#550: Will Clemente on Bitcoin Coiling Like A Spring

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 Bitcoin’s on-chain metrics, miner accumulation, strong hands buying up weak hands, dormancy, and continued bullish movements. ======================= 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.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Will Clemente is a finance major at East Carolina University. He has quickly become one of my favorite writers on all things Bitcoin, including deep dives on various on-chain analytics. You can subscribe to Will's new email newsletter by clicking on the link in the description. He does fantastic work, and I think that you would really, really enjoy reading it. So please go subscribe. In this conversation, we discuss Bitcoins on-chain metrics, minor accumulation, strong hands buying up weak hands, dormancy, and continued bullish movements. I really enjoyed this weekly conversation with Will, and I hope you do as well. Before we get into this conversation, though, I want to quickly

• 0:45Anthony Pompliano?

  talk about our sponsor, Revolut. Back to basics for a second. I've partnered with Revolut, a finance app in the United States and the UK, that say they're the simplest way to access crypto. They are putting their money where their mouth is. You can sign up and make three card transactions and get $15. That's right, 15 bucks. When can you do that 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. And as usual, when you move your money from fiat to crypto, your capital is at risk. So sign up now through revolut.com/pomp to get a $15 reward and put them to the test.

• 1:25Anthony Pompliano?

  Again, revolut.com/pomp, the easiest way to go from dollars into crypto. Go check them out. You can see their terms and conditions for details. Revolut is a financial technology company. Their banking services are provided by Metropolitan Commercial Bank, a member of the FDIC, and their cryptocurrency services are provided directly by Paxos Trust Corp. Company, LLC. Again, remember, Revolut, the fastest, simplest way to access crypto. Head on over, check them out. All right, let's get into this episode with Will. I hope you enjoy this one.

• 1:59Speaker 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.

• 2:22Anthony Pompliano?

  All right, guys. Bang, bang. I've got Will here. Thanks so much for doing this, man.

• 2:27Speaker 02

  Thanks for having me on, Pom. I'm excited to do these every week.

• 2:30Anthony Pompliano?

  Absolutely. So for those that haven't heard yet, every Friday, Will is going to be writing an on-chain analysis for the newsletter. And then every Saturday, we're going to release an episode basically talking about all the on-chain metrics and kind of giving an overview for the week. So maybe let's just jump right into this week, Will, just in terms of what you saw in the on-chain metrics that really caught your eye.

• 2:53Speaker 02

  Yeah, absolutely. So, you know, I think first of all, when we just step out and look at the kind of broader macro trend in the data that we're seeing, we're just kind of sitting in this huge, like midway consolidation zone. Every, every bull cycle, we see this huge base of capital that usually builds up around two to three times the previous all-time high, which lines up exactly where we are now. Over the $1 trillion market cap, we now have over 15% of supply that's moved, which is super bullish, because when we see these, the tops in the cycles, they're usually blow-off tops, where you have these increasingly

• 3:33Speaker 02

  parabolic moves until finally, you just see this huge run back off and decrease in demand. But what we're seeing now is the complete opposite. We're seeing a lot of distribution and movement in coins at these price levels, which is showing validation from the market of the $1 trillion market cap threshold, which is super bullish. And also, we're seeing realized cap go up, which means, the way you can think of realized cap is, instead of market cap, where every coin is increasing in price based off of the coins that are being traded on the margin, realized cap is taking the price of every coin the last time they were moved and then adding that up. So, for example, if someone bought 100,000

• 4:18Speaker 02

  coins at $1 per coin, right, and they never moved them, it wouldn't be, you know, whatever, $5.8 billion worth of Bitcoin that it is, that's added to the regular market cap, it would only be $100,000 that's added to realized cap, because that was the last time that those coins were moving.

• 4:36Speaker 02

  Coins moved, but we're actually seeing a huge increase in realized cap over the last couple of weeks and this week as well. Which is super bullish because once again, in, uh, just like I had just mentioned about the, the volume, the on-chain volume. There's a lot of coins that are being scooped up and, and new investors that are coming in, scooping up coins at these levels. Um, and that's a really great sign and that kind of aligns with. We're also seeing a, a liquid supply goes up, um, going up. So the way you can think of that is. Glass node basically clusters together different addresses in, into different entities and they say, okay. Um, this, these addresses look like one person or, or one entity and then they take those, uh, clusters.

• 5:21Speaker 02

  And they group them into three different cohorts. So they're highly liquid, liquid or illiquid. And we're seeing this steady move of, of coins to a liquid addresses throughout the entire bull market this week as well. Which is just showing that coins are moving to these entities that statistically have a very low history of selling. So after coins are, um, reaching a certain threshold of, of time that they're held in a wallet. Statistically, the, uh, the likelihood of them being moved goes down drastically. And I think the threshold glass node uses is 155 days for that metric.

• 6:00Speaker 02

  And so you, you keep seeing these coins moving to these addresses, which once again is showing that we're just in this kind of consolidation zone. Um, but some of the, two of the, the broader macro, um, metrics that I had touched on in the letter, the first one was. M V R V Z score. So it's just this fancy term. So. M V is the, the market value, AKA the, the market cap. And then R V is the realized cap, which we had just talked about, um. And so it takes the ratio of that and then Z scores it, which just means that it, it's adjusted for volatility. And so you can get these really distinct, um, tops, uh, top signals.

• 6:41Speaker 02

  And what we're seeing now is actually the metric is going down, meaning that market cap, part of it is to think so, market cap is slightly going down, but also more importantly, as we mentioned, a realized cap is going up. So this metric, when it's going down in mid-bull cycle like this, it's just showing that we're once as well in this big consolidation zone. And then the second one that I had touched on in the newsletter was market cap to thermal cap. So thermocap is just the total amount of revenue that's been rewarded to miners on the network. And so this this metric kind of gives you these distinct top signals where

• 7:26Speaker 02

  the market cap kind of rises way above where the the organic revenue that's being provided to the network, I mean, to the miners through the network. And so you see these huge spikes at the end of the cycle, where miner revenue isn't increasing, which is showing that there's not a lot of on-chain volume at those levels, but price is just being bid in through, you know, like FOMO and all these things that we know are that come at the end of cycles. And the next thing, so this is this is more so specific to this week, is the stablecoin supply. So we've seen a huge increase in stablecoin prints this week. In the last week,

• 8:08Speaker 02

  or I'm sorry, in the last 10 days alone, we've seen over 6 billion coins minted between Tether and USDC alone. Tether is primarily used overseas, but USDC is primarily used by US investors. We actually saw a one-day increase of 22% from USDC, which is showing there's a lot of demand coming from US institutions, which are who primarily operates through USDC. And it's hard to know exactly how much of this is going to Bitcoin. And obviously, some of this is being allocated to these alternative cryptocurrencies, because no one can deny that capital is being deployed into these with these crazy gains we've seen in

• 8:53Speaker 02

  the last week. But at least a substantial portion of that is going into Bitcoin. And another way you can kind of Put a visualization on the amount of capital that's going into altcoins is by looking at the Binance balance. So while Coinbase's balance has been going down, Binance's has actually steadily been going up. And I think this is a good way to illustrate the whole altcoin frenzy because Binance offers almost any altcoin that you can think of. And they also offer all kinds of derivatives on top of these coins. So the fact that Bitcoins are continually being taken on to Binance, I think, shows that people are stepping in to

• 9:36Speaker 02

  try to take advantage of some of these crazy gains that are being seen in these coins. And then the next metric that I had touched on in the letter is ASOL. So that's just abbreviation for average spent output lifespan. So you can just think of this as the average age of the coins that are being sold. And in the chart that you can see in the newsletter, we had this huge spike around January, right after all time highs. Around about the high twenties to early thirties, I think it was about 27,000 to 32,000 was the peak in selling from long-term holders. But see this huge spike in the average age of coins that are being sold.

• 10:19Speaker 02

  And since then, we've seen a dramatic decrease, which means that older market participants are holding off on selling. And most of the selling is being primarily driven by newer market participants, likely inexperienced market participants, which is also supported by this other metric called spent output age bands. So this just basically shows you the amount of coins that are being sold in different age cohorts. So Glassnode has different cohorts, all the way from one hour old to over 10 years old. And we're continuously seeing these huge spikes in the younger cohorts,

• 11:00Speaker 02

  particularly the one to the one hour to 24 hour and also the one week to one month cohorts. And we actually saw an all-time high spike in the one week to one month cohort this week, which is showing you once again that we're just in this consolidation zone where The weak hands are selling off to strong hands who are continually coming in and scooping up these cheap coins whenever the newer market participants are freaking out. And this is also supported by dormancy. So dormancy is very similar to the ASOL where

• 11:38Speaker 02

  it's taking the average amount of the coin days destroyed, meaning that so like if a coin is in a wallet for 10 days, it has 10 coin days. And then if it's moved, those 10 coin days are destroyed. And so dormancy takes that and then adjusts it for the volume. And so you get this, this very smooth picture of selling once again from older hands decreasing steadily over the last few weeks especially. And so that's very interesting because, you know, you, especially after the Tesla announcement, you saw this huge drop off in that. And usually you see these long-term holders continuously selling throughout the bull market, but we've

• 12:23Speaker 02

  actually seen a decrease in that over the last month or two. So it's possible, especially after Tesla, that some of these older sellers that were just assuming this cycle would be like all the other ones, maybe they're saying, oh, this, this cycle might actually be a little bit different because of the, the corporate adoption that we're seeing come online.

• 12:43Anthony Pompliano?

  And what about the miners? Like, it seems like the miners really have changed the way that they're thinking about buying and selling or accumulation and, and selling?

• 12:52Speaker 02

  Yeah, that's a really good point. Yeah. So in the data, we're seeing miners actually aren't just not selling their coins, but they're actually accumulating, which is super bullish. Because, you know, it makes sense that miners are more bullish on the asset than anybody because they have all of their, their capital invested in Bitcoin. And if Bitcoin wasn't, you know, in existence, then all of their, their capital that they've deployed would just be worthless, right? All their mining machines would just be paperweights essentially if Bitcoin was deceased to exist because all of their miners are literally, the mining machines are literally created just for the sole purpose of mining Bitcoin shot to 56.

• 13:36Speaker 02

  So I think it's a great sign to see the, the people that are most bullish on Bitcoin continually accumulating.

• 13:43Speaker 02

  I think it also has something to do with the fact that they're able to finance their operations through not just having to sell their coins, but also being able to borrow against their Bitcoin holdings. But we are seeing this, like I said, this huge increase in balance in miner wallets. And then in addition, Glassnode has this metric called miner net position change. So it just takes like this trailing 30-day moving average of the activity in miners. And we saw this huge spike in this during the dip down to 47,000. But we've seen a little bit of drop off of that, but they're still steadily accumulating. This indicator's been in the green now for over a month, which is super bullish.

• 14:25Anthony Pompliano?

  And so when you think about kind of where we are in the market cycle, I think a lot of people say, hey, wait, this thing ran up hundreds of percent in price, and now there's been this kind of price cooling, right? It's not still running up in this like hyperbolic way. Is there a belief that Bitcoin is just going to consolidate and go sideways again for two or three years? Or is this simply a kind of midway point where we actually see Bitcoin consolidate above this kind of $1 trillion market cap? And then eventually that is serving as that like spring or whatever to kind of push the price much, much higher through the rest of this year?

• 15:04Speaker 02

  Yeah, absolutely. So I think we're in this mid, mid-cycle consolidation point, which lines up with what happened in previous cycles as well. We saw these huge run-ups, all these indicators got, you know, pretty overkeyed. And then they drew back and Bitcoin just was in this consolidation for weeks. Or in 2013, we saw this actual 90% decrease in between the double pump that we had. So, you know, this can go on longer than you'd expect, but it is a consolidation at the end of the day. You know, it's impossible to predict exactly when it'll be over. I mean, we could consolidate for a few more days, we could consolidate for a few more months. But one thing to just take away is

• 15:49Speaker 02

  that these strong hands, these long-term

• 15:53Speaker 02

  holders that buy Bitcoin and never sell are continually buying and the people that are selling are new market participants that um that are just getting shaken out by by these moves that people who have been in Bitcoin for a long time know they're just part of the way that the market works. And so eventually we're going to get to the point where the sellers get exhausted and and there's nobody else that has um coins that are that are going to be sold. But until then, we're just sitting in this this band where where those coins are continually moving to these strong hands.

• 16:29Anthony Pompliano?

  I think that as we continue to talk every week, the on-chain data doesn't lie and it's incredibly bullish. So we'll continue to keep an eye on this in the coming weeks. But right now, while price is going sideways, it's just massive consolidation. It's a coil like a spring. And when that thing's ready to move, I think it's going to rip people's faces off. So it'll be very, very interesting to watch. But Will, thank you so much for for taking the time to do this. I think people are really enjoying the on-chain analysis. We've linked in the description to the new email that you've got. It's a free email with a ton of on-chain analysis each week. So if people want to subscribe to that, please go and do that. And then Will will do it again next week.

• 17:11Speaker 02

  Thanks so much, Pop. I'm looking forward to it, man. Hope everybody likes the newsletter as well.