#626 The Bitcoin Bull Run is Back!

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 the supply squeeze, strong hands buying, dormancy looking better, and what happens when bitcoin broke $42,000. ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn bitcoin, ether, and over 40 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days. ======================= Do you have a business idea you’ve been dreaming about, but don’t know how to actually start building it? Use Bubble’s drag-and-drop tool to develop custom, interactive, multi-user web apps in hours. Go to Bubble.io to build, launch, and scale real ideas and products without engineers or code! Bubble is the go-to no-code platform for over 1 million builders, and has recently closed a $100M funding round to continue supporting startups like yours, from MVP to IPO. Go to Bubble.io/pomp and the first 500 listeners will get their first month free on any of Bubble’s paid plans. ======================= Polymarket is the world’s leading information markets platform where you can trade on the most pressing global questions and see unbiased, real-time data on what the market thinks will happen – all on the blockchain. For a limited time, sign up with referral code “Pomp” to get your first trade reimbursed up to $100. Click on the link to get started: polymarket.co/pomppod

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.

• 0:11Anthony Pompliano?

  Will Clemente is a finance major at East Carolina University. He's 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 by clicking on the link in the description that I've provided. In this conversation, we discuss the supply squeeze, strong hands buying, dormancy looking better, and what happens when Bitcoin broke $42,000 yesterday. 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 Gemini. They're a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy, sell, store, and earn Bitcoin, Ether, and over 40 other cryptocurrencies.

• 0:53Anthony Pompliano?

  They offer industry-leading security, insurance, and uptime. Gemini is the go-to trusted platform for beginner and sophisticated investors alike. You can open a free account in under three minutes at Gemini.com/pomp and get $20 of Bitcoin after you trade $100 or more within the first 30 days. Again, you can open a free account in under three minutes at Gemini.com/pomp and you'll get $20 of Bitcoin after you trade $100 or more within the first 30 days. Go check it out. Next up is Polymarket, the world's leading information markets platform, where you can trade on the most pressing global questions all on the blockchain. You can choose from a variety of markets. Will Cardano support smart contracts by October? Will the US have more than 100,000 COVID cases before 2022? Will Trump run for president? With over $100

• 1:37Anthony Pompliano?

  million traded in the first year, Polymarket is the go-to platform to settle the biggest debates of the day. Think you know more than the market? Trade on your beliefs and earn a return if you're right. Want tomorrow's news today? Use Polymarket to see real-time data on what the market thinks will happen. No fake news, no pundits without skin in the game. So head over to Polymarket.com and make an account today. For a limited time, if you sign up with the referral code POMP to get your first trade reimbursed up to 100 bucks. Again, go click on Polymarket.co/pompod or use the referral

• 2:10Anthony Pompliano?

  Code POM when you sign up for an account and you'll get your very first trade up to $100 reimbursed by the platform. Go check it out at polymarket.co. Last but not least is Bubble. Do you have a business idea you've been dreaming about but don't know how to actually start building it? Use Bubble's drag and drop tool to develop custom, interactive, multi-user web apps in hours. Go to bubble.io to build, launch, and scale real ideas and products without engineers or code. Bubble is the go-to no-code platform for over 1 million builders and has recently closed $100 million funding round to continue supporting startups like yours from MVP to IPO. Go to bubble.io/pomp and the first 500 listeners will get their first month free on any

• 2:51Anthony Pompliano?

  of Bubble's paid plans. Again, bubble.io/pomp and the first 500 listeners get their first month free on any of the paid plans. Bubble's awesome. I think you'll really enjoy it. So make sure you go check it out. All right, let's get in this episode with Will. You guys enjoy this one.

• 3:06Speaker 02

  Anthony Pompliano runs POM Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of POM Investments. You should not treat any opinion expressed by POM 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.

• 3:30Anthony Pompliano?

  Bitcoin is ripping $42,800, literally went up 500 bucks since we went to commercial. I don't want to say that we did that, but I do want to say that Will Clemente is here. Maybe that's what's going on. Let's bring Will up. When I, when I went, when we went to commercial, I got on the Zoom and I said, Will, you good? And his exact response to me was, damn, y'all lit.

• 3:53Anthony Pompliano?

  What's up, man?

• 3:54Speaker 03

  Boys are going crazy this morning. What's going on, man?

• 3:57Anthony Pompliano?

  How are you?

• 3:59Speaker 03

  I'm doing well, doing well, especially after watching this, this price chart here the last five, 10 minutes.

• 4:05Anthony Pompliano?

  All right, let's start first with the on-chain metrics for the week. I know that you've done a bunch of the analysis as usual, and you're starting out with this URPD metric, which is basically on-chain volume. Explain what you're seeing.

• 4:19Speaker 03

  Yeah, so URPD is basically, like, if you think of a volume profile, it's usually used, like, if you're in Trading B or something on the side of the screen. It's basically just a horizontal volume distribution metric. And so showing you like how much Bitcoin has moved at different price levels. And so when we look at this, we have this massive zone of volume. Obviously, we've been in this range for like two, three months now. We've had almost 22%, 21.7% of supply has moved in this range. And then we have this massive bar of volume at about 39.5%. And 2.6% of Bitcoin's money supply moved at that bar, which makes it the largest singles zone, like, single bar of

• 5:03Speaker 03

  of distribution at that price level since 3.8,000. So, you know, we're building up this huge, what I believe is kind of this mid-cycle support, possibly, you know, if we had another macro bear market, perhaps some kind of like macro bear market bottom level that we're forming here. Because we have so much volume, especially at that 39.5 level.

• 5:24Anthony Pompliano?

  Got it. And then you created this top-bottom model. What's going on with the top-model-bottom?

• 5:33Speaker 03

  Yeah, so there's a lot here, but just to like, kind of break it down, an easy way to understand, the top model is a variant, it's basically a multiplier of the average cap of Bitcoin. So like the all-time moving average of Bitcoin. The light green line, that you'll see the second one to the bottom, that's realized cap. So that's the, well, realized price, it's just you're dividing the cap by circulating supply. But this is the average price that investors paid for their coins. And then the very bottom line, the dark green one is delta price. So delta cap is the difference between the all-time average, the all-time moving average cap and realized cap. So you can, you know, plotting that out,

• 6:15Speaker 03

  you can get almost this like cheat sheet for looking at kind of these over/underheated zones. You know, Bitcoin has always historically stayed between the delta price and the top model. But then also adding in like the realized price, you can get a good zone to accumulate, you know, at the at the bear bottom. And then also, um, you can get some some good zones to, you know, start start de-risking towards the top of the cycle. Uh, but then I put this midline, which is basically the the mean between um, the delta price and the top price. And so this is kind of like, served as a good like confirmation level for for bull markets in the past. Um, it was the level, obviously, like, 2013 got back above it, um, but then broke below this and

• 6:58Speaker 03

  and that kind of led us into the bear market. In 2017, we rejected off of it. And then, once we kind of broke back through that, retested it as support, um, that kind of gave us the next leg up. Um, it was also where we bounced off on the dead cat bounce. So like, af- after we had that initial euphoric run up, then we had that that second, um, what people call dead cat bounce. So it's a higher low. I mean, it's a it's a lower high. Um, so basically a bearish retest, and that bounced off that midline as well. And then this year, we kind of bounced off it as support in in January, and then, um, we we broke through that in mid-May. And that was kind of like, the mark where we we kind of just dropped off a cliff after we broke through that level. So, right now, it's at 53K, and that's that's something I would be looking

• 7:39Speaker 03

  for for, like, full confirmation that we are in, you know, a new bullish uptrend.

• 7:44Anthony Pompliano?

  Okay. And then talk to us about this illiquid supply shock ratio. I know that we've been talking to this now for two or three weeks, kind of this idea of a supply squeeze. What's going on there?

• 7:52Speaker 03

  Yeah, absolutely. Um, this is something I've been excited to finally see get played out because I was pushing it so hard. But, uh, there's there's two ways to look at this. So you have a a more qualitative view of this, and then also a more quantitative. So the illiquid supply shock is the more qualitative. So it's looking at what what's the spending behavior of the entities that these coins are moving to. And so what you see, and and this is the blue line, uh, this is showing you that more coins are moving to what what's on-chain considered, uh, these strong hands, these these illiquid entities. And then also, you see the purple line, um, that's more of a a quantitative way to look at the supply shock. So it's literally saying, um, what's the ratio between the amount of coins that are available to be bought on exchange?

• 8:36Speaker 03

  Relative to the overall circulating supply and you see, you know, if you overlay them both, I mean, they they move pretty much in unison. Um, but yeah, you you're seeing divergences in both of those that I don't think have uh, fully gotten uh, priced yet, you know, because these are divergences that have been growing for two, three months and then really rapidly over the last two, three weeks. And and I really, I think uh, price is lagging big time here.

• 9:00Anthony Pompliano?

  Got it. And then when we look at who's actually buying, I know that there's a a ton of um, kind of supply held by retail, it looks like.

• 9:08Speaker 03

  Yeah. So like breaking the breaking the accumulation down by like who exactly is accumulating in terms of size. What you see is that like all across the board, every major cohort is accumulating. Aside from like the, I think the hundred to one thousand cohort, which is kind of just trending sideways. Um, but what what you see is retail has really stuck out over the last, well, actually since since the March, I mean, uh, the May capitulation, but especially over the last few weeks, their holdings have kind of hockey stick upwards. Um, and and like the way I I looked at this in the newsletter was comparing all of these entities holdings with less than 10 Bitcoins and then dividing that by the circulating supply. So you get basically the portion of supply that retail holds, if that makes sense.

• 9:50Speaker 03

  Um, and you've seen that that's really gone on the tear since since May 19th. So, um, you know, retail, although people like to talk about how, oh, it's all whales move the market, retail's been holding their own. Retail's really been a driver of of this uh, reabsorption process that we've been tracking.

• 10:06Anthony Pompliano?

  Got it. And then when you start thinking about within that, the short term uh, holders and the long term holders, this seems to be like uh, one of, if not the most important charts, uh, just showing that the long term holders are accumulating.

• 10:18Speaker 03

  Yeah. So this is comparing, so like in the past, we've looked at the the raw short term and long term holdings, but this is comparing their holdings to the overall supply. So you're just getting the portion of supply that each of them holds. So very similar to what we just did with retail holdings. Um, and so what you see is like historically, whenever Bitcoin starts moving up, it gets to a certain level of um, holdings that of from long term holders, because of course they're locking up supply. So it's very similar um, to to the Supply shock thing is kind of a more abstract way to look at it, but right now we're at about sixty six percent of supply held by long term holders. Whereas like kind of in mid October of last year, when we started really running up into the main bull phase, we got up to about sixty eight percent.

• 11:02Speaker 03

  So yeah, that's just something I'd be keeping an eye on like, are are these long term holders going to continue to add? Or are they just going to dump on on any sign of exit liquidity, right? Like if we start going up to whatever forty five K? All of a sudden, you know, long term holders are just dumping like that. That's not going to be a good sign because that kind of resembles what happened in the dead cat bounce after the twenty thirteen fall.

• 11:23Anthony Pompliano?

  For sure. And then dormancy, what's that looking like right now?

• 11:27Speaker 03

  Yeah, so dormancy is basically looking at the amount of destruction. So but it's adjusting it for volume. So like destruction is is an on chain term looking at. So like if you have a coin in a wallet for one day, it has one coin day. And then if it's moved out of that wallet, it's now got one coin day destroyed. And so then then dormancy adjusts this for volume. So you get the raw, you take the time component out of it. And and you only are looking at the raw amount of destruction. And so like plotting that out over time, you can basically see, you know, like our our older our older coins being sold. But what David did, David Pwell, he took the the annualized dormancy in dollar terms.

• 12:11Speaker 03

  And then divided that or divided market cap by the annualized dormancy in dollar terms. So taking the dormancy today, you know, how how much? How many dollars have been destroyed? And then multiplying that out over three hundred sixty five days. And so what you see here is like, we have this almost full reset of dormancy and and that to me is showing like it it's partially affected by the fact that we've had lower transfer volume because by definition, you're going to have lower coin days destroyed because less coins are trading. But also to me, it's showing that the noobs are slow slowly getting flushed out. So like you can also look at other things like the raw average age of the coins being sold. We can even look at something called spent output age bands and that looks at.

• 12:56Speaker 03

  Basically like these different bands based on the the age of of the different entities that hold the coins. So anyway, so like I think it is partially affected by lower transaction volume, but overall what this is showing to me is that we kind of had this reset of of of noobs in the market and we can we can kind of build this this foundation to move upwards because the other times you've seen this were actually in in major bear market bottoms. So in late 2018, 2015, and then also after the 2011, like initial pump when Bitcoin was, you know, first brought out to the market. So.

• 13:31Anthony Pompliano?

  Got it. And then Sopra, I know that you're now looking at kind of this adjusted version. Explain again what Sopra is and then the adjustments that you're making.

• 13:39Speaker 03

  Yeah, sure. Sopra is basically looking at the profit taking that coins hold on any day. That's a good way to think about it. So A Sopra is basically just adjusting out the the one hour transactions. So it's kind of just filtering out the noise. You can also look at entity adjusted, but I just threw in a a Sopra for this one, but you can you can look at both to kind of get like a more accurate picture. And then you can also look at long and short term, just for anybody who's interested. But so we we had this breakout above one, which is basically the threshold for like profit or loss. So if Sopra is trading above one, then the market's trading in a state of profit. If it goes below, it's stating in a in a in loss, right? So

• 14:22Speaker 03

  what you wanted to see, and we talked about this like two weeks ago, was for Sopra to perhaps break out and then either retest that one line on on a price move down and then kind of stabilize. And what we've actually seen this week is we had that move down after we initially got rejected off 42K. We actually did bounce off that one line. And then that's a that's a bullish sign because in in bull markets, you you see Sopra that that one threshold is kind of that mark for where where bottoms are in corrections. Like if you go back and look at it from like. December to March, I mean, almost every time that SOFR dipped below one, it was like a perfect, perfect buy to dip opportunity. So, you know, I would like to now just see it stabilize. So now that we've got that, you know, correction in price and then bounce off one, I now just

• 15:07Speaker 03

  kind of like to see it stabilize above one.

• 15:10Anthony Pompliano?

  Minor accumulation?

• 15:11Speaker 03

  Yeah, nothing really new here. Just miners still buying.

• 15:15Anthony Pompliano?

  And the miners, they've been buying now for weeks and just continuing to do that. No, no sign of that slowing down. It's actually accelerating maybe a little bit?

• 15:23Speaker 03

  Yeah, slightly. So like I threw in the 30 day change. So you can look at their actual like minor balance and just like, oh, they sold today or they, you know, bought some today. But it gets really noisy. So like, this is the 30 day change. So taking, you know, today's August 6th, so looking at August 6th, and then the difference between now and July 6th, and that's, that's the net change. And so like, when you see there's a clear trend in the net change, you know, that that's showing like this broader trend, right? Because it's, it's going to take a larger trend to affect this metric, just by definition. So yeah, I think this is a better way to look at it. If you're trying to follow what miners are doing. And yeah, like you said, this is really showing, no sign of slowing down anytime soon.

• 16:04Anthony Pompliano?

  Got it. And the last one is kind of you, you presented a little bit of a bear case. So if you had to make an argument against what I think is your position as to being bullish, it's basically the on-chain metrics around transaction volume?

• 16:16Speaker 03

  Yeah, um, this is kind of the one thing that is a red flag to me is the fact that we don't have more on-chain activity in terms of like, when you look at the mempool or just the number of transactions, active addresses, all these kinds of things, which I personally suspect are kind of lagging indicators. I think if you start to see, you know, higher prices, we start to move towards like, I don't know, 45K plus, start moving towards 50K, I think you'll start to see uptick in this as, as, you know, volume picks up and people become interested in again. But yeah, I think part of this has just been the fact that we've been ranging sideways for two or three months. And I think of these as more of lagging indicators, but when, you know, this is something you want to look for. If we start to move back up, obviously you're going to want to see, you know, this, this

• 16:59Speaker 03

  transaction activity, you know, come back in as well. But I suspect it will, but you never know. And it's just something to keep an eye on.

• 17:06Anthony Pompliano?

  Got it. And then the last question, the question that everyone wants to know is while we are recording this Bitcoin just broke $42,000 and you previously had identified that as a pretty big resistance. What do you think happens from here, fully knowing that you can't predict the future? But what is, what is your thought process as to where we go?

• 17:24Speaker 03

  Yeah, so like, we've just broken horizontal resistance at 42K and then we've also broken this diagonal resistance line. If you draw from like the wake up and the 60Ks and then we also retested that on the way down when we came back to like, we retested 60K and hit it and then we retested it a couple of days ago. Anyway, so what I'm saying is we're, we just broke out of two major trend lines, right? So both diagonally and horizontally. So I think there's really nothing but hair here till about 48K, but I think the 200A moving average is going to give a bit of resistance and that's right around 45K right

• 18:07Speaker 03

  now. So I'll be watching to see, you know, we might take a pause, a little breather there because that's kind of a mark that a lot of people in traditional finance look at to see kind of like, you know, if an asset is in like a bullish or bear phase, I guess you could say. So yeah, I'd be looking for that, but I'm targeting right now 49, 50K and seeing how we're going to kind of react there over the, you know, I think it'll perhaps play out over the coming weeks.

• 18:35Anthony Pompliano?

  Got it. Is there anything that people should be watching out for as we kind of break through that 42 and on the way up other than prices? Is there anything on chain that you'll look for?

• 18:45Speaker 03

  Um, just in general, like one thing was, was the volume, right? We were talking about how we want to see that pick up. That's one thing. And then also the long-term holder, you don't want to see them dumping and, and, you know, just looking for some kind of exit equity like we talked about earlier, super stabilizing. And then in the very short term, just you can look at futures data, just see how funding's looking, you know, look at OI and just basic stuff like that for like very short-term price movements.

• 19:13Anthony Pompliano?

  Got it. Before I let you go, everyone loves when, when Will comes on, people even say Will season. What is, what was kind of your, your final words or anything that you want to share with folks?

• 19:25Speaker 03

  Uh, hang in there, guys. This thing's going to pop.

• 19:29Anthony Pompliano?

  I love it. I love it. All right. Well, thank you so much for doing this every week. You're doing fantastic work. As I told people, I'd say without you here, you by far, I think, are leading the charge when it comes to on-chain metrics and people are waking up to how important a lot of that data is. So folks can go follow you on Twitter or subscribe to your newsletter. Where should we send them on Twitter or the newsletter?

• 19:50Speaker 03

  Yeah, sure. Thanks for having me on, man. I hope you guys get hyped again. I know this is a little information heavy, but I'll be watching after I get off. So you guys better get the energy going again. You could find me on Twitter at W Clemente III. And then I have my newsletter is BTC by WC3 at substack.com, which is also my Twitter bio.

• 20:11Anthony Pompliano?

  Killing it, man. Thank you so much for doing it. We'll do it again next week.

• 20:14Speaker 03

  Yes, sir. Take it easy, Paul.

• 20:16Anthony Pompliano?

  All right. Sounds good.