The Pomp Podcast - #603: Bitcoin Supercycle or the Last Bitcoin Cycle? With Willy Woo and Will Clemente

Episode Date: July 10, 2021

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. We are joined this week by Willy Woo, the OG on-chain analyst. Subscribe to Will’s new email newsletter here: https://btcbywc3.substack.com/ Subscribe to Willy Woo’s new email newsletter here: https://willywoo.substack.com/ In this conversation, we discuss the history of on-chain analytics, what happened over the last few months, current market structure outlook, and questions from Twitter.  ======================= Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy bitcoin, ether, and over 30 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.  ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp =======================

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's quickly become one of my favorite writers on all things Bitcoin, including deep dives on various on-chain analytics. We're also joined this week by Willie Wu, the OG on-chain analyst. You can subscribe to both Will or Willie Wu's new email by clicking on the links in the description. In this conversation, We discuss the history of on-chain analytics, what happened over the last few months, the current market structure outlook, and we take a couple of questions from Twitter. I hope you really enjoy this conversation with Will and Willie. I did, and I think you'll learn a lot from it.

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lmaxdigital.com slash pomp. All right, let's get into this episode with Will and Willie. I hope you guys 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. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Will and Willie here with me. There's a lot of Ws in both of your names. I'm super excited about this. I feel like Willie is the OG of on-chain metrics

and Will is fast becoming one of the crucial pieces of information in the market on on-chain metrics as well. Willie, thanks so much for joining us today. Yeah, thanks for having me, Pump. Absolutely. Let's just start with maybe you can introduce yourself and give us a little bit of background in terms of why you got interested into on-chain metrics and kind of maybe what you look at on a day-to-day basis when you wake up

as a signal for what you think is kind of the most important metrics. Yeah, okay. I got into Bitcoin in 2013, kind of coming from a tech background, you know, startups, always into tech and data. And that's what appealed to me in Bitcoin, more the tech side of things. And as I sort of delved past all the tech, you know, we had this blockchain and I started looking into what was, you know, data in there, trying to draw conclusions from it. And that ended up becoming a field in its own right. You know, I started in on-chain analysis in 2016, kind of put out some of the first on-chain indicators like NVT. sort of 2016 early 2017 that's how new this whole field is and now something like four or five six

companies dedicated providing this kind of data to investors now so when we're looking on chain it's really a look into the fundamentals as the fundamentals of what investors are doing with their capital you can see them come in you can see their movements you can see the age of coins you can see you know new people coming in to buy or new people selling and you can draw kind of conclusions um like if you see a whole lot of new people um selling and into a dip and a bull season you'll you kind of know that those are the like the weak hands being shaken out you know if you see a whole lot of old hands selling all of a sudden then that's a little bit more serious because they're more experienced so that kind of gives you an idea of what we're looking at

on chain it's looking at these fundamental movements in capital from real people less the technical analysis which most traders use which is essentially just tracking the price and volume movements on exchanges and trying to draw all sort of you know metrics around that ultimately the fundamentals prevail over the long term short term the technical analysis is more I'd say timely it can you can tie markets in a shorter time frame but I've seen many many times in the Bitcoin market where the fundamentals say one thing and the technical say another and it's I've never seen the fundamentals fail actually so you know when I wake up and I check the markets I usually check

flows going in and out of the exchanges give me idea of the buying power or the selling power of um in real investors rather than just the traders um i also look at um you know one of these metrics that glass node do is um what they call liquid supply and that's really a qualitative view of the market where the coins are moving between strong holders or weak holders i use that a lot um just to give me an idea of you know who's buying or selling and those two combined give me a very good readout and then there's about i don't know 20 other indicators i might look at depending on the time on the structure of the market um glass node have about 300 to 400 charts um so ultimately usually i all of them get used um throughout a macro cycle it's

just different times like obviously right now with china um banning their miners you know looking at hash rate on the network the the speed of the blocks processing the miners wallets that sort of comes into play um so it's just kind of you know it's an ecg i think it's like a readout of this entire animal called bitcoin and you can look at it in 200 different dimensions and on-chain analysis gives you that willie i want to follow up with this thread you put out maybe you could just kind of break this down for listeners um you know the one you put out yesterday you're looking at uh the the supply shock ratio liquid supply ratio and then also exchange flows um you know i guess we could just kind of get into real quick what what exactly are those uh you know

metrics showing and and just kind of getting into this whole uh you know like re-accumulation phase that that we've been kind of describing yeah okay so i i measure a supply shock in um two ways a quantitative view and a qualitative view the quantitative view is really just the speculative inventory that's sitting on exchanges you know so you can draw a pretty easy conclusion that the supply sitting on exchanges are the coins that are able to be bought admittedly some of them are long-term holders particularly on coinbase where noobs sort of and particularly retail store long-term their coins but mostly the coins on exchanges are speculative coins and um what you can see is um as coins um deplete off that inventory there's

in effect a supply shock so um you know that's been the story of this last 12 months um ever since COVID hit the economy we've been in the supply shock setup where the inventory on spot exchanges are slowly depleting and that means that's less and less coins able to be bought that puts a bullish price pressure on and in this latest pullback where we pull back from the 50 60 000 range into the 30s you could also see a massive flow back into the exchanges so a lot of supply being put back onto the market so that's reverse supply shock but what we're seeing very recently over this kind of sideways band is actually those coins moving off again so we're back in this sort of supply shock trend upwards and the other view of it is actually it's the

indicator you created well it's um it's a ratio of um like glass nodes um measure like i was mentioning of liquid supply it's each i call it rick astley you know you've got two types of people in the market there's um the the speculative guys that um you can look on their wallets and you can look at their history and see that a lot of coins move in and out of their wallets they they are in the game to trade um more than most and then the other side is the the investor that um stacks their coins and not a lot leaves from those wallets and i call those guys the rick astley um rick astley's of this world they're not going to really let go of their coins um so when you draw a ratio between the two is which what you did actually um you can create um

the similar thing but it's based on the quality like as more coins flow into the strong hands the rick astley's versus the speculative hands you'll see the same sort of um supply shock you know the speculative hands that are willing to sell their coins whereas the rick astley's aren't they're holding and they're not going to let their coins go um so as the strong hands gain more and more of those coins there becomes a supply shock and the coins held by speculative hands is reducing so i look at that you know and in both cases whether it's the inventory on spot exchanges or the qualitative view of coins held by the strong hands they are really moving towards long-term holders moving off exchanges and we're you know if you were to look at the qualitative

of view um we're really um making near highs again we're back in the zones where bitcoin was trading 55 60 000 um and that's continuing to climb so it's a very interesting time in the market right now where the price is divergent from on-chain um the price action and technical view of traders are they're selling down there's a lot of shorts in the market and it looks very kind of like a bearish grind meanwhile the on-chain picture shows a lot of accumulation like very ridiculously strong accumulation that is not reflected in the price action and we last saw this in the months before kind of the october where um price would have been ranging sideways it pumped up to like what was it um eleven thousand twelve thousand people got really bullish and then it

dumped um down to ten thousand and so the the trajectory was downwards and sideways and all through that time um the supply shock was was um steeply rising steeply rising a lot of coins moving off exchanges a lot of rick astley controlling more and more of the coins um and that eventually um exploded into a complete um bullish run um from november onwards um and if you if i recall um you know that the the narrative back then was we just had this covid crash back in you know the april may april zone and um bitcoin was very very correlated to stocks so um and and gold was starting to take off and people were saying bitcoins have failed safe haven it's highly correlated to the stocks it didn't hold over this um this sort of bearish

crash we had um but the actual on-chain picture was completely different it was at that point long-term investors were stacking they were stacking hard um supply shots started climbing straight up from that point um and actually it took a number of months before the market kind of priced that in and there was a realization that the coins were running dry um and you know it took a while for the kind of speculative um volumes and in the in the market to kind of um get squeezed you know i kind of picture uh this the futures and derivatives exchanges having a huge dominance over the short-term price and at that point the price was swinging wildly above what i would have considered a you know there's a particular floor that investors will

support and was trading above that but that floor started climbing higher and higher and around that October price kind of met that floor estimate what long-term investors were supporting and it bounced and that was when the market realized that there was supply shock and we ran up to $40,000, then $50,000, then $60,000. So right now the structure is similar. There's a lot of bearish people in the market. the price action reflects bearishness and underlying it there's like this invisible

you know accumulation from long-term investors that I haven't seen anything like this since October last year. It's interesting like I think the key point there is kind of the fact that there's this huge divergence and like I've been looking at some of these charts lately and I've been like am I crazy like because you know this has been going on for so long now and price keeps diverging from from the fundamentals um but it is kind of wild like you said um looking at that other times i mean at least in the last year or two there there hasn't been a uh a divergence this large since since you know like you mentioned september so just waiting for that that information to kind of get priced in um but and you know in the meantime it's like this thing is just growing

and growing and growing looking at that big uptick uh you know in that liquid supply ratio this week was pretty wild and then also seeing um and i guess you could touch on this if you want um you know the uptick in whales where that's something i had been watching for a while um it was was the number of new whales which have been trending down but you had actually pointed out to me that yeah the number of whales were trending down but their supply that they were holding was actually moving up um since that big capitulation event so it's almost like you know supply was getting concentrated into older whales but then this week um when we had that big uptick i think it was like 65 000 coins uh accumulated by by whale uh entities in one day at the same

time you had an uptick in new whales so i think that was interesting to see maybe you know finally getting some some new large buyers where it had seemed like it was kind of um for the most part kind of like older whales buy yeah like the whole rundown um like a lot of the coins that were moved between wallets between entity wallets different participants um they're very young coins you know they came in um you know like in the three to six months band where they bought in below 30 000 even 10 000 i think they were very much you know this was also a time that whales were selling down and And I think that that was reflective of this kind of new thing we have in 2021 where you've got a lot of hedge funds now in the game

and high net worth individuals. And we know these guys came in around the start of this year. And, I mean, it's interesting because usually in a bull run, it's usually the new guys that come in, they get shaken out. but they're usually the um you know what would you say like the new hands the noobs the noobs get shaken out and the the strong hands and they'll they'll the old guys they know exactly what's happening in bull run they snap up those those dips um or is this time we've had like um you know hedge funds which are you know supposedly savvy i mean to be savvy um that's it's heavy

in traditional finance um maybe they're not so uh savvy in um bitcoin um they um took their profits they took a lot of their profits off the table um and so you ended up having whales these huge whales dumping dumping in a bull run um onto effectively much smaller guys um medium-sized people in retail who are you know they're stacking hard they're buying up these coins um so the dynamics kind on and i flipped it's a very weird cycle this one um and it's interesting to see that blip now um yeah the the the it's more so the the coins under control and i kind of wonder if you know what's your take on i'm i'm wondering if there's yet unannounced news you know maybe you know like we know el salvador is you know in for what 150 million in the trust fund and they've

got about 135 million that they're going to give out to their citizens that's a fair amount of buying pressure in the sideways band but i kind of wonder if there's others you know there's like eight latin american countries now very kind of bullish on bitcoin being a big thing for their economy at least they're making noises of it i do wonder if we've got some unannounced news that we can see on chain but you know, we don't know what exactly that is right now.

Willie, one of the things that's really interesting to me about all of this is as we see folks come into the market, I think most people who pay attention to this stuff have wrapped their heads around, OK, strong hands are buying and people who have been around for a long time kind of understand cycles and look for points to accumulate. But one of the things that has changed, let's say in maybe the last 12 months or so, is We now have corporations, financial institutions, and even nation states that are starting to actually buy Bitcoin and hold it. Do you have any insight or any way to kind of think through it from a framework standpoint as to maybe the quality of these long-term holders or a difference between, let's say, an individual who's been a long-term holder, been around for a while versus an institution, a nation state, a corporation, et cetera? um well like definitely the quality completely changes um you you kind of tend to have

much less signal coming from these kind of guys because they they're very measured moves like if you look at michael saylor's micro strategy they're buying um kind of in bulk in um separate rounds he's actually you know announcing it before i guess for regulatory reasons so it kind of gets front run a bit but once those coins get mobbed up um that's just a whole bunch of supply locked away um and you know there's not a lot of signal coming from his wallet right it's just those coins are aging um and so it's you know like in the old days of like 2016 and before that you know the on-chain had a lot of the dominance and it was just to see the participants and you could see all the transactions on chain and um you kind of get this

um you know it's it's a lot more um predictive when you've got you know a million people individually acting rather than like five all right and and so i think that's that's a lot of signal being removed um and i i don't think on chain necessarily is useful for that i think it's much more useful actually picking up the phone and talking to these guys in the in the industry because uh you know although these coins are held by um a lot of um like you know shareholders i guess split owners within you know a corporation or even a nation state there's a lot of vested interest in the coins the decision power is very very centralized so um in that regard it starts to look a little bit like a small altcoin their holdings it's like these people have very

concentrated power to just move their coins and it has a huge impact you know even like things like the grayscale bitcoin trust that's that's really that's you know that holds three and a half percent of the coins um and you can see the impact of even the small um you know way well at least to say the way it's structured um with the lockups and and the design of that that instrument um it has an impact on the market a significant impact and so um yeah like these entities that are very concentrated um obviously they that they they kind of add a shock to the market if they do anything so um you know i don't know if it's an on-chain thing we look at um it's it's likely you know other data in these conversations willie one thing you'd kind of touched on i just wanted to

uh you know kind of circle back to i think a lot of the capital that you know people kind of need to keep this in mind a lot of the capital that flew in or was flown into uh the market you know towards call it you know late last year you know uh november december was through grayscale for you know people trying to do the arbitrage trade and then also um you know the cash and carry trade the you know the difference between the the spot in the future long spot short in the future and just kind of capturing that that basis um you know i think a lot of and i think you pointed this i don't remember exactly who pointed this out but part of that down draw in whales kind of coincided with um the spread between the futures and spot dropping off so i i suspect a lot of

those whale entities that we saw come in um you know kind of at the beginning of the bull run because i remember that was a big narrative like uh oh you know there's this huge uptick in whales you know it was like went vertical after we broke all-time highs um you know i suspect a lot of those whales weren't actually in bitcoin for the asset itself and we're just kind of seeing this market neutral trade that they could just you know take but they had to they had to own the underlying yeah i'm not i'm not sure how much of that impact was from the market neutral participants to be honest because like we saw the whales started to sell down um we saw the whales started to sell down um quite early i think it was um around march they started to sell down

um yet like the yields that you were getting in the cash and carry trade was climbing and climbing it was it was getting very very lucrative um the yields only dropped off after we kind of got down to the 40 and 30 000 mark and people and people were interested in shorting and market went into abacudation um the you know at that point you it made sense unwind out of your um position right and because you're not doing yield by holding your bitcoin and shorting it anymore it's actually costing you money and so we did see um a little whale um holdings drop at that point and i think that was responsible for that cash in carry um i i kind of do think that this was a speculative whales you know like we we know that rougher bought around 10 000 and they sold a bit um in

the what was it the was it in the um 30s something like that and then they sold the remainder in the 50s yeah like um they they oh they sold no they sold that's right they sold some in the elon musk pump but then they sold the remainder um and saying that oh i think they cited that the kids weren't going to be playing Spectre games anymore because COVID was coming to an end or something like that. And then I know the New Zealand, one of the retirement funds in New Zealand,

KiwiSaver, they also bought in the 10,000 and they exited in the 50,000 to 60,000 mark. So there's a couple of non-funds that I know of, well, that's well publicized. And so we do know that there were funds behaving in this way.

and if that's the tip of the iceberg, there's certainly a lot more whales than funds being announced that they've bought Bitcoins. So there's probably a lot of this action happening. You know, fund managers are highly connected. They might be copy trading more or less. So, yeah, I think we did get a bit of Southside and you see that reflected in the GBTC inventory not climbing anymore.

So, Willie, one of the things that always fascinates me about the on-chain metrics is kind of this idea of like the on-chain metrics can't lie, right? The data is the data. How you interpret it could be different for different people, but it's this real-time transparent view into what's happening in a part of the market. How do you think about the on-chain metrics being kind of more reactive or more of like a lagging indicator for things? So sentiment changes, then the on-chain metrics change versus the on-chain metrics are really driving maybe sentiment or other types of activities in the market.

Because it feels like there's a relationship where, you know, if you kind of zoom out and look historically, you can definitely tell, okay, at some point in the market, we saw a bunch of the metrics change and around the same time, sentiment might have changed. But what do you think about the relationship between those two things? Yeah, it's a good question. I mean, there's so many different metrics you can look at. And I find some more predictive than others, and others certainly lagging. And so, you know, it's that constant search of finding the leading indicators.

And, yeah, I think, you know, on-chains really, it's, you know, there's short, medium, and long-term on-chain indicators. And some of the highest value you can get as an investor is the longer-term stuff. because you want to know when is a good time to enter and when you know it's probably highly risked and worth taking some money off the table and so the macro long-term indicators of on-chain is very useful and whether or not you call that predictive you might just say look things are

getting dicey here because our on-chain models are saying that this is where the fundamentals are and this is where the price is and when you do the ratio between the two things are very highly speculative in a you know almost mania phase and and that kind of stuff is interesting it doesn't say the price is going to crash you go even higher but it can tell you your risk you're carrying is high and it might be worth de-risking a bit and so that's that's kind of the more macro side that's super useful and then you can kind of get into the shorter time frames like demand and supply that's happening over the week to week and um that stuff it's still pretty reliable but it's um you know it's not going to be um it's not going to be perfect because it's based on

interpretation it's it's based on um these are markets anything can happen like at one point i remember i'm saying this thing is tentatively recovering i think i'm bullish and then but the key thing was essentially recovering and then elon musk tweets about tesla not accepting bitcoin and validating um this this fud on bitcoin you know to the mainstream who aren't very clued on bitcoin they're just validating this whole rhetoric that it's destroying the planet with fossil fuels and and that totally um started this whole bearish run and there's no way you can predict that right on chain doesn't predict these market moves that are outside you know That basically means the on-chain investors that we're seeing

got sideswiped by some random event in the market. It doesn't mean it was wrong in saying that investors are buying and they're bullish. It just means that we didn't pick this unpredictable event. And having said that, on the short term, when I say short term, maybe in the three weeks out, I do a letter and there's about 22 forecasts out now. And the backtrace is high 70s or 80% reliable.

So if you're a trader and you're trading a technical signal, typically you're doing really well. You're in the 55, 60% accurate in your analysis. So on-chain currently, even the short time frame stuff can be predictive if you're looking at the right stuff. Got it. And before we let you go, maybe talk a little bit just about where we are today

from a market structure standpoint kind of what are you looking for moving forward so are there specific uh milestones are there specific things happening with the on-chain data that you'll say you know hey this is going to be a big moment uh we don't know when it'll happen but i'm looking for it um or is it more so you just wait till the on-chain metrics develop and then analyze what uh what kind of happens uh in real time yeah right now the big story is like when does this um accumulation band um pop uh like i mean you know that sounds almost sunny funny you know if you talk to people on crypto twitter um because everyone's so bearish saying we're in a bear market and i'm like this is a bull market there's no mistaking this like we've got x-ray vision on

what the investors are doing and it's bullish whilst price is sliding downwards i think the next major event is when the fundamentals squeeze the price action and we we break out of this what i'd call a reaccumulation ban right in the middle of a bull market like a like a bearish shock that is now being shrugged off so that's the that's the next thing i'm looking for and then typically once you know we usually get a few pullbacks within a bull run this is a really weird one um a whale um powered pullback um but i'm really after that i'm really interested in seeing how the tail end of this bull market develops because um this bull market is um you know it's structured unlike any i've seen before um and the the market of you know the

whole market is completely um different you know we've got very well developed futures and derivatives and options um and now we've got you know large etf instruments so and we've got a lot of leveraging system you know block fi these kind of loans um and a lot of hidden leverage like that so it's getting a more it's become a more complex beast and i think we've already seen um the way the price is moving um in this this um you know this epoch this um happening epoch four year cycle um it's unlike anything it's not smooth it's lopsided volatility all over the place and um i really i'm just really interested in seeing how that structures later on um i'm not predicting um i'm not predicting you know waiting for some event in the end of the year i'm more like using

on chain as a map to try and get a grasp of what exactly is happening in the market and i have no idea what's going to happen in fourth quarter you know we've got like a nation state coming on board what would that look like on chain um you know we've got lightning network with that nation state i'm starting to fire up and so there'll be a lot of activity locking into that and taking it off the chain um and trying to see if we can get some data on that um so yeah it's it's kind of a wait and see and like figuring it out as it comes willie do you know any positive news is hopium come on now any positive news i think we just sort of talked about it um i think the positive right now what's that i was gonna say we're the glass node hopium guys yeah yeah exactly

glass node hoping guys i think the positive news is that um there is so much bearish trolling on twitter you know um you know like if we can get more and more people bearish then um that'll be certainly the bottom i want to ask you what what's the uh top model look like i know this is you know kind of a reactive model that um you know you can kind of gauge where the trajectory of it is going right but um i'm assuming that that's your opinion on that has changed i know you had been kind of looking at you know two three hundred k i was just curious um you know where that kind of stands in your mind oh yeah so um people who are like like to cite that i have an opinion like i make a prediction all i'm doing is reading off the model and like i get the luxury of saying the

the target is a moving target because the model keeps changing because it's basically, you know, a moving average over the, the market cap is what it's based on. And, and it's hit every top in the history of Bitcoin, you know, 12 year history that I'm not saying it'll do it this time. Cause it's such a weird cycle, but that top model, and there's another model which frames the bottom. They, they give me an idea of where the top may be. And, you know,

first quarter of this year we were ranging up to the 300 to 400 000 range um right now um the top model is 157 000 today um of course it moves um and so really it's looking i don't know if we we if we squeeze out of this um accumulation band like i'm expecting i would say that we'll start curving upwards and when the 250 to 350 000 range sounds a bit ludicrous right now but that's what the model says um if we hit it you know if we hit it don't know if it will would you be looking for um well i guess a few things so like obviously we're talking about this reaccumulation when that when that kind of supply shock takes place um do you suspect that you know shorts because when you look at like funding funding's been negative for well over a month now um i mean there's been a

couple days of slight positive but in general um do you think there's a possibility of us kind of getting this this short squeeze on the way back up and then second of all um you know we we've been kind of talking about funds that got in and like you know 10 to 20k and then had moved to take took in profits um you know kind of at the beginning of the year do you think there's a lot of um there's a lot of momentum uh funds like kind of that will come in if we have a breakout and kind of try to ride that momentum wave right like so maybe we'll see an uptick in whales or whatever it may be that's kind of showing like once we break i don't know whatever it is that the 208 moving average something that kind of gives capital that's sitting on the sidelines

um the confirmation that okay yeah maybe we are waiting for lower prices but this thing's now broken out to the upside so now you know we feel confident to go ahead and take a position do you think you you get that effect or like have you gotten that effect in the past once bitcoin breaks out of some major resistance yeah i um you know i will remember in the three thousand four thousand day and it broke out and it really was a squeeze i can't remember how the the derivative um set up at that point but looking at the the squeeze it looked like um it was primed to pump upwards if it broke resistance um presently there's very very little interest um compared to you know open interest is very low the number of contracts in the system is low uh so i i'm not entirely sure

um if we'll get a squeeze but you know historically we we do squeeze um so squeezing meaning we get a very violent move and this time it'll be a short squeeze because we're on shorting so it'll move to the upside um so i kind of expect it but right now i'm not seeing enough open interest to see anything really very violent um but i do think you're right and that as um because this thing starts to pick up momentum and it shakes off all of this crazy bearishness of you know not only do we have all this um crappy energy fossil fuel narrative thrown at bitcoin but then we had On top of that, China's shutting down all of their mining, which will take apparently roughly six months

for all those miners to really move that infrastructure and set it up and redeploy it. So the hash rate of the networks, I think, what is it, 40% down or something ridiculous? So there's a lot of bearishness that's been thrown on Bitcoin. It's still chugging along. Price pulled back 50%, but it's still doing well. um so if we shake that out and then we've got you know you look at the the picture we're seeing

where we've got um you know sovereign wealth funds that haven't really been much of a story but um and i'm quite interested in these non-speculative hodlers at very large scales like sovereign wealth um like el salvador loading up 150 million for um their trust i think singapore loaded up on some bitcoin but there's a number of um sovereign wealth funds that i think um must be looking at um at um accumulating yet you know i don't think we've seen much of that yet and um i think that's a story for like the fourth quarter of this year maybe um if it happens and if it happens then it's going to really change the cycle um because we have that kind of buying power on on typically what we'd expect to be near the end of a bull

market um we could see a a really different cycle i kind of wonder if the cycle um i'm calling it different like um dan howard's calling this a super cycle i'm thinking this might be the last cycle meaning um at this point bitcoin doesn't see this very strongly imprinted four-year cycle um and we we we do more of a random walk and it's highly correlated to macro um and we just random walk all the way up to a million dollars in a few years willie do you think that's the top why a million dollars why not uh 10 million or 500 million plus you know i have what is it there's there's no top to bitcoin because fiat has no no bottom was it um yeah i think that we're you know the the monetary base of civilization is about to be um reset um more than reset reinvented

um i'm looking at this it's like people are looking at this as reset of the long-term debt cycle you know um reinventing money money gets reinvented every roughly 100 years and i'm like going well if you look at when money was invented there was the agrarian age you know so we had we shifted from not not trading to actually using money in agriculture and all this technological advancements and that led to civilization and i think this is the same thing we're going from this kind of industrial age to a digital age um but you know it's a real first reinvention of money since the agrarian revolution it's a one in 10 000 year event um it's not a 100 year reset so um yeah it's it's i think it's gonna it's gonna um the top on it is um roughly one-to-one to

world gdp and market cap um which is what 100 trillion i think i i concur with um plan b plan b is 100 trillion uh so um there might be a quadrillion by the time more money gets printed it's interesting what you had kind of touched on about the cycles this is something i've kind of thought about like over over time obviously the supply shock has less of an effect right like you like you've analogized it to a bathtub where you're sitting in a bathtub and you have that push and then that gives it the momentum and then obviously like you know just market behavior your greed kind of kicks in and, and, you know, drives the speculative rally up throughout the bull run. But, you know, over time that push you know, the, the pool of water is getting bigger.

So it has not as large of an effect, right. On, on that, that kind of supply shock. So over time, I almost like to think of it as like the, the halvings got the initial kind of inertia going for the adoption, right. Where it gave people a monetary incentive to come in and buy this thing because of the, you know, just the pure monetary appreciation of it. But then it gets to a point where the halvings aren't necessarily driving people in through that supply shock, but the demand kind of just takes over the adoption, the network effects of Bitcoin. Once it has that inertia going, that momentum going, then, you know, that's kind of just

doesn't really matter as much as the pure demand from that aspect. And then, like you're saying, you know, as Bitcoin becomes larger, as it becomes a multi trillion dollar asset um it's going to be much more adapt to um you know following kind of macro trends and and what that landscape is looking like yeah i'm really i'm interested in this last last cycles because it's really um i'll put some metrics to it because it's really based on what you're saying the supply shock right supply shock is what creates these four-year cycles and the cell pressure from the last supply shock was 1800 bitcoins per day down to 900 so 900 bitcoins are being mined every day and that's being sold off right that's the sell pressure um now we're in

the cycle where there's so much derivative trading um that you can picture um you know 1 000 to 2 000 bitcoin potentially being harvested as fees by the exchanges um and that's potential sell pressure if they're selling to pay shareholders and salaries so um the the sell pressure from exchanges like mining um it's like a tax on trade and then selling constant cell pressure um that that's already the same size as is the current um like mining you know and then we're going to drop to 450 bitcoins per day at the next halvening epoch at that point it's the minuscule the the least of the um the cell the cell power like to put this in perspective um from Grayscale's 2% of their coins under custody for that fund, that pseudo ETF fund, generates a sale power of 36 bitcoins per day.

Probably all the ETFs combined currently is just over 40 bitcoins per day compared to miners that are doing 900. so um by the next halvening etfs will be 10 of mining power is cell pressure um and so i want to i want to do this thing where you add all the cell pressure the exchanges the etfs and all these kind of products that ride on top of bitcoin that extract fees and bitcoin value and then they sell to fiat um i think the mining story is now going to be a thing of the past um it'll be there but it'll be less important than these new market influences we're seeing i think also like miners are you know the most bullish on the asset of anybody in the space because you know bitcoin were to go away like all of their capex would just be deemed worthless right like all

their machines would just be paperweights at that point so you know when you look over time miners actually have a pretty strong tendency to hold their coins um and even recently you know people have been talking about um you know miners have played this huge role in the selling pressure downward but at least you know in glassland's data you're only seeing you know like a little over 5 000 coins that were sold down you know kind of amidst that month in there um which in that now over the last two weeks it looks like they've actually started slightly accumulating again so um yeah i think i think kind of like the whole narrative about minor selling has kind of overstated yeah i mean it's like uh i mean there was a dip that dip was uh if it was 5 000 as you

you quoted um that was very shortly after the mining the minor band in china and um presumably it made sense for miners to sell coins because some of them are getting out of the game um and liquidating for real and others um uh selling out to fund relocation um but after that sell-off um were an accumulation um of coins by the miners and they're not selling and it's it's very much what you see with the bottom um the miners the strong miners are left the strong miners being the ones that didn't get shut down by china um and so they know it's a bottom because the sale pressure is um is is gone now um so yeah it's and interestingly the the mining the mining um it's really weird to be looking at the mining equation

in the middle of a bull market. I mean, typically the sell pressure from miners is very, very small compared to the full force of buying of a fully unleashed Bitcoin bull market. And so we're in this kind of tentative band where we're going sideways, where it kind of does matter. But normally, you know, back to the first conversation, there's like, you know, 300, 400 metrics you can look at on-chain.

and mining right now is being pulled out of the toolkit whereas normally we don't look at that much during a bull run very little signal because the cell pressure is very low in a bull run but right now it's important. If you don't mind just touch on you know the Puel multiple which kind of dipped into a buy zone briefly and then as well the difficulty ribbons right something I don't think a lot of people are familiar with. Yeah I am not very familiar with the pro multiple i remember he created it and we was like we know the equation

but it was like two years ago and i haven't um i haven't i haven't got in my head right now um it's the issuance divided by the 365 day moving average of issuance in dollar terms so when you when you had right so like when you had the the block slow down um i think that coincided with why you had such a steep drop in it because minor revenue was less because there was less gotcha okay so that basically um pure multiple and the difficulty ribbon is very much measuring the same thing then so what you're looking at is um you know the bitcoin network generates hash rate from the miners and then that um also translates into difficulty um the the network makes it more difficult for miners to mine right and so the two things the hand in hand

And the two things are matched to keep the block time every 10 minutes. Therefore, the issuance should be roughly the same. The pool multiple is measuring the localized issuance. And what we saw was the issuance dropped off a cliff because the hash rate dropped off the cliff and the difficulty takes two weeks to adjust. And so essentially the whole network started processing blocks even up to three times slower than normal.

And so issuance was one third during those times. And typically when you see that kind of event happening where issuance is so slow, you'll see this drop And it really is very similar to what I'm measuring with Difficulty Ribbon, which is also measuring this drop in difficulty, which is a bit lagged. It lags hash rate. You know, the hash rate's dropped and the difficulty will correct downwards. And as it's correcting downwards, eventually this thing bottoms

and new miners start adding hash rate into the market. And what we're really looking at is what I call a miner's capitulation. the um the weak miners just got liquidated um they could not typically in the bear season um as the price goes lower and lower and lower eventually the weakest miners who are least efficient on opex and electricity costs they get they get um they get run into a loss and then eventually they um they exit they exit by selling off their coins closing down operations to pay for their losses and so those bitcoins get dumped onto the market those that cell pressure drops the price a bit and then it liquidates the next weakest miners and eventually you capitulate all

the miners down until the last um biggest baddest miners um that are very efficient um are left and so it's a weak miner cal um and then um the strong miners know it's the bottom because the weak guys got shaken out and the sell pressure subsided that whole sell cascade of weak miners has now ended and um the buying can begin um so they know that they're not going to sell anymore they're going to hold their coins and and so the difficulty ribbon you'll you'll see the difficulty drop and we'll see a visual compression in that ribbon and then you'll see it recover and it's a visual view of that capitulation event and the pure multiple

is very much similar in measuring that. Instead, looking at it as a side effect of issuance because it's effectively those block times and how difficulty and hash rate work together.

Willie, I feel like Will and I could talk to you forever. Unfortunately, we can't do that on a podcast or on YouTube. Before we let you go, explain to everyone the email that you put together and kind of the analysis and research that you do

with the on-chain metrics and where they can go find more if they're interested? Yeah, sure. I launched this October last year. It was kind of a good time because it was like the start of this bull run. And the idea is really to give investors, particularly investors that are relatively new to the market,

like a market intelligence newsletter to see what's actually happening with investors as we're seeing it on-chain so they can make informed decisions. Because we see a lot of investors come in, they buy, they get freaked out by the volatility, particularly in a bull market, you get these shakeouts. So I put that letter out. I call it the Bitcoin forecast.

It effectively takes all these metrics that we get off Glassnode. I reprocess it. I add my commentary and predictions based on that. um and that's available um on um substack currently so you can just go to my twitter handle um it's woonomic at woonomic and there's a link there to my substack and that's available if you want to subscribe um awesome listen thank you so much for taking that time to do this we'll make sure that there's a link in the description to send people over there will any last closing words yeah hang in there guys this thing's gonna pop

will clemente anything from you uh i just wanted to say you know thanks for coming on willie obviously you know uh you know you're very instrumental in kind of my understanding of all this stuff it was it's actually a podcast you did with uh peter i think it was like in in december or something it was like right after we broke out all-time highs and like just listening to kind of you know explain how everything was moving on chain it was really fascinating to me i think you know we kind of get insight into um activity and investor activity that you don't get in any other market so stuff really is fascinating and i appreciate you you know taking the time out to you know communicate back and forth with me and then also just come on and this is awesome

for me so thanks yeah thanks will it's been really great to see you come in there and sort of take the torch it's like a new generation on chain analyst coming in and and helping build up the space so that's really great to see um good on you for that thanks willie awesome guys thank you guys so much and we'll do it again in the future okay catch you later