The Pomp Podcast - #586 Bitcoin Is WILDLY Oversold! 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 by clicking on the link in the description. In this conversation, we discuss a variety of different on-chain analytics, what's been going on with the price, who's buying, who's selling, and what Will thinks the on-chain metrics are telling us about the short-term to medium-term future.

Starting point is 00:00:39 I really enjoyed this conversation with Will, as I do with all of them, and I hope you enjoy this one as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Revolut. Let's go back to the basics for a second. I've partnered with Revolut, a finance app in the US and the UK that say they're the simplest way to access crypto. They're putting their money where their mouth is too.

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Starting point is 00:03:19 on Amber app, you can earn interest on your own terms and do more with your crypto. Go into the description, click on the link and let's see what you think of them. Go check out Amber app today from the Amber Group. Go click on the link in the description and let me know what you think. All right, let's get back into this episode with Will. I hope you enjoy this one. 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.

Starting point is 00:03:57 This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Will here with me. He is on a little trip. So apologies for not getting this out on Saturday. But Will, what's going on, man? Hey, Pom.

Starting point is 00:04:17 Not too much. I'm just taking it easy here in Hawaii. Getting a little burnt. Trying to get a little tan. But just taking it easy, man. How about you? Absolutely. The price of Bitcoin is taking it a little easy as well.

Starting point is 00:04:30 Let's jump right into this. We can kind of just start out with, it seems like we've basically continued through this reaccumulation phase, kind of going sideways, and we're really oscillating between like, I don't know, $32,000, $34,000, and $40,000. Talk a little bit about the price to get us started. Yeah, so, you know, we've been in this range between $32,000, call it, to $40,000 for like well over a month now um and so we we got that retest of range highs um up towards you know we almost broke through like 41 and a half k or something like that and then um we moved back

Starting point is 00:05:08 down and now we just retested range lows this morning so um still sitting in that range um obviously you know still until we break out of that range i think you know it's still kind of like a crab market where people are hesitant to uh take a directional move um i still think breaking above the 200-day moving average is still really crucial for Bitcoin, which sits right around 42K. And I think to the downside, a big level is right around that 30K mark as well. So aside from price, I think in the short term, the biggest risks to Bitcoin are obviously the legacy system. If something happens there, then whatever on-chain data is saying or technical analysis is going to be thrown out the window um you know very similar to march of last

Starting point is 00:05:57 year where you know on chain looked somewhat bullish and then you were heading into the halving and then you had a big legacy financial crash and all that stuff didn't matter um and then also i think the what's going on with china um i think they're actually uh cracking down on the miners i haven't seen anything i just checked like 50 minutes before we got on here uh to see if there was any selling from uh from the miners granted you know glass node might be missing some of these wallets um and then they also can't account for you know possibly like executives at these uh mining companies that you know are facing uncertainty or you know they're they're for the in the short term they're not going to have any revenue so um i think that that plays

Starting point is 00:06:40 uh in the short term um as some selling pressure and i think you know there's not a whole lot of buys here already. And so seeing that, that might be in part due to why we've seen this drop in the last couple of days. But to be honest, I haven't seen anything for sure in the data I'm looking at, but there's always a chance that some of that isn't being seen. Absolutely. And then you started off the letter that we published on Friday with NUPL. Maybe describe what that exactly is and what you're seeing in that metric? Yeah. So NEPL, it's called net unrealized profit loss. So the way it's calculated is you're basically subtracting the market cap from the realized cap, or I'm sorry, the realized cap from the market cap.

Starting point is 00:07:27 And then you're dividing that by market cap. And so what you can kind of get are these, I guess you could call it sentiment zones for like coddling behavior where when you're in the top of a bull market um everyone thinks bitcoin is going to the moon and you know it's hyper bitcoinization so people stop selling um and so you get these uh what's labeled in in nuple is is these euphoria greed zones um and then when when we're in a bear market people are you know obviously the sentiment is terrible so everyone's selling at that you know the second there's a rally. And so conversely, you have these hope and fear or capitulation zones. And so in the newsletter, I'd kind of identified this line. It's between 0.6 and 0.8 in the ratio. But you see,

Starting point is 00:08:21 it's been this kind of inflection point where Nupal has bounced off of that in between the 2013 double pumps but then also it served as you know if once it breaks that you see a lot more downside in 2018 once once it broke through that level then it was pretty much straight down from there in terms of in terms of this metric so we're really kind of just sitting on that here so you know this will be something over the next couple weeks you'll get a more you know distinct you know idea of where it's going but for now yeah we're sitting at this kind of inflection point in that metric um and and that's something that that's you know supported by a couple other things um that that we looked at in the newsletter that we're kind of sitting at this inflection point

Starting point is 00:09:10 another one is soper which we've talked about many many times uh but we've never talked about long-term soper which is the same thing as just looking at the longer term kind of hollowing behavior this is kind of like broader cyclical behavior versus looking at the kind of short-term SOPR to gauge you know very short-term corrections and once again we're kind of sitting on this inflection point where either SOPR has bounced off this historically for example in 2013 or in late 2017 or I'm sorry in in late 2016 but also has served as a resistance for example you know at the end of the 2013 bull market, the end of the 2018, and then as well in 2019, when you kind of had that rally that was driven by the plus token policy.

Starting point is 00:09:57 When you think about MVRV, just the simple ratio of market cap to realized cap, what's that telling us? Yeah, so the realized cap is something that I think we've talked about a few times. It's basically the market capitalization, but it's instead based off of when the coins were last moved. This is something that was kind of conceptualized by Pierre Richard and then was really created by Nick Carter. But the NVRV ratio was created by Murad and David Puel. And so it's a very simple ratio of market cap to realized cap. And so, you know, when I ran a 21-day moving average just to kind of smooth it out. And once again, we're kind of sitting at this inflection point where, you know, this is served as support in early 2013, between the 2013 double pumps, late 2016, and then also towards, you know, when we had that drop in late September last year, right before the bull market really kicked off.

Starting point is 00:10:58 I'm sure some people remember that correction because for me, that was like my first big correction because I got into Bitcoin in late August. So I remember that one, that one pretty distinctly. But it's also served as resistance, you know, for example, after 2013, after 2018, and then also right before the March crash, which was interesting. But, you know, this is another thing where we're kind of just sitting at this inflection point here. and over the next couple weeks you'll get you'll get a better uh you'll get a better uh i guess gauge of where that's going so i think you know kind of the key takeaway between these metrics is that um we we are sitting at you know this inflection point um and over the next couple weeks i think are very crucial um in terms of in terms of kind of the directionality of of where

Starting point is 00:11:44 we're headed um granted you know i i what i'm seeing in the in the short to midterm um is is looking bullish, uh, slightly, but, uh, you know, this is something that we'll just have to watch over the next couple of weeks to kind of gauge the broader trend. And when you're talking about an inflection point, just for those that are listening or watching, uh, what you're really talking about is we're kind of in this gray zone. We don't know if there's gonna be a breakout to the upside or a breakout to the downside, uh, but definitely kind of going sideways here, there's going to be a breakout in either direction. The next couple of weeks is when we'll kind of find that, uh, which leads us to, uh, yeah, there's people selling, uh, whether

Starting point is 00:12:20 it's because of uncertainty or realizing losses but they seem to be all short-term holders talk a little bit about that yeah so i think this is something we've talked about like the last you know two weeks and this is i guess you know a process that it's it's going to take longer to kind of play out than you would think um you know possibly over it might even take another couple weeks from here um but what we're really seeing is that all the coins that are being sold are from very young wallets. So Glassnode can separate these using heuristics into the wallets or entities

Starting point is 00:12:54 that are short-term or long-term. Once they cross a certain threshold, they're labeled as long-term, which is I think 155 days. But a lot of the selling has come from those short-term holders. And then also another way to look at this, and this is what I threw in the newsletter,

Starting point is 00:13:09 is dormancy, which has been trending down for months now. But I think the key thing to look at here is that the short-term holders, and this is a process that started last week, have now been offset by the long-term holders buying, which I think is key to look at. The short-term holders had been offsetting the selling from the long-term over the last, call it three, four weeks ago, but now that's starting to rotate back into the favor of long-term holders. I think they're offsetting them by uh 5337 is what i put when we put the newsletter out it might have changed because it's been a day later but uh that so you're starting to see that that rotation back

Starting point is 00:13:50 into into long term which is of course a good thing but you know one one thing uh conversely to kind of you know the bearish narrative is that we haven't seen any new whales i think seeing seeing new whales is something that um we're gonna we're gonna kind of need to uh keep keep a $700 billion asset afloat moving up. So we've really seen predominantly longer term market, I mean, experienced market participants doing a lot of the buying, but we haven't seen any new large entities coming on chain that would necessarily represent perhaps institutional buying or something like that. So that's something that I'm keeping a close eye on because I think Bitcoin is beyond the point where retail can reasonably sustain this asset

Starting point is 00:14:38 granting on like people like to throw out those statistics of like, if everybody in the world bought $10 at Bitcoin, it would go up. But I just don't think that's realistic. So yeah, I, at this point, I think you're going to, you're going to need at least an uptick in the short term of those new whales coming on chain to really start to see a dramatic price reversal, which that's been trending down for a month or two. So perhaps, you know, that has to do with institutional buying coming in late summer i know like night gig is doing some

Starting point is 00:15:06 stuff there so well you know that's something once again we'll have to just keep an eye on but that is still trending down we still haven't seen a big substantial uptick in new whales coming on chain for sure one of the ways that uh you've talked about this in the past is kind of exchange flows uh and i know that there was a change there over the past week from the last few weeks what was that change yeah so you know when we had that big sell-off we had a lot of coins that were just kind puked out right um and one of the ways to to note that was um obviously the the price drop but i've seen coins you know swaps of coins coming on on the exchanges uh but but that's kind of reversed over the last you know week or so um i think exchanges when i wrote this were down about

Starting point is 00:15:48 you know a little over 15 000 btc so the metric that i threw in there is called exchange net position change and so that is this 30-day change of the exchange balance from 30 days ago to now and that had you know that had been going way up as we sold off but it has been trending down over the last two three weeks but now finally it moved into the red zone so what that's something that's showing negative exchange flows which of course is showing accumulation because people are moving coins off of exchanges, perhaps, you know, either into wallets or, you know, some kind of custody solution probably for institutional buyers. But that has flipped into what resembles accumulation. Got it. And then this also, I think, leads into kind of this illiquid supply change, right? And

Starting point is 00:16:42 so talk a little bit about that. Yeah, so yeah, that's something we threw in last week. And we had been kind of tracking the trend of this had moved down into supply had been moving into, you know, becoming highly liquid throughout the sell-off, but then had slowly been trending back into a liquid. So this is looking at, you know, kind of a, I guess you could say strong long-term holder, not long-term holders, strong hands, right? And so over the last couple of weeks, it's been trending back up into the liquid zone, which is what you'll see the green bar in the newsletter, or if we throw the pictures in here. But you had this big uptick in green. And since I wrote that the last three days, you've had, you know, substantially higher and higher upticks in

Starting point is 00:17:29 that. So that's another thing that that's resembling accumulation as well. Got it. And then long term holder net position change. That seems to continue to be going up as we've seen over the last few weeks. Yeah, that's, that's just really another way to look at what we have been talking about that the long-term holders are adding um which it's it's it could be considered bullish or some people can view this as as uh bears to be honest because you you see generally that long-term holders scale out um in in the bear in the bull market but then they buy heavily in the bear market um but at the same time you also had this this um dynamic that we're seeing where long-term holders are stepping in and setting the floor. That also took place between

Starting point is 00:18:17 the 2013 double pumps and then also in late 2016 as well. So it's not necessarily, some people are saying this is a bearish thing that long-term holders are starting to accumulate. But I don't see it that way because they also stepped in towards the middle of the last two bull markets and kind of set the floor for the continuation back upwards. So, yeah, this is something that I'm tracking. Well, we had mentioned that the long-term holders are now offsetting the selling from the short-term. I think, you know, that's a good trend to follow.

Starting point is 00:18:51 But, you know, I think the key takeaway here is that Bitcoin is, you know, deeply undervalued in the eyes of, you know, experienced market participants. And they're starting to, you know, buy discounted BTC. So I think, you know, when you're when you're in an asset like this, you should watch the people that have been in for a long time. You know what they're doing, how they're behaving. And this is showing in aggregate that the people that have been in the market the longest are buying right now very heavily. And the people that have gotten into the market recently, they're selling. So I think, you know, that's a that's an interesting thing to note. But, you know, this is, once again, like this accumulation process may take several weeks to play out.

Starting point is 00:19:34 You know, it may be something that we will continue through this reaccumulation phase, you know, through perhaps mid-July. I don't know if it'll take that long, but it's not out of the cards. I do still stand on the fact that, you know, we're kind of in this latter half of the reaccumulation phase where now we're starting to see things flip into, you know, it's not like bullish. We're going to a hundred K tomorrow, but it's starting to flip into what looks like strong accumulation and it's still trending in that direction. Haven't seen anything that is showing any, any stop in that, in that change where, you know, we, we saw the opposite of that trend into, you know, the, the bottom of that correction, but now, you know, the last couple of weeks and especially in the last week, we're starting to see what looks like, you know,

Starting point is 00:20:17 strong accumulation and, and it'll be something to keep an eye on into next week. But I, you know, I think perhaps I have no idea about the short term price action in the next week or so. But I think, you know, over the over the next couple of weeks, you are going to start to see, you know, more more slightly bullish price action because you're starting to see, you know, really strong accumulation here. And that's that's just trending upwards. Absolutely. The last thing I want to talk about is the NVT signal, which Willy Woo, I think, famously created. Just explain what this is and then kind of what it's showing right now. Yeah, so NVT is like a very simple ratio of the market cap to the on-chain transactional volume. And so Willie Wu, to be honest, I'm not sure exactly what he did here in this new chart that he put out,

Starting point is 00:21:05 but he created some kind of oscillator. You have to ask Willie about that. But from this oscillator that he created, we're in the deepest correction since, It looks like since after the 2011 pump, the bull market, and then also after the 2017 bull market. So, you know, in on-chain terms, Bitcoin is deeply oversold. Anybody who uses like an RSI or something like that, it's very similar. The oscillator is, you know, beneath what you would call, you know, the range that it's been trading in. So I think, you know, key takeaways is, you know, in the short term, I don't know if we'll have another like down.

Starting point is 00:21:46 to perhaps, you know, retest that 30k range. But, you know, Bitcoin is undersold and, I mean, oversold in terms of, you know, on-chain, especially that MDT. But you're starting to see long-term holders step in and, you know, take advantage of that discounted BTC. And then also, we're starting to see, once again, you know, following up on last week, continued accumulation. And I think, you know, at this point, it may just, you know, be another couple of weeks, but, you know, I still stand strong on the fact that we're not in a bear market. You know, one other thing to note that also kind of resembles that we're in a bull market and not a bear market is the new users coming on chain. So, you know, after the 2017 blow off top, you saw new users

Starting point is 00:22:29 pretty much dropped off a cliff. But what we're seeing now is a big spike in new users, which are perhaps, you know, attracted by, you know, cheaper prices. But I would like to see perhaps, like a geographical breakdown of maybe how many of those new users are coming from Latin America. I think that would be interesting. But nonetheless, you are seeing this big spike in new users coming on chain. So that's another thing that resembles that we aren't in a bear market. Absolutely. Yeah. I think the big takeaways here is everything on chain shows that the long-term holders are buying from short-term holders. It's heavily oversold. It seems to going sideways in this gray area where it's either going to break up or down, probably with some

Starting point is 00:23:15 level of violence of action. And the next couple of weeks are very crucial, but we do see still a lot of the on-chain metrics pointing to something that looks highly, highly bullish over the medium to long term. So this is great work. Anything else you want to leave everyone with? Yeah. So I just wanted to just touch on, just kind of reverberate, this stuff isn't going mean that price is going to go up in the next couple days perhaps you know this is the on-chain necessarily um and this is something i see on twitter a lot like people commenting that uh not just to me like willie woo or these other guys you know checkmate um this stuff is perhaps going to take longer than you would expect to play out but the point is is that you know in

Starting point is 00:23:56 in my eyes at least i don't want to speak for them i know willie agrees with me on this too but like we we we're not resembling um anything in a bear market in terms of on-chain um so So, you know, this stuff is perhaps going to take weeks to play out, but it's not, it doesn't mean, you know, okay, we're starting to resemble, you know, slight accumulation on chain, you know, prices are going to go up tomorrow. This is stuff, you know, you just have to be patient. It's going to take a few weeks in my opinion. But other than that, you know, I'm doing the newsletter with Pomp for everybody listening.

Starting point is 00:24:30 And then, you know, I have my own channel that we're going to start to rotate the Friday newsletter too, as well, which goes out on a BTC, uh, by WC3.substack.com. Uh, and I put out, you know, a weekly update on there as well with, with pomp, but that that'll be moved to my newsletter eventually as well. So if you're interested in this stuff, it's free. So make sure you sub to that, but, um, otherwise, man, I'm looking forward to, uh, keeping track of this stuff for you and I'll touch your base next week. Absolutely. Thanks so much for doing this. Well, thanks, Bob.

The Pomp Podcast - #586 Bitcoin Is WILDLY Oversold! w/ Will Clemente

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