The Pomp Podcast - #626 The Bitcoin Bull Run is Back!

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's quickly become one of my favorite writers on all things bitcoin including deep dives on various on-chain analytics you can subscribe to will's new email by clicking on the link in the description that i've provided In this conversation, we discuss the supply squeeze, strong hands buying, dormancy looking better, and what happens when Bitcoin broke $42,000 yesterday. I really enjoyed this conversation with Will, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors.

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Starting point is 00:03:09 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. Bitcoin is ripping $42,800, literally went up 500 bucks since we went to commercial. I don't want to say that we did that, but I do want to say that Will Clemente is here.

Starting point is 00:03:41 Maybe that's what's going on. Let's bring Will up. When I went to commercial, I got on the Zoom and I said, Will, you good? And his exact response to me was, damn, y'all lit. What's up, man? Boys are going crazy this morning. What's going on, man? How are you?

Starting point is 00:03:59 I'm doing well, doing well, especially after watching this price chart here the last five, ten minutes. All right. Let's start first with the on-chain metrics for the week. I know that you've done a bunch of the analysis as usual, and you're starting out with this URPD metric, which is basically on-chain volume. Explain what you're seeing. Yeah. So URPD is basically, like if you think of a volume profile, it's usually used like if you're in TradingView or something on the side of the screen, it's basically just a horizontal volume distribution metric. And so showing you like how much Bitcoin has moved at different price levels. And so when we look at this, we have this massive zone of volume.

Starting point is 00:04:40 Obviously, we've been in this range for like two, three months now. We've had almost 22 percent, 21.7 percent of supply has moved in this range. And then we have this massive bar of volume at about 39.5 and 2.6 percent of Bitcoin's money supply moved at that bar, which makes it the largest single bar of distribution at that price level since 3.8 thousand. So we're building up this huge, what I believe is kind of this mid-cycle support, possibly if we had another macro bear market, perhaps some kind of macro bear market bottom level that we're forming here. Because we have so much volume, especially at that 39.5 level. Got it. And then you created this top bottom, uh, model what's going on with the, uh, top model

Starting point is 00:05:32 bottom. Yeah. So, um, there's a, there's a lot here, but just to like, kind of break it down an easy way to understand, um, the top model is a variant. It's basically a multiplier of the average cap of Bitcoin. So like the all time moving average of Bitcoin, um, the light green line that you'll see the second one to the bottom that's realized cap so that's the well realized price it's just you're dividing the cap by circulating supply um but this is the average price that investors paid for their coins and then the very bottom line uh the dark green one is delta price um so delta cap is the difference between the all-time average uh the all-time moving average cap um and realized cap so you can you know plotting that out you can get almost this

Starting point is 00:06:16 like cheat sheet for looking at, um, kind of these over underheated zones. Uh, you know, Bitcoin has always historically stayed between the Delta price and the top model. Um, but then also adding in like the realized price, you can get a good zone to accumulate, you know, at the, at the bare bottom. And then also, um, you can get some, some good zones to, you know, start, start de-risking towards the top of the cycle. Uh, but then I put this midline, which is basically the mean between um the delta price and the top price and so this is kind of like served as a good like confirmation level for for bull markets in the past um it was the level obviously like 2013 got back above it um but then broke below this and and that kind of led us into the bear market

Starting point is 00:07:00 in 2017 we rejected off of it and then once we kind of broke back through that retested it as support um that kind of gave us the next leg up um it was also where we bounced off on the dead cat bounce so like after we had that initial euphoric run up then we had that that second um what people call dead cat bounce so it's a higher low i mean it's a it's a lower high um so basically a bearish retest and that bounced off that midline as well and then this year we kind of bounced off it as support in in january and then um we we broke through that in mid-may and that was kind of like the mark where we kind of just dropped off a cliff after we broke through that level so right now it's at 53 K and that's, that's something I would be looking for, for

Starting point is 00:07:40 like full confirmation that we are in, you know, a new bullish uptrend. Okay. And then talk to us about this illiquid supply shock ratio. I know that we've been talking to this now for two or three weeks, kind of this idea of a supply squeeze. What's going on there? Yeah, absolutely. Um, this is something I've been excited to finally see get played out because I was pushing it so hard, but, uh, there's two ways to look at this. So you have a, uh, a more qualitative view of this, and then also more quantitative. So the illiquid supply shock is the more qualitative. So it's looking at what's the spending behavior of the entities that these coins are moving to. And so what you see, and this is the blue line, this is showing you that

Starting point is 00:08:18 more coins are moving to what's on-chain considered these strong hands, these illiquid entities. And then also you see the purple line, that's more of a quantitative way to look at the supply shock. So it's literally saying, what's the ratio between the amount of coins that are available to be bought on exchanges relative to the overall circulating supply? And you see, if you overlay them both, I mean, they move pretty much in unison. But yeah, you're seeing divergences in both of those that I don't think have fully gotten priced yet, because these are divergences that have been growing for two, three months, and then really rapidly over the last two, three weeks. And I think price is lagging big time here. Got it. And then when we look at who's

Starting point is 00:09:02 actually buying, I know that there's a ton of supply held by retail, it looks like. Yeah. So breaking the accumulation down by who exactly is accumulating in terms of size, what you see is that all across the board, every major cohort is accumulating, aside from I think the 100 to 1,000 cohort, which is just trending sideways. But what you see is retail has really stuck out over the last, well, actually, since the March, I mean, the May capitulation, but especially over the last few weeks, their holdings have kind of hockey-sticked upwards. And the way I looked at this in the newsletter was comparing all of these entities' holdings with less than 10 Bitcoins and then dividing that by the circulating supply. So you get basically the portion of supply that retail holds, if that makes sense. And you've seen that that's really gone on a tear since May 19th.

Starting point is 00:09:54 And so, you know, retail, although people like to talk about how, oh, it's all whales move the market, retail has been holding their own. Retail has really been a driver of this reabsorption process that we've been tracking. Got it. And then when you start thinking about within that, the short-term holders and the long-term holders, this seems to be like one of, if not the most important charts, just showing that the long-term holders are accumulating. Yeah. So this is comparing. So like in the past, we've looked at the raw short term and long term holdings, but this is comparing their holdings to the overall supply. So you're just getting the portion of supply that each of them hold. So very similar to what we just did with retail holdings.

Starting point is 00:10:34 And so what you see is like historically, whenever Bitcoin starts moving up, it gets to a certain level of holdings that from long term holders, because, of course, they're locking up supply. So it's very similar to the supply shock thing. It's kind of a more abstract way to look at it. But right now we're at about 66 percent of supply held by long term holders, whereas like kind of in mid-October of last year when we started really running up into the main bull phase, we got up to about 68 percent. So, yeah, that's just something I'd be keeping an eye on. Like, are these long term holders going to continue to add or are they just going to dump on on any sign of exit liquidity? Right. Like if we start going up to whatever, 45K, all of a sudden, you know, long term holders are just dumping. like that that's not going to be a good sign because that kind of resembles what happened in the dead cat bounce after the 2013 fall for sure and then dormancy what's that looking like

Starting point is 00:11:25 right now yeah so dormancy is basically looking at um the amount of destruction so but it's adjusting it for volume so like destruction is an on-chain term looking at so like if you have a coin in a wallet for one day it has one coin day and then if it's moved out of that wallet it's now got one coin day destroyed um and so then then dormancy adjusts this for volume so you get the raw you take the time component out of it and you only are looking at the raw amount of destruction um and so like plotting that out over time um you can basically see you know like or older or older coins being sold um but what david did david poiled um he took the the annualized uh dormancy in dollar terms and then divided that or divided market cap by the annualized dormancy in

Starting point is 00:12:15 dollar terms so taking the dormancy today you know how much how many dollars have been destroyed um and then multiplying that out over 365 days and so um what you see here is like we have this almost full reset of dormancy and and that to me is showing like it's partially affected by the fact that we've had lower transfer volume because by definition you're going to have lower coin because less coins are trading but also to me um it's showing that the noobs are slow slowly getting uh flushed out so like you can also look at other things like the raw average age of the coins being sold um we can even look at something called spent output age bands and that looks at basically like these different bands based on um the the age of of the different uh entities that

Starting point is 00:13:02 hold the coins so anyway so like i think it is partially affected by lower transaction volume But overall, what this is showing to me is that we kind of had this reset of of noobs in the market and we can we can kind of build this this foundation to move upwards because the other times you've seen this were actually in major bear market bottoms. So in late 2018, 2015, and then also after the 2011, like initial pump when Bitcoin was, you know, first brought out to the market. Got it. And then Sopra, I know that you're now looking at kind of this adjusted version. and explain again what Sopra is and then the adjustments that you're making. Yeah, sure. Sopra is basically looking at the profit taking

Starting point is 00:13:42 that coins hold on any day. That's a good way to think about it. So A-Sopra is basically just adjusting out the one hour transaction. So it's kind of just filtering out the noise. You can also look at entity adjusted, but I just threw in A-Sopra for this one, but you can look at both

Starting point is 00:14:00 to kind of get like a more accurate picture. And then you can also look at long and short term just for anybody who's interested but so we had this breakout above one which is basically the threshold for like profit or loss so if soper's trading above one then um the market's trading in a state of profit if it goes below it's stating in a in a uh in loss right so what you wanted to see and we talked about this like two weeks ago was for soper to perhaps break out and then either retest that one line on a price move down and then kind of stabilize and what we've actually seen this week is we had that move down after we initially got rejected off 42k we actually did

Starting point is 00:14:38 bounce off that one line and then that's a that's a bullish sign because in bull markets you you see soper that that one threshold is kind of that mark for where uh where bottoms are in corrections like if you go back and look at it from like uh december to to march i mean almost every time that soper dipped below one it was like a perfect uh perfect uh buy the dip opportunity so you know I would like to now just see it stabilize. So now that we've got that, you know, correction in price and then bounce off one, I now just kind of like to see it stabilize above one. Miner accumulation?

Starting point is 00:15:11 Yeah, nothing really new here. Just miners still buying. And the miners, they've been buying now for weeks and just continuing to do that. No sign of that slowing down. It's actually accelerating maybe a little bit. Yeah, slightly. So like I threw in the 30-day change so you can look at their actual like miner balance and just be like, oh, they sold today or they, you know, bought some today, but it gets really

Starting point is 00:15:32 noisy. So like, this is the 30 day change. So taking, you know, today's August 6th. So looking at August 6th and then the difference between now and July 6th, and that's, that's the net change. And so like, when you see there's a clear trend in the net change, you know, that that's showing like this broader trend, right? Because it's, it's going to take a, a larger trend to affect this metric just by definition. So yeah, I think this is a better way to look at it. If you're trying to follow what miners are doing. And yeah, like you said, this is really showing no sign of slowing down anytime soon. Got it. And the last one is kind of you present a little bit of a bear case. So if you had to make an argument against

Starting point is 00:16:10 what I think is your position as to being bullish, it's basically the on-chain metrics around transaction volume. Yeah. This is kind of the one thing that is a red flag to me is the fact that we don't have more on-chain activity in terms of like, when you look at the mempool or just the number of transactions um active addresses all these kinds of things which i personally suspect are kind of lagging indicators i think if you start to see um you know higher prices we start to move towards like i don't know 45k plus start moving towards 50k i think you'll start to see uptick in this as as you know volume picks up and people become interested in again um but yeah i think part of this has just been the fact that we've

Starting point is 00:16:48 been ranging sideways for two or three months and i think of these as more lagging indicators but But this is something you want to look for. If we start to move back up, obviously, you're going to want to see this transaction activity come back in as well. But I suspect it will, but you never know. And it's just something to keep an eye on. Got it. And then the last question, the question that everyone wants to know is, while we are recording this, Bitcoin just broke $42,000. And you previously had identified that as a pretty big resistance.

Starting point is 00:17:17 What do you think happens from here, fully knowing that you can't predict the future? but what is uh what is your thought process as to where we go yeah so like we've just broken horizontal uh resistance at 42k and then we've also broken um this diagonal resistance line if you draw from like the the wake up in the 60ks and then uh we also retested that on the way down when we uh came back to like we retested 60k and hit it and then we retested it a couple days ago But anyway, so what I'm saying is we just broke out of two major trend lines, right? So both diagonally and horizontally. So I think there's really nothing but hair here till about 48K.

Starting point is 00:18:00 But I think the 200A moving average is going to give a bit of resistance. And that's right around 45K right now. So I'll be watching to see, you know, we might take a pause, a little breather there. Because that's kind of a mark that a lot of people in traditional finance look at to see if an asset is in a bullish or bearish phase, I guess you could say. So yeah, I'll be looking for that. But I'm targeting right now $49K, $50K and seeing how we're going to react there. I think it'll perhaps play out over the coming weeks. Got it.

Starting point is 00:18:36 is there anything that uh people should be watching out for as we kind of break through that 42 and on the way up other than uh prices is there anything on chain that you'll look for um just in general like one thing was was the volume right we were talking about how we want to see that pick up um that's one thing and then also the long-term holder you don't want to see them dumping and and you know just looking for some kind of exit equity like we talked about it earlier, um, sober stabilizing. Um, and then in the very short term, just, you can look at futures data, just see how funding's looking. Um, you know, look at OI and just basic stuff like that for like very short term price movements. Got it. Far, I let you go. Everyone

Starting point is 00:19:15 loves when, uh, when we'll comes on people or even say we'll season, uh, what is, uh, what was kind of your, uh, your, your final words or, or, uh, anything that you want to share with folks? Uh, hang in there guys. This thing's going to pop. I love it. I love it. All right. Well, thank you so much for doing this every week. You're doing fantastic work. As I've told people, I'd say without you here, you by far, I think are leading the charge when it comes to on-chain metrics and people are waking up to how important a lot of that data is. So folks can go follow you on Twitter or subscribe to your newsletter. Where should we send them on Twitter or the newsletter?

Starting point is 00:19:50 Yeah, sure. Thanks for having me on, man. I hope you guys get hyped again. I know this is a little information uh heavy but i'm gonna be watching after i get off so you guys better get the energy going again uh you can find me on twitter at w clemente iii and then i have my newsletter is a btc by wc3 at substat.com which is also my twitter bio killing it man thank you so much for doing it we'll do it again next week yes sir take it easy pop all right sounds good

The Pomp Podcast - #626 The Bitcoin Bull Run is Back!

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