The Pomp Podcast - #638 Bitcoin New ATH By September?! 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 following him on Twitter. In this conversation, we discuss the Bitcoin fundamentals, on-chain metrics, miner accumulation, all-time high and an important metric, and what Will's guess for a bull market top is. I hope that you enjoy this conversation with Will. I really enjoy doing them every single week. Before we get into this episode, though, I want to quickly talk about our sponsors.

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Starting point is 00:04:03 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, everyone, we got Will here with us. Right now, we're currently looking at Bitcoin sitting around $48,000 or so. Let's start with the realized price distribution or URPD. What are you seeing there? Yeah. So this is just basically on-chain volume profile. You're basically looking at like at which different price

Starting point is 00:04:47 levels a certain amount of Bitcoin was moved. And so like we have this massive zone of volume that was formed while we went sideways for three months between 30, 40K and that's below us. And then as Well, we have a fair amount of distribution, kind of like the mid 40Ks, between call it like 44 to 47K that we're kind of, well, we just now broke through that. So, yeah, we have a good amount of support under us in that sense. All right. And then the miners, when China banned a bunch of the miners, obviously hash rate dropped significantly. But the miners that stayed on, what happened with them? They got super profitable? Yeah. So when we had this big drop in hash rate, we had a record difficulty adjustment that followed. And so what it meant is that the miners that were still left on the network became way more profitable, especially in North America.

Starting point is 00:05:37 And so this is shown in this chart. What you see is the green line is is hash per I'm sorry, revenue per hash. And then the purple line is just the hash rate. And so what you see is this correlation between as as hash went down and we had difficulty adjustment, then the miners, like we just said, still on the network were more profitable. But as hash has started to slowly come back on the network over the last few weeks, that profitability is kind of fizzling out, if you will, but it's still way higher than it was compared to a few months ago. But yeah, hash is starting to come back online slowly, still far from where it was before the Chinese miner migration, but it's looking positive. And so when we look at their actual net position change, this has been positive. They've been

Starting point is 00:06:22 accumulating Bitcoin, not selling it for a while now. Has that continued? Yeah, for sure. It makes sense because they're more profitable, right? So they don't have to sell as many Bitcoins to cover their operational costs. And so this is looking at the 30-day change between miner balances 30 days ago on the 20th of July versus August 20th. And so what you see is that it's been staying in the green and over the last, call it week or so, it's actually moved up so yes seeing strong accumulation from miners which you know as we just looked at the profitability uh you know completely makes sense yep so it's pretty much since the beginning of july once they went from selling a bunch of bitcoin uh to now holding it accumulating it

Starting point is 00:07:02 uh that's actually accelerated as well which we're seeing here in the chart another metric that you uh included this week which i don't think i actually understand is market cap to thermo cap ratio explain to us what is this and then what is this chart showing us yeah sure this was created by uh nick carter it's just looking at the the market cap of bitcoin in comparison to like the total revenue that miners have ever brought in if that makes sense and so like what you basically get is these over and under heated zones and obviously like the peak of the bull in the bottom of the bear in terms of like the speculative premium that's bid up on the marginal from the marginal buyer in comparison to um the the the revenue that miners are bringing in

Starting point is 00:07:44 Yeah. So super bullish to see it kind of, uh, what appeared to be, it was going down in that trend reversed, uh, pretty significantly and kind of headed back up now. Yeah. And then also we never really, uh, reached like a real overheated zone, at least, you know, compared to historical peaks. Uh, and, and yeah, so like over the last couple of weeks, this started to move back up as well. Yep. One of my favorite stats right now is the realized cap, uh, is at this all time high explain what RealizeCap is and then what you think kind of the ramifications of it hitting an all-time higher. Yeah, RealizeCap was also created by Nick Carter. This is basically looking at, if anybody doesn't know, Nick Carter is like crazy smart. RealizeCap is basically the average

Starting point is 00:08:26 weighted price of Bitcoin. So it's the capitalization based off of when coins were last moved. So like, you know, if you bought $100,000 of Bitcoin at a dollar, well, then you're adding a hundred thousand dollars to realize cap if those coins have still not moved since when you bought them at a dollar then still only added a hundred thousand dollars to realize cap while you know in market cap terms you're you're just um you know that's like four point whatever now we're at 48k so it's 4.8 billion dollars that's uh the chunk of market capitalization that those coins are contributing to so it's basically like a v walk which is a volume weighted average price of bitcoin um and so like seeing that seeing that reaching new highs and showing two things um well

Starting point is 00:09:08 not a few things so like a coins are being um they're no longer being sold at a loss because like if you like i said it's based off of when their last moves so if they're last moved at 60k and then they were moved at 30k well you have 30 000 removed from the realized cap so seeing seeing it go up is showing that coins are moving from below and not above and so also it's showing that there's new capital inflows um that that's coming in and and they're buying at these higher prices so it's a really good sign basically showing like the markets absorbing um the profits that are being taken from below so bullish uh if we take the realized cap a step further you've got david pwell's uh mv rv here what is mv rv uh and then what is it showing us yeah this is

Starting point is 00:09:55 a simple ratio basically taking what we just described as the realized cap a ratio of that and the market cap and then this is the z-scored version so it's adjusted for volatility and it just kind of gives you like crisper signals on the on the upside and so you get these very similar to the market cap to thermo cap you get these overheated uh zones in the top of the bull market and then also you get these like nice buy zones in the bear we kind of briefly dipped into the overheated zone but we didn't break above it like we did uh historically um but yeah we've started to see a recovery in this as well over the last like two weeks especially over the last week so it's another really positive sign uh basically like the way you can think of this is

Starting point is 00:10:37 when it goes up it's basically showing that the marginal buyer is bidding the price up higher it's at a higher premium comparison to like what the average price is that investors paid for their coins so when this blows way out out of proportion then it's it's the marginal price is way higher than what the actual average prices that investors bought in. So therefore the market's overheated by definition. And then also in the bear market, like when market cap goes below realized cap, you're in capitulation by definition because the market cap is below the average price that investors paid for their coins. That makes sense. You've got these three supply related ratios that we've been tracking now for a couple of weeks, things like the illiquid supply shock ratio,

Starting point is 00:11:20 etc uh describe uh kind of what you're seeing in all three of those supply ratios yeah people have been hearing me talk about this for like crazy for the last three weeks probably sick of hearing about these things but you were right but you were right don't let the haters ever say that you were wrong you were right in terms of what was going to happen in the supply shock keep going yes so we've got the liquid supply shock ratio and that's basically looking at a qualitative view of um the movement of coins from from weak hands or nds that are like moving coins in and out all day. And the movement of those coins to strong hands are basically entities that have very low selling history. So they take a lot of coins in, don't move a lot out. And so this has

Starting point is 00:12:00 been pretty much up only for the last couple of weeks. Saw another uptick in this over the last few days. So that's a really good sign. The green line is the long-term holder supply shock ratio. So very similar, but instead of looking at the spending behavior, it's just looking at the age of the entities. So it's over a 155-day threshold is the cutoff for long-term holder, short-term holder. And so seeing this moving up is showing that coins are moving from short-term holders to long-term holders.

Starting point is 00:12:28 It's also showing that those previously entities that were previously recognized as short-term are aging past that 155-day threshold. So showing that these entities that accumulated those coins 155 days ago are now starting to cross into that long-term threshold and are holding strong um that's also reflected in like hot waves which is very similar in the sense of like what's what it's kind of showing uh hot waves is just showing like this the percentage of supply that was last moved in a certain time frame so you're seeing really strong maturation of coins in that sense as well uh so yeah so this is a really good sign and then the purple line is the exchange uh supply shock ratio

Starting point is 00:13:09 This is just basically looking at, you know, the amount of coins that are available to be bought on exchanges relative to the overall supply. This is just kind of in sideways, you know, so kind of sideways neutral. But, yeah, the liquid supply and the long term holder supplier are looking really bullish. When we look at the long term holder supply, we've got another chart here that shows, you know, through 2018 and 2019, there's these two big upward movements that led to pretty significant price increases afterwards. you know shortly after it appears that we're now looking at a third very large increase in the long-term holder supply uh is your expectation that you know kind of history repeats yeah so like there's a couple things to unpack here um this is basically just looking at the portion

Starting point is 00:13:53 of supply so just literally the percentage of supply held by these long-term holders and so what you see is that you know in the bottom of the bear markets that long-term holders come in and they start buying discounted coins and then when they get into the bull market they they distribute those coins but in in the bear market when long-term holders hold a certain threshold of supply then you get this supply squeeze effect because they lock up a certain a certain portion um and so like it's there's not a certain threshold but what you see is that when you get this peak um in terms of the movement from from the short-term to long-term holders uh that that's when you get those uh supply shock like there's not a certain ratio necessarily that it

Starting point is 00:14:35 crosses to say that it's going to initiate a supply shock but in a general sense the idea here is just to illustrate the fact that long-term holders set the floor basically um and as we just touched on long-term holders are accumulating really heavily right now and so my opinion they are kind of setting the floor here um one of the big things to point out is the rate of increase so like when you look at like when people look at this one of the things they'll say is like oh after 2017 you saw long-term holders also accumulating so like why is this bullish um but what you really need to look at here in my pain is the rate of change um the rate of change here is is way stronger than what it was in 2017 and then also the base that it was built off of is way

Starting point is 00:15:18 higher so like if you look at the bottom of long-term holdings in 2017 you see it's almost at aside from 2012 it was at the lowest it ever was so it it was going to take a while for those long-term holders to re-accumulate those coins and initiate another supply shock which came in the bottom of the bear market in 2018 um but yeah like so we have a a higher base for these long-term holders to to build off of and then also like a really high rate of change upwards so uh yeah it's just basically showing the same thing just kind of in a broader sense that these long-term all they've set the floor and i suspect that's kind of what's going on when we look at the illiquid supply shock ratio compared to 2017 uh it looks like you've identified almost the exact

Starting point is 00:16:02 opposite of the end of a bull market explain what's going on here yeah this is very similar so we you know two two metrics ago we explained the difference between the long term and illiquid supply so this is the illiquid supply shock ratio over time um and what you see is like in late 2017 this pretty much just dropped off around what dropped off like a rock um and then really didn't start moving back up it kind of bottomed out in the bottom of the bear and then started moving back up after the covid crash instantly i mean um um ironically so what we're seeing now is this reaccumulation that we've been describing and and this you know when looking at 2017 looks nothing like what we saw heading into the bear market where this metric pretty much

Starting point is 00:16:44 just dropped off cliff so yeah complete opposite of of what historically is has marked kind of like bearish uh price action bullish all right spent output age bands yeah this is something we've been looking at in terms of like is this a dead cat bounce or not because what you don't want to see is long-term holders taking exit liquidity and then just dumping on the first opportunity they get um so this is looking at all the spent outputs above six uh six months because that's closest threshold i could get it to the long-term holders which is um five months but looking at this we really haven't seen anything alarming um we did get some movement on tuesday from two to three year old coins um but that was just seems like it was just a one-off thing uh overall the

Starting point is 00:17:30 trend is nothing alarming um also looking at you know dormancy and uh destruction um which is basically coin days destroyed and then also the the average spent output lifespan these are all all basically saying the same thing, just kind of looking at the age of the coins moving. And yeah, like not seeing anything alarming there in the sense of like what we mentioned about long-term holders taking exit liquidity. So this is a good sign so far. When you look at things like the entity adjusted NUPL, the net unrealized profit loss, what are you seeing? Yeah. Like the premise of this metric is basically when you get into like a full blown bull market, people get really complacent and they don't want to take profits. Right. And so like that basically sets up

Starting point is 00:18:11 the market for a big capitulation once you finally get that move down because nobody's taking profits so then everyone basically takes profit at once and causes a cascade and so you basically have these little zones you have capitulation hope and fear optimism anxiety belief denial euphoria greed we never reached a euphoria greed zone that we have historically uh but we we also interestingly bounced off the the hope and fear threshold which is very similar to when you look back in mid-2013 what happened there um both after the 2013 and after the 2017 bull runs when we started moving into the bear market we actually did dip into that hope and fear zone um so yeah like that that that kind of distinguishes it for me in terms of like

Starting point is 00:18:58 is this kind of like a mid-cycle thing or are we perhaps just seeing like a relief rally um yeah it doesn't resemble it in that sense and we're starting to move back into that belief denial phase so people are not realizing their profits aka kind of holding their coins stable coin supply ratio yeah this is comparing uh the market cap of the coin relative to the overall stable coin supply um and and so this is running like bonger bands willie willie did this he ran bonger bands over it and what you see is that whenever the ratio dips below the bottom bonger band um it is marked kind of like this historical uh bottom basically you know you see late 2018 march 2020 september of last year and then just recently a few weeks ago we went below uh now

Starting point is 00:19:49 we're starting to come back inside of the volunteer band so that's basically showing to me that stable coins are starting to flow back into the market and then very similarly we have the stable coin exchange reserve ratio which i created this week um it's just comparing the overall stable coin supply relative to the amount that that's on exchanges um the only flaw here is that i need to filter it out for smart contracts so for how for how much uh the amount of stable coins locked up in those smart contracts and then also i'm going to try to figure out a way to figure out um how much of this is just coins that are being used as collateral because it's just showing that they're on the exchange. It doesn't necessarily say that, you know, are they just sitting idle ready to be

Starting point is 00:20:32 deployed or are they already being locked in, you know, in some kind of futures contract as margin. But overall, though, we still do have a pretty large portion of the stable coins that are sitting on exchanges. So at least a portion of that can be presumed to kind of just be dry powder waiting to get in. So to me, that's showing that, you know, there's still capital on the sideline that has yet to kind of flow into the market this is how you know will's a young wizard so he just casually dropped yeah i looked i just created this new metric this week no problem um all right let's go to sopra uh spent output profit ratio remind everyone what this is and explain what uh what it means that it's over one still yeah i think we've looked at this metric

Starting point is 00:21:13 every week since we met um this is this is looking at the profit taking of the coins and then this is the a the adjusted version a soaker uh this is basically looking at soaker but but uh filtering out the outputs under one hour so it kind of just gives a little more clear signal the one threshold is basically the kind of like the pull bear threshold if you will when when the market isn't kind of a bearish phase it tends to stay below one and in a bullish phase it stays above and so we got that breakout above one in late july like three weeks ago and so what we wanted to see is twofold so a we wanted to see um a retest of one as support if we got a price correction and then also kind of see the the ratio stabilized above one so we got you'll see right above august 2nd

Starting point is 00:22:01 on the on the timeline on the bottom you'll see we we bounced off the the one threshold on a price drop and then we've kind of just stabilized above one so to me um i we had seen that balance and then i was i was just looking for the full confirmation with the stability above one but think we have that now after after kind of going hovering above it for the last couple weeks so to me i think this is like a textbook sober reversal so this is this is uh one of the more bullish things one of the things you told me a couple of weeks ago was if you had to make a bear case for bitcoin at the time was the number of transactions where the active addresses was going down uh and that wasn't good it appears that it's coming back now yeah um this is like the one thing

Starting point is 00:22:45 that I was kind of skeptical of. Like when you looked at transactional activity, looked at the mempool, everything just looked kind of dead. But we are starting to see that move back up. So when you're looking at active addresses, you're also looking at just the number of transactions. Both of these things are starting to move back up,

Starting point is 00:23:03 which is a positive sign of kind of like follow through on this rally. But of course, want to see more continuation of that over the coming weeks. But so far, so good. All right. And then lastly, derivatives is something that I think you're starting to get deeper and deeper into.

Starting point is 00:23:16 What are you seeing there? Yeah, a few things. So the chart I threw in the newsletter this week was the futures estimated leverage ratio. This is just looking at the amount of Bitcoin on an exchange relative to the open interest. So it's trying to kind of ballpark the amount of leverage that people are using.

Starting point is 00:23:35 So basically like the amount of how collateralized people are. And so looking at this, then also looking at funding, which is the mechanism that's used to peg the perpetual swap contract to spot price. That's not near what the levels it was back in February, March, earlier this year at similar price levels. Yes. Like overall, it looks pretty healthy. But, you know, we'll have to we'll have to watch over the coming weeks if we start to see, you know, funding absolutely spike. And, you know, we might get some kind of short term price pullback. But I think funding is best used when you're looking at the weight that open interest has against market cap.

Starting point is 00:24:15 So you can take like a very simple ratio of just market cap to open interest and see, you know, what percentage of market cap is made up of open interest. And so, like, when you go back earlier this year, that was way higher than where it is now. um we're very similar to the estimated leverage ratio we're kind of you know we're not really overheated in that sense at all so yeah derivatives for now look look pretty healthy and there's nothing of of kind of red alarm there i got two last questions for you and then we'll let you go first is i saw dylan leclerc say bitcoin all-time high september when do you think we hit an all-time high do you have a uh an estimation uh let's say something for engagement or do i try to be objective here you pick it's your your answer let me see i'm gonna say this i'll say by the end

Starting point is 00:25:12 of the year i think 75k is conservative whether we get new all-time highs next month i i think it's kind of up in in the air to an extent um it could depend on like some macro factors because you know macro doesn't look really great right now so if we don't get like any of those existential threats then i'll say yeah we get all time high this next month okay second question where we sit today if you had to pick what's the highest you could see it going not saying it's going there but what's the absolute highest you could see bitcoin going this year yeah so i have a price model basically looking at like the historical tops it's marked the historical time it wasn't built by naos but by willard it's marked the historical tops within like five percent

Starting point is 00:25:58 and so right now that model's sitting right around 176k um right now though so there's a couple different if i get into the math of it i'm probably going to bore people to sleep but i'm looking for us to cross this this threshold of about 57 58k it's sloping upwards but once we cross that um i'll have full bull market confirmation if you will even though i'm pretty you know strongly believe that we are in a bull market right now but once we get over that then i'll have that full confirmation which also by the time we get there it'll probably be around all-time highs anyway but once we get above that i'd probably be targeting around uh 92 94k which is the next uh kind of uh threshold in that model so right now looking to see if we get above that

Starting point is 00:26:44 Once we get above that, we'll be targeting around mid-90Ks. And then if we can get above that, then we'll see where that top model is kind of sloping at. I suspect by then it'll probably be up near 200K because it's sloping upwards. But yeah, for now it's around 176K. So 176K to 200,000. Not saying it's going there, but it's possible. Yeah. Perhaps that'd be the absolute cycle top.

Starting point is 00:27:12 All right, man. where can we send people to follow you on twitter and uh subscribe to the newsletter yeah sure thanks for the plug um w clemente iii on twitter and then uh the newsletters in my bio it's just blockerintelligence.com you uh you came on and bitcoin started absolutely ripping it's at like almost 49 000 right now whoa look at that live reaction look at the live reaction Oh, the people love to hear the young wizard when he talks about Bitcoin. It'll be very interesting. You have any ideas to when we'll break 50,000?

Starting point is 00:27:51 I feel like that's like another big kind of psychological barrier. It's closer to 100 than zero. See, I think 50K is probably the last logical level for bears because that's where we broke down from the lower low when we broke down in mid-May. um and so if we can get back above that i think the whole idea of a dead cat bounce from a price structure standpoint um the probabilities of that are going lower and lower especially once we get above that 50k is also just like a nice round number so we'll

Starting point is 00:28:24 probably see some resistance there um it depends though like if if we get there and everybody's shorting it then odds are we'll we'll probably break through relatively soon right so we'll have to look at funding once we get up there um but yeah like if everybody's if everybody's trying to long resistance then yeah we probably get a rejection there at least for the the short term um but i think like 50k is probably the last logical level for like a macro lower high um and and above that i think it's it's probably gonna be pretty quick to that that upper 50k upper you know 60k range but i think like 50k is like the final boss in my opinion 50k is the final boss joe and john are sitting here eyes wide ready to roll they're like hey

Starting point is 00:29:08 we'll take down that wall and then we'll see you at a new all-time high going right through it we all buy at the same time we all coordinated on twitter willie whale that's that's what i'm gonna start calling you will the whale all right man listen i did my 50 dca buy this morning so there you go he pushed him up he's pushing it up all right man listen thank you so much for doing this everyone appreciates when you come on they absolutely love it and uh we'll do it again next friday keep up the great work i see you uh absolutely just cranking out content on twitter so everyone make sure you go follow will uh probably the best follow you you're followers

Starting point is 00:29:48 by the way let's see what are you at this week last week you were uh you were growing oh man you're at 184 000 you are absolutely exploding right now yeah it's pretty wild man like sometimes i'll look at it and like i'll have to double look and be like do i really have that many followers real quick for uh joe and john end of year will clemente follower prediction it depends on the price i'm going uh somewhere between i'm bullish on the price so i think it's gonna be somewhere between uh i'll say 275 275 john i'm gonna say 300 plus i got you will you guys are you guys are haters will clemente will end the year with over 500 000 followers oh shit we he's at 183 500 000 he's got as long as he keeps tweeting he keeps doing high quality

Starting point is 00:30:40 work he's gonna end up the year with yeah well this is relying on you here so will don't let me down i changed my number i got you brother all right all right we'll see all right we'll see you next friday thanks for doing it man thanks well no problem take it easy guys later

The Pomp Podcast - #638 Bitcoin New ATH By September?! w/ Will Clemente

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