression of how they've been raising. And they said that in their meeting as well, that they're going to kind of slow the interval between when they've been raising. The Fed doesn't meet again until September. So I think that kind of sets up somewhat of a window just from that perspective for a little bit of market rally.

• 4:34Anthony Pompliano?

  All right. Now we see Bitcoin's price is reclaiming the 180-week kind of trend line here. What is this showing us?

• 4:42Speaker 02

  Sure. Yeah. So like the first two charts are just basic, like super high timeframe trend charts. So we're looking at one weekly and one monthly. The one you brought up is the 180-week E H M A. So this is called the exponential whole moving average. It's just a moving average that has more weighing to recent price action. And so whenever it's green, as you can see, the entire chart is green, that indicates that it's in enough trends. So this is a good kind of meme line to show you that over the long term Bitcoin kind of only trends up because the moving average only trends up. And also, as you'll notice, by looking at the chart, historically, it's kind of indicated kind of these macro bottoming or accumulation areas. And this is something that we've talked about for several months.

• 5:25Speaker 02

  And as we approached this, we said, hey, this is probably a pretty good time to start averaging in. And then kind of the sign of confirmation would be reclaiming that line. So for Bitcoin, one thing that I've noticed over the last two years, and also looking at, you know, historical data as well, is that kind of these failed breakouts and breakdowns have been almost a better signal than actual breakouts and breakdowns in general. So like, an example would be the double top of last year, right? We kind of deviated above the previous all-time high from May of last year and November of last year. Another example would be the summer of last year when we deviated below 30K before initiating kind of that second leg up into the back half of the year.

• 6:08Speaker 02

  So on a similar note, if we did reclaim this, that would essentially make all the price action below that, what's called a deviation. So you have kind of this, all this activity that goes on below that trend. Once it breaks back below, it basically invalidates the breakdown initially. And so you can see the same thing with the 200-week as well. One thing to keep in mind, though, and very important to keep in mind is that these candles haven't closed yet. So they'll close Sunday at 8:00 PM Eastern Time. You know, the reason I say it's important to close is if you look at the weekly, for example, you had kind of gotten this WIC above the 200 week, but you know,

• 6:49Speaker 02

  we ended up closing below it at the last second, price had dropped below before the weekly closed last week. So for now, it does look good, but you just for, you know, kind of these more high timeframe, kind of trend based market participants, maybe you want to wait to see that candle close on Sunday evening to get that confirmation that it has been reclaimed. But both of these look good so far.

• 7:11Anthony Pompliano?

  The market cap of USDC and USDT, the stablecoin, dollar based stablecoins, you've been talking about now for a couple of weeks, the relationship between those and price. What are you seeing here as we see this starting to kind of move a little bit?

• 7:27Speaker 02

  Yeah, sure. I would throw so that initial chart and the chart below it are both kind of in the same family. I would say the first one is a better indication. The second one's more of just something to look at confluence. So we'll focus on that first one. Like you said, this is looking at the market capitalization of USDT, which is Tether, and USDC, which is Circlecoin, and comparing that to the aggregated total crypto market cap. And so what you see is that you essentially have this kind of channel in the top section of the chart on the screen. Whenever you get to the bottom end of the channel, and the reason that I have it red is because that's historically marked on these topping areas. And from first principles, this chart actually makes a lot of sense. So it's indicating to you that there's been a lot of dry powder deployed in the market

• 8:11Speaker 02

  relative to the size of crypto's market cap. So therefore, there's a lack of new marginal buyers. And so that kind of from first principles indicates to you that they were probably likely in the area of, you know, topping out from very high timeframe sense. You know, this chart is looking at like, you know, multi-month kind of swing trade type of timeframes. And then along the top end of the, of that kind of ascending range or ascending channel, what you see is that whenever it hits the top end of that range, that indicates that there's a large amount of dry Powder on the sidelines relative to the size of the aggregated crypto market cap. And so the way I kind of think of this is it's very like, um, you know, like dry Kindle and, and, and, you know, when you have a spark, the more Kindle there is that that's

• 8:54Speaker 02

  laid out, the more likely that you are to see that kind of fire spread. Uh, and so the more dry powder that there is on the sidelines, you know, as you see any type of rally that increases the likelihood that just from a psychological standpoint, you're going to see a higher likelihood of market participants wanting to chase. Uh, and so you are starting to see, you know, I posted this about a month ago when it initially whipped up to the top of that range. Uh, but now since then, over the last, you know, couple of weeks, what you've started to see is that start to kind of roll over off the top of that, that trend line. Uh, and so to me, what that's indicating is you are starting to see, uh, some of that, uh, on a relative basis, dry powder being deployed into the market.

• 9:34Anthony Pompliano?

  When we look at M V R V Z score, this is one that I think you and I started talking about, I don't know, year, year and a half ago. Uh, or so what, uh, what is this showing us now? It's down in the green zone, my friend.

• 9:46Speaker 02

  For sure. Yeah. Um, you know, we talked about this, as you said, for a long time. What we always said was, oh, if this ever got back into this green range, it'd be a tremendous time to average in. Um, and you know, we got back into that green zone over the last month or two. Uh, and at that time period, we came on the show and we said, Hey, look, this is a good time to average in. Uh, it does appear now that the, you know, indicator has successfully, you know, shown another time to average in as well. Uh, you know, that doesn't mean that, you know, these lows can't get retested. Uh, but you know, as we kind of head out of this accumulation range, uh, it does appear that we're kind of moving away from that area where uh, was, you know, an incredible kind of, you know, multi-year opportunity to buy.

• 10:28Speaker 02

  Uh, I think there is a, a, you know, pretty strong likelihood that we were to retest that. Um, but just to say that, you know, this, the, uh, the market has respected the green zone again. And, uh, if we get back into the green zone, I would definitely be averaging in as, as I have over the last, you know, month or two, you know, within it.

• 10:46Anthony Pompliano?

  You got the 200 day trend here, uh, as Bitcoin continues. We got another green signal. What's this showing?

• 10:53Speaker 02

  Yeah, we love, we love the, the green stuff. Green's a cool color. Um, yeah. So like a month ago, I had posted this, uh, this tweet below. It says, you know, Bitcoin has only ever been this far below its 200 day moving average a handful of times less than 2% of its existence. Each of which look terrifying to buy at the moment, but terrifyingly obvious in hindsight. Uh, and so now when we kind of fast forward a month from there, uh, as you can see, we've now exited that green range and we're no longer that far below. Uh, the, this deviation from the trend that historically has marked bottoms. Uh, and so again, not to say that it's impossible for that to be retested. I think there's, you know, a, a stronger than 50% likelihood that, that, that probably is retested by the end of the year.

• 11:38Speaker 02

  Um, but you know, that's not to say again, that I think this, uh, you know, this is served well again, and we used it in real time to indicate a good time to average in. And if we were to head back down below this, you know, to this low of a deviation, uh, to this far of a deviation from that 200 day trend. I would looking to be getting some more, uh, spot buys in as well.

• 11:58Anthony Pompliano?

  When we go and we look at the derivatives, uh, three month basis has recovered slightly, uh, and there's even this backwardation. Explain this.

• 12:05Speaker 02

  Yeah. So, um, when we, when we've been talking about derivatives, you know, we kind of made this like mental checklist for things that we want to see. Uh, one of which has been seeing, uh, the, the three month futures basis go into backwardation. Um, and so, you know, this has been something that's fueled bull markets. So if you look at, you know, like 2020 to, to 2021, we saw this rip up to like 45%. What this meant is that you could long spot short futures and then capture the difference. Uh, and so that, you know, this really rips high in times of like high speculation. Everyone wants to get long BTC. And it creates an ARB opportunity, uh, for market participants that are like delta neutral, meaning like they're, you know, um, they have no directional bias essentially.

• 12:47Speaker 02

  Uh, like that and arbitraging funding are like the two main ones that took place. Oh, and also obviously the, the grayscale one. Uh, but that was more towards the, the back half of 2020. Um, but yeah, like those, those two or three were kind of the main drivers, I would say of. That kind of fueled the bull market. And as we can see right now, we're, you know, back from, we reached as low as like 0.27% and even backwardation towards the bottom on a couple venues, but now we're back up to about 2.57%. So right now, you can long spot, short futures and capture the difference. Another thing I wanted to kind of highlight is that you're seeing kind of this lack of like extreme speculation

• 13:29Speaker 02

  in the market on this rally, because this has remained relatively muted. As you can see, you know, whenever we reach a period of high speculation like early 2021, you know, we can reach those high, you know, states of 40, 45%. And you see the same thing in funding, same kind of general premise as well.

• 13:47Anthony Pompliano?

  Yeah, we've got the short-term holder cost basis here. We're underneath it. What is this telling us?

• 13:53Speaker 02

  Right. So short-term holder cost basis, explained it, I feel like several times on the show, but just from a high level, it's the aggregated cost basis of market participants that have been in the Bitcoin market for less than 155 days. So we look at the market capitalization based off when those coins were last moved for that cohort of market participants. And currently that's down to 28,000 from like 53,000 at the peak in December of last year. This is something that we used when we broke below to say, hey, look, it's time to be cautious, right? Because we kind of lost what has been historically

• 14:30Speaker 02

  a kind of momentum or trend-based kind of indicator. And so what I'm looking at here is from like a super kind of macro perspective. This is a good indication of bear bull trends. And so if we were to reclaim this, reclaim this, I think that's kind of confirmation of, you know, a trend change. So look, I think in this market, we have value-based market participants and momentum-based market participants. You know, a lot of the indicators that we've talked about have been kind of deep value indicators. And so, you know, those are for those value-based market participants like myself, like yourself, Pom, who have kind of this long-term, you know, time horizon and they're able to hold their buys for several years.

• 15:12Speaker 02

  Uh, but there are also market participants uh that just look to follow Bitcoin's uh, you know, extreme in in many cases uh trends. And so this is a good kind of proxy for that. And as you can see in the beginning of 2019, kind of spring of 2019, once that was reclaimed, that kind of was a a good signal for uh riding the the rest of that move up to about 14K throughout the the middle of 2019. Um, and you know, you you didn't really miss the Pico bottom. You missed it maybe by $500 or $1,000. Uh, but you basically are paying the price for getting that confirmation of the trend. So I would say for those momentum based market participants, this is something to keep in mind. It currently sits again at 28,000, uh, which is also when we look at the chart below,

• 15:55Speaker 02

  uh, some confluence, some nice confluence uh with kind of daily uh, you know, price structure. There's pretty much, you know, I don't want to use this, this, you know, kind of meme word of of price or, you know, price gap or or air between, but you know, we really had a lot of inefficient selling between like 28 down to to 18K. A lot of that, in my opinion, was forced selling. A lot of that was probably 3AC. Uh, you know, other participants that were kind of related to a lot of the contagion that took place. So you saw a lot of what what's called uninformed flow. So basically people that have to sell, they're not necessarily, you know, that could be liquidations or people that are, you know, selling because uh they have to post collateral for um, you know,

• 16:38Speaker 02

  whether they're, you know, borrowing from any of these like centralized lenders and they were, you know, all these centralized lenders are checking all these market dispense after 3AC to see if they actually have the collateral they do because there's a lot of hysteria around who's solvent. Uh, a lot of that stuff took place. So you had a lot of kind of inefficient selling down. Uh, and so due to that price structure really doesn't have any real resistance up until about that 28K level, uh, which is confluence with with on-chain as well. So, you know, whenever you see confluence between on-chain and technicals, that kind of strengthens um the importance of that level in my mind. So, you know, I'd be looking for, I kind of, I, you know, I think kind of the base case would be, this would be a dead cat bounce to kind of that area unless it were flipped. And then you could say, okay, perhaps this is actually a, you know, high timeframe

• 17:22Speaker 02

  uh, you know, trend change. So, you know, those are two important levels that, you know, I think are are important to to keep in mind from a kind of trend perspective.

• 17:31Anthony Pompliano?

  Talk to us about funding rate. I know that you've said that you want to see more of a negative funding kind of rate regime. What's going on here?

• 17:38Speaker 02

  Right. So funding is based on the delta between the perpetual futures and the kind of weighted average spot price across the different spot venues and something called the spot index price. And so what we want to see ideally is A, a regime of negative funding and then B, price grinding up on a regime of increasingly negative funding. So if we look at, you know, after March of 2020 was an extreme example where you basically had a disbelief rally off of those lows. Another good example is September of 2020 and another really good recent example was July of 2021. And Pop, I remember when we came on and we said, you know, the day before that big short squeeze, we said, hey, look, I think, you know, we said, there's, there's a high likelihood

• 18:23Speaker 02

  of a short squeeze. The reason we said that was because funding was increasingly negative as price was grinding up. So, you know, that in an ideal world is something that you'd say, hey, look, this, this is going to give me high conviction that we're going to see a continued reversal. You know, right now, obviously, we have seen some, some, you know, pockets of negative funding over the last month or so. But at the moment, we're seeing slightly muted positive funding. Again, it's nothing of major concern, but I'm just bringing this up as a point to say, if it were to go, you know, increasingly negative as we grind it up, that would be an indication to say, okay, I can have stronger conviction in this kind of being somewhat of a disbelief rally.

• 19:04Speaker 02

  So more of just put that in, in this, something to look out for than necessarily something that's like giving a particular signal at the moment.

• 19:11Anthony Pompliano?

  And the last thing is the leverage ratio. I know that you've been putting these out on Twitter, but explain these.

• 19:16Speaker 02

  Sure. Yeah, I just kind of threw this in here. Just because I've seen this chart kind of circulating on Twitter as something that people are using. You know, similar to open interest, like the idea is similar, you know, gives you an idea of the amount of like pressure or contracts that are, that are built up. And on top of that, this would tell you how, you know, how much leverage is being taken on, on those contracts. The kind of calculation. For this is you're looking at the aggregated amount of futures open interest and then you're comparing that to the amount of coins that are on centralized exchanges. And you know, from first principles, that kind of makes sense, right? Because you're getting a proxy for how much collateral is essentially on these exchanges relative to how many contracts are open.

• 20:00Speaker 02

  Uh, so that should be a good kind of proxy for the amount of leverage that people are using. Uh, I, the problem that I personally have with this metric is when we go to the next chart. What what's happened over the last year or so, year and a half, I would say, is you've kind of got this regime change in the futures market where you've gone from seventy percent of all the futures. Contracts being collateralized with Bitcoin and other crypto assets, mostly Bitcoin. Uh, and that's come all the way down to about forty percent of the aggregated futures, uh, open interest being collateralized with crypto, again, mostly Bitcoin. Uh, so you know, I would say that kind of macro kind of regime change of of kind of the the futures, uh, market structure.

• 20:41Speaker 02

  That's changed, in my opinion, the usefulness, uh, of this metric. So. I kind of just threw it in there just to say this is something that I've seen people talking about on Twitter, but it's something that I don't find particularly useful anymore. Uh, because of kind of that under, you know, that underlying like fundamental change in the in the futures, uh, structure.

• 21:00Anthony Pompliano?

  How do you feel right now in terms of sentiment wise? Like i- if you just kind of had to zoom out from all the charts, everything you see Twitter, you see, uh, kind of the the legacy financial institutions, you see the Federal Reserve and kind of all the macro stuff like. Wha- what's your general sense as to where we are at the moment?

• 21:16Speaker 02

  You know, I think, um, you know, I spend most of my time on like crypto Twitter, right? And with all these like anonymous, like, you know, random animal characters as their profile pictures that are traders and stuff. And I would say like across all of these people, um, you know, the kind of consensus is that. It seems like somewhat of disbelief, I would say. Uh, and you could see that as well in like engagement from different, uh, you know, Twitter accounts, some that have, you know, leaned majority bearish. Rightfully so perhaps over the last like month or two, um, and not necessarily saying anything against their views. Cause again, the, you know, those have that have been, you know, erring on the side of. Over the last like month or two or three, you know, they've they've, you know, been prudent and likely done well.

• 21:58Speaker 02

  Um, but I would just say like, looking at some of those, you know, those accounts and their engagement, seeing, you know, some of these posts. Get, you know, five to 10,000 likes for just saying something like, hey, I'm not buying into this rally. Um, that to me is a bit of an indication, just from like a pure sentiment perspective, that perhaps we're getting a bit of disbelief. Especially when you compared that to some accounts that in the moment uh are are leaning bullish. So I would say that that has been one thing that I've noticed, just like being on Twitter all day. Um, but you know, that that doesn't mean too much because that's, I guess, just the the crypto centric crowd and, you know, the people that are really allocating capital maybe aren't on Twitter, but that's just something that I've noticed from like, uh,

• 22:40Speaker 02

  you know, kind of retail trading on on uh Twitter perspective is that it seems like the engagement is definitely on the side of those who are kind of pleading cautious, so.

• 22:50Anthony Pompliano?

  I love it. What um, where can we send people to uh to follow you on Twitter?

• 22:55Speaker 02

  Sure, yeah, my uh Twitter account's W Clemente I I I.

• 22:59Anthony Pompliano?

  W Clemente I I I. How many followers you got now? Are you over 700,000?

• 23:03Speaker 02

  Uh, I don't know about that, man. It's it's definitely slowed down. That's another thing I'll say is that, um, you know, I'm sure you've noticed this as well as that. Engagement, I would say is kind of like dropped off a cliff just in general from like follower count, all that stuff, like the rate of change over the last like few months. You know, I'll check it like once a month or so and just kind of use it more of like, not just to say like, in like a narcissistic way of like, how many, you know, how many followers did I get this month? But like more so, I think it is somewhat of a good data point to say, okay, hey, look, you know, in, you know, uh, September or November of 2021, you know, I added like whatever 100,000 followers or something. And, you know, this last month I added like, you know, nine or 10,000. So it's showing you, you know, there's definitely a decrease in the rate of change of of new market participants coming into the crypto space.

• 23:48Anthony Pompliano?

  I think that that's actually a uh a very fair uh analysis, like like it's a great data point that shows just how much interest is there from outside of the community, right? The following is uh is who's already in the community and then how many people are coming from outside makes uh makes a lot of sense. Um, all right, my friend, we will, uh, we will continue to do these. I appreciate you, uh, you jumping on and uh, uh, we'll, uh, we'll speak soon.

• 24:13Speaker 02

  All right. Thanks a lot, Pop.

• 24:15Anthony Pompliano?

  All right, later, buddy.

• 24:16Speaker 02

  See you, man.

• 24:17Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you enjoyed this one. Make sure you're subscribed on Apple, Spotify, or your favorite podcast player. And if you're looking to transition into a brand new job in the Bitcoin or crypto industry, we've got you covered. Head over to thecryptoacademy.io. My team and I have been working with the top HR teams in the industry to develop an intensive three-week training program with over 50 live events. We teach you exactly what you need to know to break into the industry, including live interview prep and resume review. Our students have been hired at over 75 for the world's best Bitcoin and crypto companies. Go to thecryptoacademy.io to learn more. Again, that's thecryptoacademy.io. If you enjoyed today's episode, make sure you share it with your friends and I'll see you all for the next episode.