#720 Is The Bitcoin Bottom In?! w/ Will Clemente

Will Clemente is the Lead Insights Analyst at Blockware. He has quickly become one of my favorite writers on all things bitcoin, including deep dives on various onchain analytics. In this conversation, we discuss the bitcoin fundamentals, on-chain metrics, what happened in the past week, and what the on-chain data is telling us to be prepared for moving forward.

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 the Lead Insights Analyst at Blockware. He's quickly become one of my favorite writers in all things Bitcoin, including deep dives on various on-chain analytics. In this conversation, we discuss the Bitcoin fundamentals, the on-chain metrics, what happened this past week, and what the on-chain data is telling us to be prepared for moving forward. I really hope that you enjoyed this conversation with Will, as I always do. Alright, let's get this episode with Will. I hope you guys enjoy this one.

• 0:37Speaker 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.

• 1:00Anthony Pompliano?

  Will, I think we got you here.

• 1:02Speaker 03

  Hey guys. How's it going?

• 1:03Anthony Pompliano?

  We're doing great. How are you?

• 1:05Speaker 03

  Good, good, good.

• 1:06Anthony Pompliano?

  Alright, let's get it. We got a whole bunch of stuff we gotta get through today. So, let's just start first with the kind of price structure. You went ahead and you've got this tweet that, or I'm sorry, this chart that shows kind of price movement over the last couple of months. What are you seeing here?

• 1:21Speaker 03

  Right, so if you remember from last week, what we talked about was, we were expecting volatility. I kind of said I had no real strong opinion about where price was headed in the short term, but you know, I was expecting some volatility, and that's when we were right smack dab in the middle of these, the two Bollinger bands. And so the squeeze is highlighted by that yellow shaded area, and I'm using the WIC High Timeframe Indicator to identify that. What we talked about last week was that, for the past three volatility squeezes we've had, we've initially gone in one direction to grab liquidity from the breakout traders, and then gone in the opposite direction. And so, once again, this actually happened, again, on this, on this fourth time, on Wednesday, we broke out above the

• 2:06Speaker 03

  Bollinger band, looked like we were having the squeeze to the upside, grabbed liquidity, and then reversed. And so, yeah, I mean, I'm not saying that I necessarily like called this, but it's just like, we were prepared for this. And what, you know, what we had talked about last week was like, we were in the middle of the bands, but to kind of check your, you know, check your bias in terms of like- You know, it did look like it was breaking to the upside, but you know, if we, if you had been paying attention to what we mentioned in the newsletter last week, then you wouldn't have, you know, just been, you know, fully bullish, like you would, you would have been aware that there's the potential that we would have this reversal, which we end up doing. So now we've had four of those in a row where we've broken out, grabbed liquidity and reverse.

• 2:50Speaker 03

  As far as like price structure, um, these are just levels that I've, I've had in here for like weeks now. Um, you know, I think as long as we're above this kind of green, this green zone, which was that point of breakdown from earlier this year, um, I remain bullish. I mean, I'm not saying that this will happen, but I think we could correct as low as like 51 to 53K and still have, uh, still maintain like bullish market structure. I think if that happened, you would see some, some, you know, sideways consolidation, but I think as long as we were maintaining above that level, just from like a pure price structure standpoint, um, you know, I'm not like macro bearish.

• 3:25Anthony Pompliano?

  Got it. Okay. And then you have this piece here where essentially, once we saw that, uh, break all the way up to $69,000, which is of course like Bitcoin hitting $69,000 is, uh, is almost like the meme.

• 3:36Speaker 03

  Too bad we didn't hit 69,420. That would have been even better.

• 3:39Anthony Pompliano?

  Dude, the memes write themselves. Like of course 69,000 is the Bitcoin all time high. Uh, we got a large influx of open interest. So what are you seeing here with this futures open interest perpetual on the exchanges?

• 3:49Speaker 03

  Right. So as we broke all time highs, you just saw a real big influx of open interest. Basically people trying to buy that breakout as, as we mentioned a second ago, especially on Binance, you saw a real high, uh, increase in, in, uh, open interest, particularly, um, the coin margin contracts or crypto margin contracts. So we've talked about this before. When you're margining a, a futures contract with crypto versus stable coins or USD, um, you have more convexity to the downside, which is just a fancy term for saying, as the trade goes against you, you're long, you're basically longing your longs, right? Like you're longing Bitcoin with Bitcoin. Let's say, you know, the trade starts to go against you. Well, not only is your P and L going down, your profit and loss going down, or the, you know, the, the profit of the trade is going down,

• 4:33Speaker 03

  but your collateral or how collateralized you are is decreasing. tandem with that. And so that can create these these washouts. And so, yeah, we had a large increase in in open interest as well as funding was rising a bit. And then you pair that with, you know, we had like the CPI data as well as Evergrande news. And then we also had a couple major exchanges that went down, including FTX, which from my understanding, that's like the first time FTX has gone down during any kind of like significant market move. Usually FTX has always been the one exchange that hasn't gone down. And so, I mean, I don't think you can really like pinpoint price action, at least one specific thing, but like those factors kind of, you know,

• 5:17Speaker 03

  gave the perfect recipe for a flesh out.

• 5:19Anthony Pompliano?

  Got it. Now, Sopra, this is the entity adjusted Sopra, which I feel like you and I, Sopra, we're we're on a journey together here. But what's going on with Sopra?

• 5:28Speaker 03

  Right. So Sopra is our spent output profit ratio. So we're looking at when a coin was last moved and when it's being moved. So, okay, let me say this. We're looking at all the coins that are trading on a given day. So, you know, it's you, the coins that are being spent today, you're looking at the profit and loss that those coins that are being spent today hold. So if a coin was, you know, bought at 50K, it's now being moved at 60K, well, that coin's realizing $10,000 of profit. If a coin was bought, you know, at the Pico top at 69K, and then now it's sold down here at 63K, well, it's realizing $6,000 losses. So you're only looking at the coins that are being

• 6:09Speaker 03

  spent on on each given trading day. And then you run the ratio between the profit and loss, and you get Soper, which is spent output profit ratio. One is kind of that threshold where, you know, if you divide one by one, it's neutral, right? So if the profit and loss is balancing each other out, then you're at one. Above that, the market's trading in a state of profit. Below, it's trading in a in a net state of loss. And so what you want to see in bearish trend, or well, in bullish trends, is coming back down and bouncing off that one threshold on any kind of major correction. In bearish trends, what you're looking for is a failed retest from the underside of one. And so what you'll see is You can't see this on the chart, but we bounced off one in September of last year.

• 6:53Speaker 03

  We had a continued uptrend in the ratio. As you can see, we had, I didn't, I didn't label this actually, but you can see this bearish divergence where the oscillator was making lower highs as price was making higher highs.

• 7:05Anthony Pompliano?

  Yep.

• 7:05Speaker 03

  So that was kind of an early warning sign. We had this reversal, broke down below one. And that's what I have marked as that bearish break. So at that point, you know, you can have a bearish bias, but you don't quite have absolute confirmation yet. Coming back down, you know, that, that initial failed break above that range we were in over summer. We had that failed retest from the underside of, of one. And now it's confirmation that we were in a kind of a broader bullish trend. Got a second confirmation of, you know, the underside test of one. And then very shortly after, we actually got a bullish break above one. And so from there, then you, you know, you have bullish bias generally towards the market, but we were once again waiting for that confirmation. We came back down and retested 40K about a month ago at the end of September.

• 7:50Speaker 03

  And that's when we got that bullish confirmation. Now we're kind of hovering, you know, a bit above one. You know, I would love to come down and retest, you know, on some kind of correction and hit that one threshold. But when you go back to last year, I mean, after we had that retest after September, we had like a 25% correction right before the major phase of the bull run at the end of last year. And we never came back down and retested one again. We just continued an uptrend. So what I'm looking for is if we have a price correction to come back down and retest one. In general though, I'm expecting this probably just to trend higher. And you know, as we get further into the bull run, I would be looking for another bearish divergence. As, as you can see, we had on the left-hand side of the chart, you know, when we were in like April,

• 8:34Speaker 03

  March, April kind of timeframe.

• 8:36Anthony Pompliano?

  When we look at this UTXO realized price distribution, you've got it squared off. And you said 18.36% of the supply. Why are you calling that out and explain what this chart is showing us?

• 8:48Speaker 03

  Sure, so this is realized price distribution. So we talk about realized price, which is the capitalization of Bitcoin based off the last time coins are moved. So with this in mind, what this is showing is if a coin is last moved at 1,000, no, it's in the 1,000 bar volume. If it's then moved once again at 20K, well, now it's pulled out of the 1K bar and moved into the 20K bar. So that's where the realized aspect is coming from. So you're essentially looking at where where each denominated, at each denominated price level, how much of supply has last moved there?

• 9:24Speaker 03

  And so as you can see, above 50, I forget the exact number because it changes as supply increases of what exactly the price level is that the $1 trillion market cap threshold is, but it's above 53K. So I just cut it off at 54K. But roughly 18.3%, 18.36% of Bitcoin's money supply has moved above that $1 trillion threshold. And so to me, that's showing that there's confirmation from the market, well, from market participants that this asset class is here to stay. And that Bitcoin is establishing itself as a maturing macro asset.

• 10:02Speaker 03

  I think that 1 trillion, that 1 trillion threshold is kind of a line in the sand. As you can see, that's kind of where this cluster that we're currently in starts.

• 10:11Anthony Pompliano?

  Got it. And when you look at this price distribution, that cluster, what are you looking to see happen over, like, say, the remainder of the bull market? Like, what is your expectation there?

• 10:22Speaker 03

  Um, I mean, the way I just see it is like, by definition, you're showing where a lot of market participants or capital inflows have come in. So ideally, like, these zones of volume are kind of supporter resistance levels because they're they're levels where market participants have interacted heavily with. So if you're coming up from the underside to a large cluster of realized price distribution and saying that you're probably going to face some resistance, some people that are taking profits. And then conversely, if we're correcting, then I look for some of these, some of these zones as like, you know, support levels on the, you know, on a move down. So that's kind of the way I see it. But yeah, I mean, this will definitely change over time because you'll have coins that are, you know.

• 11:07Speaker 03

  In whatever 40, 50, you know, in those, in those price levels that are going to move once we go higher. So, you know, this is, this is just something to, to watch in terms of like identifying where a lot of this investor behavior is going on.

• 11:22Anthony Pompliano?

  Got it. And so when we look at this new chart that you have, the, I appreciate in the newsletter that you published this morning, you said, next, we take a look at a new variant of illiquid supply that I created yesterday. Like you are moving so fast to create some of this stuff and, and continue to analyze it. What are you showing here in this new illiquid supply shock, kind of this new variation of it?

• 11:42Speaker 03

  Sure. So usually we look at a liquid supply shock ratio, which I created with Willie Wu over the summer. What that basically is doing is it's comparing the liquid guys, which are essentially the strong hands. So they take in and, and don't spend at least 75% of those, of the coins they take in. So for every four coins they take in, they hold at least three. The liquid guys take in and spend 50, 50, and then the highly liquid guys spend over 75% of the coins they take in. So for every four coins they take in, they only hold one. And so you run the ratio of the illiquid, AKA the strong hands to the weak hands, which are the highly and, and highly liquid and liquid guys. And that's what the liquid supply shock ratio is. But I just was tinkering around with it and like took it a step further by applying an RSI to it.

• 12:28Speaker 03

  You can apply different timeframes. I just thought this one was the clearest, the, the two month or 60 day version of it. You could look at it like the 30 day version or whatever. But what I'm, what I'm just trying to point out here is similar to what we talked about in Soper with the bearish divergence. And also you'll see in the chart after this, another bearish divergence in on-chain.

• 12:49Speaker 03

  What you're looking for here is seeing that the RSI, which is essentially measuring the momentum. So in this case, you're looking at the momentum of illiquid supply shock. So you're looking at the momentum of the supply dynamics, right? So, you know, if, if you have a bearish divergence, which is when the oscillator is making lower highs, then it's showing the, the amount of supply or the strength of, of the supply shock is getting weaker. Meanwhile, you know, price is making higher highs. So you can see that happen in 2017. Um. Once we broke that downtrend in 2019, at the bottom of 2019, then that kind of marked the bottom of the bear market. We had a continued uptrend in the ratio. Um. And then, as you can see, kind of at like the, the beginning of this year, actually, you could, you could say

• 13:31Speaker 03

  it started as, as we broke all time highs in December at the end of, uh, last year, we began this, this bearish divergence between the oscillator, um, and price. Once we broke below that, the green line I have, um, which is, which is, you know, showing the uptrend in the metric. Once we broke below that, uh, then we had that May capitulation event. So showing that the trend of supply getting locked up, uh, broke. Um. And then, since then, we've, we've broken back above that downtrend, uh, which is like, uh, you know, a bullish break above, very similar to what we just talked about it, you know, at the beginning of 2019, when we broke that downtrend. So, uh, you know, we're in, we're in bullish territory now. Uh, and we broke that at the end of, um, September, um, after

• 14:12Speaker 03

  we retested 40K. Uh, and so, you know, what I'm looking for moving forward and like, I posted this yesterday and like, uh, you know, maybe, maybe it's a big miscommunication on my end, but, um, you know, it seems like some people kind of miss nuance in the sense of like, I wasn't saying that this, this is bearish. I'm just saying like, what I'm looking for moving forward. So like, you know, we've, we've been, um, you know, I, I kind of got caught off guard by the move in May. And then over summer, I really kind of grinded out my understanding of all this stuff because, you know, I, I kind of, you know, I was kind of pissed that, you know, I missed the whole move. And then I really got like dove deep in on chain, created a lot of these new metrics and like really took it seriously. Uh, and so now, you know, with that being, with that in mind, like I'm looking

• 14:55Speaker 03

  for moving forward, you know, what are some of the, I'm trying to stay objective as possible and look forward, you know, what are the things moving forward that we, we can identify that are showing that the market's starting to get overheated, or when we should start becoming cautious. And with this specific metric, what I'm looking for is another bearish divergence as we had in 2017, um, and also earlier this year. So, um, you know, we're, we're in bullish territory for the metric now. Um, and as you can see, you know, it takes a couple touches of, of, in, you know, on that, on that downtrend, once we begin to bearish divergence before it actually plays out. But, you know, after we have two, three touches per se, you know, I'll, you know, I'll probably start to become pretty cautious, especially paired with, um, some other metrics. But that's, you know, that's what I'm looking for specifically with this metric moving forward.

• 15:39Anthony Pompliano?

  Got it. And then Checkmate has this market realized gradient. I'm unfamiliar with this. So how do you describe this? You put a little bit in the newsletter in terms of the actual language that's used to describe it, but like, how do you think about this in a way that people can use it?

• 15:55Speaker 03

  Yeah, so this is a great metric created by Checkmate. And Checkmate was, Checkmate's been doing on-chain since like 2018. And Checkmate was actually bearish earlier this year, mostly because of this metric. And so what essentially you're looking at here is the rate of change between realized cap and price. And so we've talked about realized cap. I'm not going to explain it because I feel like we talk about it every time I talked about two minutes ago. But you're looking at the rate of change. So the amount of new capital inflows relative to the speculative bid on price. And so, you know, as long as, as long as realized cap is increasing, along with the rate of change of price, then, you know, it's fine. We're in an uptrend and that's, that's what you're seeing right now.

• 16:37Speaker 03

  But earlier this year, you had the rate of change of realized price was going down as price was increasing. So you had this bearish divergence between the realized gradient and price. And so that's, that's what I'm looking for moving forward as we get, you know, higher over the coming months, which I'm expecting. You know, I'm looking for this oscillator to start making these, these lower highs. You know, essentially you're just looking at like the, the, the delta, which just means like the difference between the rate of change of, of realized cap or new capital inflows and the speculative bid that market participants are bidding up the market.

• 17:13Anthony Pompliano?

  And then when you start to look at this on-chain cost basis, I think we talked about this maybe last week, but there, there's definitely been kind of a reversal of the previous trend. So describe this one.

• 17:25Speaker 03

  Yes. Dylan had this good idea about a month ago or so to compare the short-term holder and long-term holder realized price. And if you can't tell, like realized price is one of the most important metrics in on-chain analysis to understand. But specifically by comparing the short-term and long-term holder realized price, you can get some interesting signals. So another way to think of realized price is, A, you can think of it as for someone who's like a more technical trader, a VWAP, which is a volume weighted average price, or you could just think of it as the cost basis of investors. And so By looking at the short and long-term holders, what you see is that when short-term holder cost basis goes below the long-term holder cost basis or realized price, that's generally

• 18:07Speaker 03

  a good time to start buying heavily. And that's highlighted by that, you know, you'll see that that green line at the bottom. What that's basically showing is like all the the short-term holder were the speculators, you know, that were that were, you know, likely in the in the previous bull run or they had kind of bought on the way down, you know, thinking that it was just like the another buy the dip opportunity or whatever. They kind of capitulate, you know, when the market seems like it's never going to stop going down, right? Because I mean, you know, newbies usually buy when they think the market isn't going to ever stop going up and they sell when they think the market isn't going to stop going down, which is the complete opposite of what you should be doing. But nonetheless, you know, this is just showing that, you know, there's the short-term guys

• 18:50Speaker 03

  completely leave during the bear market. And that's also reflected by like short-term holder supply and like huddle waves. But they leave in the bear market and then conversely, we can use this to kind of identify when the market's getting overheated in the bull market, when short-term holder realized price kind of way, you know, overshoots long-term holder realized price. So just showing that, you know, the the short-term guys are dominating the market and they're basically, you know, buying the buying the long-term holders guys bags and there's a lot of exuberance and new market entrance in the market. So.

• 19:22Anthony Pompliano?

  Got it. And then we got a red print on the long-term holder net position change. Is this bullish or bearish? I guess is my first question. And then like, what, why do you see? Why do you think we're seeing this? Like, can you explain like, like, what's driving it?

• 19:37Speaker 03

  Yeah, yeah, I posted this one this morning, and there's definitely some confusion as to like, what this exactly means. But what we're looking at here is the 30-day change of long-term holder supply. So we're looking at, for example, you know, what was long-term holder supply on October 12, and then we're comparing it to today, and we take the net change between the two. And so what we've talked about for the for the past two, well, let's back it up. Over summer, we started this reaccumulation phase and we saw that the long-term guys were starting to lock up supply via illiquid supply and also just the long-term holder supply metric via the last node.

• 20:19Speaker 03

  And so what we talked about is that we're looking to reach this peak huddle level, which we've reached, I mean, honestly faster than I thought we would. We reached an all-time high in the long-term holder supply shock ratio. And since then, we've started to see old coins being spent. And this is something that we've talked about, you know. This is natural bull market behavior. What you see in these natural dynamics between market participants is that the long-term guys buy weakness. They set the floor in the bear market. And then once the kind of reflexivity of a full-blown Bitcoin bull market or momentum of a full-blown Bitcoin bull market takes off. Then you have the short-term guys or new market entrants that come in and buy the long-term guys' bags the whole way up. And so, you know.

• 21:03Speaker 03

  We peaked out, like I said, we peaked out, reached an all-time high in the supply shock ratio. Now we're starting to see those long-term holders distribute. We can see this via long-term holder supply, long-term holder net position change. You know, average spent output lifespan, spent volume age bands, coin days destroyed, dormancy. All these different metrics that are just showing that you're starting to see these long-term guys sell off. And that's not, that doesn't mean that the bull market is over. That's just, like I said, natural bull market dynamics. And as you can see, when the long-term guys actually initiated or started to sell previously. You know, that was actually kind of coincidentally at the end of October of last year.

• 21:46Speaker 03

  You know, that was at the very beginning of the bull run. And, you know, we always talk about how. These guys don't perfectly time the tops and bottoms. Like, they don't perfectly buy the pico bottom of the bear market and they don't perfectly time the pico top of the bulls. They kind of, you know, scale into the bear and scale out in the bull. And so you're just starting to see them scale out and that, you know, that.

• 22:10Speaker 03

  This is, this is a bullish chart over the coming months, uh, but you know, once, once we, once we start to see real heavy selling like as you can see, like in January, the beginning of this year, um, then you know, you can start to, start to become cautious. And then, uh, when we flip green, that's actually generally kind of a, a bearish signal because that's showing that the long-term guys, you know, have started buying back again. And that's like naturally what, what, uh, bear market behavior, uh, looks like. So, um, you know, this isn't something to be like entirely concerned about at all. It's just like, you know, just keep an eye on this over the next couple, you know, next couple of months. And this is kind of the start of the end, but that, you know, doesn't mean to say that we don't have a long way to go because these guys don't, you know, they, they've just started scaling out and they definitely don't perfectly time the top.

• 22:58Speaker 03

  So.

• 22:59Anthony Pompliano?

  Yeah. I, I tend to think that that's right. Based on the, the data that we have, uh, from previous, uh, kind of upward movements. Uh, we've got supply shock ratios. What, uh, what, what are you seeing here? Same kind of reversal right there at the bottom?

• 23:11Speaker 03

  Right. Yeah. I mean, this is just another visual to, to show the same thing. Um, so this is like the complete zoomed out version though. So green is long-term holder supply, uh, and purple or fuchsia, whatever you want to call that color, uh, that's, that's short-term holder supply. And so you, I'm just threw this in there to show that dynamic. Um, you know, you see in, in 2013, uh, the long-term guys were buying up until the main phase of that, that first leg up, they scaled out during that, and then they rebought during that, uh, kind of mini bear phase between the two 2013 double pumps. And then they sold again, um, into that rally while the short-term guys bought their bags the whole way up. Long-term guys started scaling in through the bear market. Short-term guys left at the, you know, very pico bottom of, of short-term holder supply. That's when the market starts to reverse because all the short-term speculators are completely gone.

• 23:57Speaker 03

  Um, and you know, the people that are buying down there have strong hands, you know, because they're buying when the market looks completely dead. And these are guys with like long-term conviction. Um, so they kind of set that floor, uh, as we head back into the, the main phase of the bull, then you start to see the long-term guys scale out again. Short-term guys buy their bags up. And so you see this pattern, right? Um, throughout all Bitcoin's history. And as you can see, we're we're just starting to reverse the short term holder supply. But you know, another way to look at it is the metric that I've been thrown in for a few weeks, just the long term holder supply shock ratio where we kind of reached. That that's comparing the long term and the short term guys through a simple ratio. And so through that, you're basically adjusting adjusting this for supply.

• 24:43Speaker 03

  And and because, you know, by definition, like long term holder supply is going to trend up, you know, as there's more supply and circulation. So running the ratio between short and long term guys kind of alleviates that like. You know, the disadvantage that that you have by by not like adjusting it for supply. But yeah, you're you're starting to see that reverse, and this is just another way to to show what what we just looked at. But like this is just the zoomed out version, essentially.

• 25:08Anthony Pompliano?

  Got it. When we look at transaction fees, I remember during the summer, one of the things that you had said was, hey, you know, I got to see transactions pick up. Because that would be like my biggest bearish argument against Bitcoin right now. This is transaction fees. What are you seeing here? Looks like it's ticking up a little bit.

• 25:25Speaker 03

  Yeah, I mean, going back, I think I probably would adjust what I said in the sense of like, doesn't necessarily mean that. The the market itself is bearish because like low, low, you know. Low demand or or low activity could also just mean like all the speculators are gone, and it's really just like the smart money that's left in the market. And like, if I could have changed the way what I was saying is just more of like. Bull market, you know, bull market behavior that, you know, throughout Bitcoin's history as as included, you know, increasing network activity. And so we are starting to see a pickup in that. I mean, very slight, you see in the bottom right, it's very slight compared to, you know, what we've seen in 2017 and and.

• 26:07Speaker 03

  The end of last year, leading into the beginning of this year, but I'm watching to see if we get that continued uptrend. You know, it looks like once we kind of broke that uptrend previously, that's that's, you know, when when the market started to reverse as well as like. I think you can also kind of use this as a as kind of a topping signal where you have that, you know, huge blow off spike. And that kind of means that there's like, you know, exuberant mania and and like a lot of, you know, new speculators in the market, and so the market's getting a little frothy. So yeah, I'm looking for, you know, a sustained uptrend in fees because I think fees are like a good way to kind of proxy like block space demand. As well as like some kind of major, you know, spike, you know, in the in the months coming ahead.

• 26:50Anthony Pompliano?

  Got it. And then we've got the exchange net position change. That's in the red. It has been for a while now. Kind of same thing continuation of what we previously saw.

• 27:00Speaker 03

  Right. I mean, yeah, like we're seeing outflows in the short term. But also what I just wanted to show here with the full zoomed out version is like after March of 2020, I don't want to use the word paradigm, new paradigm, but we've kind of seen this, this trend change in, in market, you know, participants behavior. Where aside from like at the end of 2016, leading into 2017, where you saw some pretty heavy, like consistent outflows. And there's no comparable time in Bitcoin's market history to the last year. So where we've just seen sustained outflows. As well as before the major, you know, down, down draw that we, we had over the summer. We had the, the highest day of, of daily inflows to Binance. So that's like another, you know, you know, if we start to see real

• 27:46Speaker 03

  large inflows to exchanges, you know, day after day, then you know, it's probably time to, to be a bit wary. But for now, we're still in kind of this sustained period of outflows and zooming out after March, it seems like we're kind of in this, you know, new trend and behavior from, from market participants. I mean, I think you could partially just attribute that to like institutions being in the market, driven by the whole inflation hedge narrative, et cetera. And, you know, they're looking to take custody of their BTC in general.

• 28:13Anthony Pompliano?

  Got it. And then when you think about this very last chart you have around miners, it looks like, you know, we've got everything in here from a, where the Chinese miner migration or the Chinese mining ban that occurred all the way back to it coming back online pretty aggressively, which looks pretty bullish. Is that your general read?

• 28:31Speaker 03

  Yeah. Um, you know, I think, I think like hash is definitely correlated to what the value of the Bitcoin network is because the more hash there is on the network, then the more secure the network is, right? And so, you know, seeing hash come back online is, is great in that sense. And then also just for the decentralization of Bitcoin. You know, mining was, was really heavily concentrated in China. And so that was one of the biggest, you know, FUD narratives that, that, you know, Bitcoin, excuse me, that Bitcoin bears. Would would throw at us, right? And they'd say, well, all the all the miners are in China. And so it's it's it was pretty funny, honestly, over summer that, you know, you had all these people that use that as kind of their their one of their main like bearish narratives around Bitcoin or arguments against Bitcoin.

• 29:15Speaker 03

  And then you start to see hash leaving China and going across the world and and and decentralizing itself across the world. And then they're saying, you know, oh, well, all the all the, you know, hash came off the network so quick, you know, it's just like, you know, it it's completely contradicting yourself. But uh, but yeah, I mean, just seeing hash come back online is is a great sign because it's it just shows the resilience of the Bitcoin network, right? Um, you know, it doesn't matter what centralized entity, you know, bans Bitcoin. I mean, Bitcoin hash is going to find a new home somewhere else and and the network is doesn't have any centralized point of failure. So I mean, yeah, I mean, it kind of sucked. We had, you know, hash drawdown and and some a bit of a bit of selling for miners over the summer, but you know, the network

• 29:58Speaker 03

  uh, had has come back out even stronger from that. Um, and so, you know, Bitcoin has a lot of these events where it's kind of like a what doesn't kill you makes you stronger type deal. And for long term investors, you know, this was a real bullish event in my mind. Um, and a reflection of that hash coming back online aggressively is you can see in difficulty in the purple or blue line, whatever you want to call that. Um, we've had eight consecutive positive difficulty adjustments. So it's just another reflection of um, how aggressive hashes come back online.

• 30:27Anthony Pompliano?

  Got it. Joe, John, what questions do you guys have?

• 30:29Speaker 04

  Yeah, Will. So we looked at the chart earlier about long term holders selling into strength. Um, and it looks like it has just started. Is there any historical evidence of how we should think about this? Like how long it can go? What metrics you should be looking at, etc?

• 30:42Speaker 03

  If you're able to go into, I think it was the newsletter two weeks ago, what you see is that I have the the long term holder supply shock ratio basically plotted out and kind of like this descending wedge, if you will. And so whenever we tag the upper trend line of that, um, and for anybody listening and and like, if you're by chance not able to get it up, look at a week 12's newsletter and then scroll down. It's like the Sixth or seventh chart in the in the newsletter. When we tag the upper trend line of that, that's usually where we we've kind of peaked out and and because that's showing that. You have a large amount of supply that's moving to to short term holders. And then conversely, when we tag the bottom of that trend line.

• 31:27Speaker 03

  Those have actually been really, really good bottom signals. So it's showing the bottom at the end of of 2015. As well as at the bottom of of 2018 and then also during the COVID crash, we came back down and tagged the bottom of that trend line. We hit the bottom of that trend line about a month ago. And so now I'm looking to reverse back to the upper part of the trend line in this kind of descending wedge. And so once we kind of get up and, you know, at least in the upper half of of the wedge, you know, that's when I'll start to. Start to kind of look to be cautious just based off of the behavior of long term holders. That's that's that's, you know, probably the the best visual to get like a clear signal on like, you know, when when to become cautious or or, you know, optimistic about the market.

• 32:11Speaker 04

  Gotcha, and I I trust you will educate us on that when it gets closer.

• 32:16Speaker 03

  Yeah. An eye on it.

• 32:18Anthony Pompliano?

  All right, John, what you got? Yeah, what's up, Will? So what was your takeaway? So what did the on chain metrics say about this week's volatility? We saw Bitcoin go as high as $69,000, $69,000 and then as low as $63,000. Was that like, I probably wasn't expected and we know it's volatile, but what was your takeaway from all that?

• 32:36Speaker 03

  Yeah, I mean, I think in the I think in the short term, when you have kind of these whipsaw moves, a lot of that is is more so driven by the derivative stuff. You know, we do insane amounts of volume and and, you know, there's insane amounts of liquidity in the in the perpetual futures market. And so in the short term, you know, when those traders get off sides, you have these kind of, you know, flush outs or reversals. And so that happens often, that's that's part of why Bitcoin is so volatile. I think, you know, in the past, like in like the BitMEX glory days, Bitcoin is pretty much just like a free walk trying to liquidate the most traders. I still think we have that to an extent. And so like that, you know, I think that drives a lot of the short term volatility, but you know, when you're trying to just zoom out and like, you know.

• 33:19Speaker 03

  Don't care about the day to day fluctuations. That's where on chain more so comes into play. I mean, you did see, you did see like some increased spending as we've talked about from these long-term guys. As well as, you know, some slight like exchange outflows before the event, but more than it, more than anything, I think a lot of these short-term moves are just driven by the derivatives. Thanks for that.

• 33:41Anthony Pompliano?

  Well, if you zoom all the way out, we are now into Q4 of 2021. What's your general read? We're, you know, hitting all-time highs. Is this kind of what you would have expected? In the beginning of the year into the spring, like Q4 of the year after a having, we're hitting all-time highs?

• 33:59Speaker 03

  Yeah, I mean, I think I know a lot more about the market than I do, like than I did earlier this year. Like I kind of look back at myself and cringe a little bit. But I mean, yeah, like we've been talking about how we've kind of been expecting higher prices into the end of the year. I think some of these on-chain like supply specific dynamics that we're seeing and as well as like, like, you know, coin days destroyed and stuff. Some of those things kind of point to maybe this extending out into the first few months of next year.

• 34:30Speaker 03

  You know, I don't, I don't necessarily look for, for timing and we've talked about this before, like, I don't look for timing as to, okay, the market's going to end, the cycle's going to end in December because that's when it's historically ended. I'm just looking for these behaviors. So,

• 34:45Speaker 03

  you know, I know it's this time and time again, but it's like, I don't have specific time or price targets. It's more so like, what are the behaviors that have, you know, previously resembled exuberance or greed in the market? And once we see those, I don't know if that happens next month, you know, that could all of a sudden happen within a matter of weeks or, you know, it might take several months for us to get to that point. But historically, in terms of how long it's taken for these dynamics to kind of play out. I mean, I think, I think there's a reasonable argument to be made that we kind of extend out a few months into next year. But yeah, I mean, my, my conservative kind of price target for the end of the year was always, I said all-time highs to about 75K. And I, you know, I still think that's in the cards, but I mean, as far as the absolute like,

• 35:29Speaker 03

  Pico top, I mean, we'll have to just, you know, keep monitoring these behaviors to know.

• 35:34Anthony Pompliano?

  Thank you so much for, uh, for coming on and, uh, we'll do it again next week. I think everyone is, uh, we're, we're all waiting. What, what is Will gonna drop next? Either what metric is he gonna create? Or, uh, or is he gonna tell us something's gonna happen before it happens? So, uh, keep up the good work and, uh, you know, this weekend, don't do anything that, uh, my brothers and I would do.

• 35:52Speaker 03

  Thanks, guys. And, you know, I, I appreciate you, like, you know, continuing to push the on-chain stuff, you know, outside of just, like, doing these interviews, but as well, like, on Twitter and stuff, you know, I think, uh, the, the further we, we can push this information out to new people, then it's just, you know, it's a, it's a additive thing where, you know, other people come up with metrics, you create something based off of their stuff and, you know, we can kind of, it's, it's, it's still so early in terms of, uh, like, you know, the, the, the metrics we have and like the information and data we have that, you know, I think it, it, you know, it's, it's a, it's a win-win for everybody and, and we can kind of all win together, at least, at least for now. Maybe like, years down the road, the alpha will get, uh, will get, uh, you know, squeezed out a little bit as more people take on chain seriously, but.

• 36:37Anthony Pompliano?

  No, no, no. We're all in this together, my friend. Joe, John, you guys got anything else?

• 36:42Speaker 04

  No, man. Have a good weekend, Will. Appreciate you joining us.

• 36:45Anthony Pompliano?

  Thanks, buddy.

• 36:46Speaker 03

  All right, guys.

• 36:46Anthony Pompliano?

  See you.

• 36:47Speaker 03

  Take it easy. See ya.