The Pomp Podcast - #574 Will Bitcoin Break Out Of The Accumulation Phase?! w/ Will Clemente

Starting point is 00:00:00 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 in the link in the description. In this conversation, we discuss this week's sideways movement, the on-chain metrics, who's selling and who is buying, and much, much more. I really enjoyed these weekly conversations with Will, and I hope you enjoyed this one as well. Before we get into this episode, though, I want to quickly talk about our sponsors.

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Starting point is 00:03:36 only. All right, guys. Bang, bang. I've got Will here with me. Thanks so much. How are you doing, man? Doing well. How about yourself, Paul? How's Miami going? I'm doing all right. Great way to start off a Saturday morning with a little on-chain metrics. Let's just jump right in for the week. It seems like we basically are just trading between like $32,000 and $40,000 and it's like range bound. Explain a little bit kind of how you see where we are right now. Yeah. So, you know, when you're just looking at just the order books, I mean, there's a lot of buy orders set between, you know, like 32 to 30 K and there's a lot of buy orders set between, you know, 40 to 42 in that range. So just looking at that alone, we're going to need a lot of volume

Starting point is 00:04:25 to kind of break out in either direction. And until then we're just kind of range bound. So, So, you know, we're kind of in this in this zone where it's almost like no man's land, where no one wants to take, you know, a directional trade in either in either way, because people are just waiting to see, you know, kind of kind of what the market is saying. We've had relatively low volume now heading into the weekend. Weekends are always lower volume than weekdays. So it'll be interesting to see perhaps if we have any moves with low liquidity. But yeah, for now, I mean, we're just pretty much range bound. And it's one of those things where, you know, in my humble opinion, this isn't where you kind of, you know, take any trades. You just kind of sit it out, maybe trade the range, maybe, you know, pick up some at the bottom of the range and then take some off at the top. Aside from that, I think you're just waiting for like confirmation in either direction.

Starting point is 00:05:19 And talk a little bit about the futures open interest. That's super interesting that you kind of called out that it's pretty flat. Yeah. So after we had that big, you know, liquidation event, whatever it was like two, three weeks ago now, the futures open interest is pretty much just completely flat. We've seen it come back a little bit, but not not substantial at all. And then the futures contracts like you can go in and see, you know, the number of contracts that have been opened. And since we had that drop, I mean, it's pretty much just dead. And for anybody that is subscribed to the newsletter, if you look on that first picture that's up there, that bottom part of the chart, that's the futures contract. So you can see after we had that big liquidation event, I mean, no one wants to step in here.

Starting point is 00:06:05 People are just waiting to see what the market's telling them at this point. Yeah. And it also feels like, I know you've called out the dry powder and stable coins. And like, there's just a bunch of stable coins that are just sitting there. I'm assuming waiting until people know which direction to take. But what are you seeing on the stablecoin dry powder? Yeah, so Glasslund has this metric called stablecoin supply ratio. And all it does is it takes a ratio of the stablecoin market cap to Bitcoin's market cap. And so the way you can kind of think of this is when the metric goes down, there's more stablecoins in relation to Bitcoin's rate.

Starting point is 00:06:45 So seeing this metric really take a dive down in the last two weeks, I think says twofold. First of all, obviously, Bitcoin's market cap has gone down a little bit, but also the fact that there's a lot of stable coins. And I think that kind of illustrates that, you know, there's money sitting on the sidelines, similar to what we were just saying, that that's kind of waiting to see, you know, a directional trend in the markets. It's I've heard from a couple of people that kind of deal with institutional investors that, you know, they're looking to get lower bids filled, you know, perhaps in the 20s. Right. But if they see that confirmation to the upside, you know, if we have a solid break into the upper 40s, you know, then they're then they're more willing to step in, you know, once they see the momentum that that is going back to the upside. But I think for now, people are just kind of playing chicken and you see that. Not only the futures contracts, but also the stable coins. It just seems like people are just waiting it out on the sidelines for now.

Starting point is 00:07:48 Yeah. And you have this chart where there's these like clusters of price distribution and kind of where a lot of volume trades. And I know that you've called out previously between $53,000 and $59,000. There was a ton. And then also previously between $7,000 and $11,000. But it feels like you're seeing a third one form here kind of in this range. So talk a little bit about those price clusters and how people should think about what that really means. Yeah, for sure. So this metric is it's called UTXO realized price distribution.

Starting point is 00:08:23 And it's just this kind of fancy term for you're looking at this this profile. If you were to flip the chart vertically instead of horizontally, you're basically looking at a volume profile of the on-chain volume, not exchange volume, but on-chain. So like you were saying, we had this big kind of distribution zone between 53, 59K. And that was one of the reasons why I was pretty bullish when we were in that zone, because it looked like a really strong zone of support. it um we had 10 10 and a half percent of supply had moved above uh between 53 and 59k but yeah once once we lost that 53k mark i mean it was pretty much straight down from there uh and then we had another kind of big support at 47 dropped from there and then now we've kind of found this um this range and call it you know once again 32 to roughly 40k is what the the on-chain

Starting point is 00:09:23 transaction volume is saying as well so um in this zone we've had about uh 10 10 and a quarter percent of supply uh exchange uh which is yeah when you for anybody that subscribes to the newsletter um and i'm sure that uh we'll throw in the charts in as well for this video but you'll see these three very distinct clusters so you have that one between 53 59k um this one between 32 40k And then you also have one from earlier on in the bull market where, you know, perhaps some wouldn't even consider this the bull market, but between between seven and 11 K, like you were saying. So that's about 19 percent of supply. And that's like a huge support zone there. I don't, I don't see us going that low, but, uh, if we were to lose, you know, just to, you know, kind of stay neutral, uh, if we were to lose the 32 K, um, you know, we kind

Starting point is 00:10:20 of have a little bit of support in like 26, and then you're looking at some perhaps in around 22 and then one last big support at 20 K. So I would, if we were to break down out of this range, um, I would be looking for, for those especially uh 20k i think is uh i'm not saying it necessarily would get that low if we broke that you know broke down but uh that that's a really strong support zone there um with the on-chain volume and then also i know um you know that's a big uh technical support as well where you know obviously that was the previous all-time high so uh that'll be a spot that a lot of people are looking to buy as well got it and then in terms of where the selling's coming from it feels

Starting point is 00:11:01 like it's just all new coins, right? I know you've called out in the analysis, kind of the one to three month old coins and also three to six months. So what's going on there? Yeah. So, you know, because of, you know, the Bitcoin's open ledger, we can track all the different cohorts, ages of the coins. You can see, you know, when coins move and then when coins move out of a wallet, they're considered spent. So just looking at, you know, the different cohorts of coins by age. Like you said, we're seeing a lot of selling between that one to three month and three to six month. So perhaps, you know, these are funds that may be accumulated in, you know, the 10 to 20k band last year, at the end of last year, and then also, you know, in that upper, you know, 50 to 60k

Starting point is 00:11:50 range. And those coins, of course, are selling at a loss. But I think, you know, one thing to takeaway is that it's a lot of the selling is coming from newer market participants rather than people that have been in this market for a long time. And you can see that through this metric called dormancy, which basically just looks at the amount of, it's not necessarily an average of the coins, of the age of the coins is a different metric, but this is looking at something called coin days destroyed. So if you have a coin in a wallet for one day, it has one coin day. And then once it moves, it has one coin day destroyed. Or if it's in a wallet for 10 days and then it moves out of the wallet, it then has 10 coin days destroyed. So this is looking at a

Starting point is 00:12:37 ratio of that to the on-chain volume. And so you can kind of get this clear signal where trending down since, how do you call it, January, it's been younger and younger coin selling, which I think is an important trend to see where, you know, at the tops historically, it's been younger coins selling kind of towards the middle to beginning of the bull market. And then, you know, the older coins are coming in. I'm sorry, the older coins are being sold into strength, you know, towards the end of the bull market. So I think the fact that we're not seeing a lot of the older coins selling, I think it is some signal because these are the people that have been in a market the longest. So I think they're the ones, they're kind of the smart money in the space. If we start to

Starting point is 00:13:33 see these older cohorts, three to five years, five to seven years, 10 years plus, if you start to see those people selling significantly, I think that's something to kind of raise an eyebrow to. Yeah. And then what about realized losses as people sell? Yeah, so realized losses is just, you know, if you bought a coin at a higher price, sell it at a lower price, you've realized the loss. You know, if you bought it at a higher price and you're still holding, then it's unrealized. So, you know, this is just saying people are selling at a loss and they have been since that big capitulation event. And this is trending down, though, which is a good thing. So it looks like, you know, these coins are the weak hands are almost done selling off.

Starting point is 00:14:20 um and you know we're getting close to a bottom out and you know realize losses but very similar um soper which is similar to that instead of looking at the raw number of the losses it's taking a ratio of the profit to loss of the coins throughout the day and we're getting close to broke even breaking even on that um there's this for anybody in the newsletter you'll see this this black line go across kind of the middle of the screen and, and that's kind of the threshold for breaking even, which is one, a ratio of one and we're kind of right on that, right on that line. So that's something I'd be looking, looking to watch as well as,

Starting point is 00:15:01 as you start to see, you know, whoever's going to capitulate sell at a loss has kind of done so. And we're still in this, you know, while we're ranging you, you have, you know, still some of these, some of these coins that, you know, are looking to exit the market are selling at a loss while you're seeing the long-term holders come in and scoop those coins up. So that's kind of like the process that we're in where I know we've been saying this for weeks now, but it still is weak hands selling to strong hands. It's just, you know, a question of how long is that process going to take?

Starting point is 00:15:34 Obviously there's people selling, there's somebody else buying, and it seems like those all long-term holders yeah 100 so you know i put together this chart where you're comparing the long-term holder supply holdings versus the short-term holder supply holdings so glassnode for this uses um 155 day threshold which comes out to five months to determine if an entity is a long-term holder and you're seeing um those entities have been stacking really heavily, while it seems like the shorter-term holders have been selling off pretty significantly. And it's interesting because over the last month, the selling from the short-term holders has offset the buying from the long-term holders. But over the last week, we've actually started to see

Starting point is 00:16:24 the long-term holders are now offsetting the selling from the short-term holders. So it seems like we're flipping back into this accumulation where either A, you know, the long-term holders are buying more or B, the short-term holders are selling less. But you are starting to get that transition from, you know, the short-term holders overpowering the buying of the long-term versus, you know, now we're starting to see long-terms over the last week stacking heavily than the shorter term. And that's something that I think I would like to see going forward. And so that's age. Then if we're going to talk about like the size of the cohorts, you've had this pretty clear downtrend now for like two and a half months. Actually, I'm sorry, like more like three months where we've seen less and less whales coming in on the blockchain. And some of this is, you know, so Glassnode uses a thousand BTC threshold for, you know, calling someone a whale.

Starting point is 00:17:30 And so part of this is possibly just these entities reshuffling their holdings into smaller wallets because you've seen a wall of whales over a thousand BTC has been trending down. There's also been a pretty significant move up in 100 to 1,000 BTC entities. So I think there's definitely some reshuffling of holdings there. But overall, the trend of entities over 1,000 BTC has been trending down while retail continues to trend up. It seems like, you know, retail has really been stacking harder than they almost ever have in the history of Bitcoin. I mean, you know, I have this chart and it shows the supply held by these these smaller entities. And I mean, it's pretty much just like vertical right now. So I think that, you know, it's two things. A, it's it's bullish for Bitcoin adoption because you have whales scaling out while retail is scooping up those coins.

Starting point is 00:18:33 And obviously the coins are getting more widely distributed. So there's that aspect of it where I think it's bullish for adoption. But I think in terms of price, you're going to you're going to need to see a jolt in whales to kind of do the heavy lifting to get us that momentum back to the upside. And, you know, possibly that that's something that we'll see if we have a definitive move to the upside out of this range. We'll have to wait and see. But I would be if we if we have a strong move out of this range and we start to get some momentum back to the upside, I'm going to be watching that number of whales chart closely to see, you know, perhaps some of that money that's waiting to get a position now and trying to get the best position possible. If they get that confirmation, perhaps if they'll step in, but that's something I'm keeping an eye on for sure. Got it. So really to summarize for this week, it's basically we're in this kind of range bound, you know, kind of trading.

Starting point is 00:19:28 there's not tons and tons of volume uh when it comes to futures open interest there's not tons of uh real takeaways in terms of where we're going directionally it kind of feels like uh when we break out it's going to be violent in either direction um and people are just kind of waiting and seeing uh which direction that's going to be but if we do break out to the upside uh you know you'll see people pile in and then also on the downside uh you also see people kind of pile in it's just right here people are a little uncertain about the the short-term future yeah yeah that that's my base case um and i think you know you just need one person to kind of step in and make the move um and then people will follow in either direction i guess but uh you know supposedly

Starting point is 00:20:12 there's uh an announcement i saw a bitcoin conference put out something that jack mallers is uh making a big announcement today around four so maybe that'll be the announcement that pushes this up. We'll see what happens. Absolutely. All right. What, uh, what, what is the one thing you're going to be looking for, uh, over the next week, uh, in terms of, uh, metrics, is there, is there one thing specifically you're looking at, or you're just going to kind of look at it in totality? Yeah, I think, um, you know, this stuff is, is you can't necessarily look at one thing. You kind of have to have, I like to look for confluence across multiple things where, you know, if you have several indicators that are um you know preferably uncorrelated that are all telling

Starting point is 00:20:54 you the same thing and then you're also kind of looking at the technical side of things where i look mostly at the on-chain uh data but i also look at you know obviously some of the some of the technicals and if you have you know your fundamental analysis on-chain and technicals all lining up um kind of saying the same thing you know statistically the odds of that are way higher so i think you know i think you need to look at multiple things but if i were to just kind of pin it on a few um i think the whales is definitely one thing like seeing that that jolt upwards in whales uh also looking at the future's open interest you know if we start to have a little move up and then all of a sudden all all this leverage piles in which is possible um i

Starting point is 00:21:41 don't think that would be super bullish short term um because all of a sudden you you have this big incentive for whales to flush that leverage out and and uh scoop up some cheaper coins if they can liquidate all the all that leverage so that's something uh to look at and then i'm just you know still following this trend with the short to long-term holders that's kind of it's interesting because um in 2017 obviously we have a very small sample size with with these cycles but in 2017 there's this kind of clear dichotomy where the long-term holders were selling off into strength throughout the whole cycle. The short-term holders were buying the whole way up, basically buying the smart money's bags the whole way up. But in 2013, you saw that. And then when we had two double

Starting point is 00:22:29 pumps, so we had a big parabolic advance, drawdown, I think peak to trough was like 80% or something like that in a relatively short amount of time, I think a few months. And then we had the second parabolic advance. Between those, you saw something similar to what we're seeing now where the uh the shorter term holders are selling off in the middle of the cycle and then the long-term holders are coming in and stepping in in the cycle i think this is something we touched on last week but uh that's a trend that i'm i'm interested in in seeing how that continues to play out for uh moving forward because from that from that aspect um this is definitely uh not looking like like 2017 absolutely where can we send people to find you on the

Starting point is 00:23:11 internet uh or subscribe to uh the newsletter that you're writing yeah so i'm on twitter at w clementi um iii and then i do a newsletter every week um the friday one goes out with pop obviously and then monday i do it on my channel my channel is btc by wc3.substack.com you can subscribe there and i'm always putting stuff out on twitter i just you know whenever I see something interesting, I'll throw it out there. So if you want to follow me on there and, you know, I answer, I'm super active on Twitter. So if you have any questions or, you know, if you want to say, Hey, well,

Starting point is 00:23:48 this is something really cool that I saw and I love to chat with anybody about the market. So feel free to reach out. I think you're doing a fantastic job. I think everyone else is really enjoying it. So keep up the great work and we'll do it again next Saturday. Appreciate it, Paul. Have fun in Miami, man.

The Pomp Podcast - #574 Will Bitcoin Break Out Of The Accumulation Phase?! w/ Will Clemente

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