The Pomp Podcast - #653 Is Bitcoin About To Take Off?! w/ Will Clemente

Episode Date: September 4, 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. In this conversation, we discuss the bitcoin fundamentals, on-chain metrics, what happened in the past week, and what the on-chain data is telling us to be prepared for moving forward. ======================= Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com ======================= With 10M+ users, Crypto.com is the easiest place to buy, and sell 100+ cryptocurrencies. The Crypto.com Visa Card gives you up to 8% back instantly, and 100% back on Spotify and Netflix. Also, Crypto.com lets you earn up to 8.5% p.a. on BTC, and 14% p.a. on stablecoins. Get $25 when you download the Crypto.com App with code "pomp". Download the App now: https://crypto.onelink.me/J9Lg/pomppodcast2021

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. In this conversation, we discuss the Bitcoin fundamentals, on-chain metrics, what happened in the past week, and what the on-chain data is telling us to be prepared for moving forward. I always enjoy these weekly conversations with Will, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors.

First up is Circle. Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce, and financial applications worldwide. Circle is also a principal developer of USD Coin, or known as USDC, which is the fastest growing, regulated, fully reserved dollar stablecoin in the world. And it now stands at more than $20 billion market cap, and it's adding nearly $300 million of net new digital dollars in circulation every single week. The free Circle account and suite of platform API services bridge the gap between traditional payments and crypto trading for DeFi and NFT marketplaces. I've had Jeremy Allaire, the CEO of Circle, on the podcast before. I really enjoy his perspective, and I think that USDC speaks for itself in terms of the recent growth. Go check him out at Circle.com.

Again, you can learn more about the fastest-growing, regulated, fully-reserved dollar stablecoin in the world and all the ancillary services that they've built at Circle.com. Next up is Crypto.com. They're helping to mainstream the crypto industry, signing major global partnerships with multiple sports, including Serie A, the Italian Football League, UFC, and my personal favorite, Formula One. With over 10 million users around the world, Crypto.com offers an easy way to buy and sell more than 100 cryptocurrencies. You can even buy Bitcoin with as little as $1. New users enjoy 0% debit card fees in their first 30 days. Crypto.com also pays some of the most competitive interest rates in the industry. You can find out how much to earn by visiting Crypto.com.

Crypto.com is also Visa's biggest crypto card partner. My listeners across North America, Europe, and most of APAC can apply for the slick metal card offering up to 8% back on most purchases and comes with these amazing perks like 100% rebate on your Netflix, Spotify, and Amazon Prime subscriptions. You get $25 when you download the Crypto.com app today using code POMP. Again, $25 when you download the Crypto.com app today using the code POMP. You can click on the link in the description to take you right there. Crypto.com, again, they've got these partnerships that they've done with Serie A, the UFC, and Formula One. Shelling out cash to get the word spread.

Go check them out at Crypto.com or click on the link in the description and get that $25 when you download their app. All right, let's get into this episode with Will. 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. We got Will here. Will, what's up, man?

Hey, guys. How's it going? Happy Friday. Happy Friday to you as well. Let's get two things out of the way first. One, breaking news. You dropped out? Taking a semester break. Walk us through the decision to decide to take a semester break. Yeah, I just think Q4 is going to be pretty wild,

and the opportunity cost of not having my full attention on this space is, I don't know, too great, or at least over the next couple months. So just going to kind of give a Bitcoin my full focus for the next, you know, two, three months and see how it goes. But yeah, for now, for now, it's just I'm taking a semester off. I love it. I love it. I think this is a good idea. So we're excited that you're doing it. Second question. We are two weeks into you being at college. How drunk has everyone been? Give us a college update real quick. Oh, well, the first week was syllabus week. So that, that's like a 10. Like I got a couple of buddies that ended up in the hospital, but, um, I'm, I'm, I'm not getting too crazy, but yeah, there's, there's some people wilding out. Well, did you just hit us with a, did you just hit us with a casual? My friends went to the hospital and that's a 10.

yeah people people wilding out first week i don't know people just i i guess like everybody wants to throw crazy parties and then like so everyone comes to their party so it's like yeah first week i mean it's been like that the last three years but yeah it's pretty wild welcome back you're shell-shocked you're like in the fog of war all right let's get into bitcoin Let's start off with these price clusters, the U2XO realized price distribution. Explain what this is. And we're going to pull up the chart here to show people. But what exactly is this?

And then how do you analyze it? Yeah, so it's basically just on-chain volume. So you're looking at different price levels in which how much Bitcoin supply has moved at. And so what you see is we kind of have these four very distinct volume clusters. We kind of have this pre-bull market cluster, which is about 28.5% of supply, and that's between, call it 3K, 11K. And then the one below us, while we range for two, three months, and that's right between 30, 40K, and that's about 15.5% of supply. The one we're currently in, call it between 45, 50K, that's about 9.6% of supply. And then we finally have one, um, smaller cluster kind of in that distribution range

that we were in, uh, in kind of March, April, and that's about 7% of supply between 54 K and call it 60 K. Got it. And then when you look at the state of profitability, uh, by the way, the charts that you've been putting out now are very, very clear. So you're doing a great job in terms of highlighting with the colors and stuff. I like it. Uh, let's look at the adjusted Sopra, um, and kind of explain to us what's happening

here with this reversal. Yeah. our good old friend Soper. He's looking good. So like, you know, one thing that we have been watching for like two months ago was we wanted to see Soper break above one, which is the threshold for, you know, is the market trading in a state of profit or loss. And then we wanted to see us, you know, see the, see the metric come back and retest one as support on a price correction. And then, and then see it consolidate above one and kind of stabilize to get that confirmation that were in this uptrend. And so we had that retest of one as support. We consolidated above

one. And so far, it's held. So that to me is confirming that the broader trend is bullish. One thing to note, though, it's given that we haven't had a retest of one in over a month, it's not crazy to suspect that we might. But when you go back and look at the end of last year, I mean, we went two or three months without having a full reset. But just keep that in mind. At some point we will come back down and retest that one threshold got it and then let's walk through the supply dynamics um it seems like this is very very bullish and you know a continuation of setting up this like supply shock but walk us through things maybe starting with this illiquid supply rsi yeah i mean like the supply side i mean it's like undeniably bullish um i don't know like it's hard

to find um other setups i mean i guess you could say like late last year but you know it's looking very very clear cut to be honest um this a liquid supply rsi created i don't know like two or three months ago it's basically it's a 365 um stock rsi using like the 30-day change of liquid supply so in essence it's just trying to capture the broader movement of of you know a liquid supply and so it's basically trying to identify these supply shocks like broader macro supply shocks um and so the last ones we've had were a kind of going into the 2017 uh bull run uh b coming out of the 2018 bear market heading into the mini 2019 uh bull market when we ran up to like 14k and then also heading into to late last year before the you know before we broke all-time

highs and got into the real mania phase of of the early bull market and we just got another one like two or three weeks ago so to me this is illustrating in a broader sense we're in this um, you know, uh, state of state of supply shock. And I suspect like the full effects of this aren't, aren't, you know, fully priced in yet. And then when you look at supply shock ratios, uh, across the other two, it seems like exact same thing. It's just, this is completely being ignored by maybe not ignored, but, uh, is definitely underpriced in the market in terms of how bullish it is. Yeah. Like, well, just like as a side thing, I suspect like as more people look at this stuff, um, just by, because of information asymmetry, like the, the signal of it

may go away over time as more people look at this stuff but yeah um we've had this bull div between the supply ratios so we have on the screen uh the liquid supply shock ratio just tracking the movement of coins basically from weak to strong hands um the highly liquid ratio which is tracking the movement of coins from highly liquid to liquid and so that tends to be a bit more reactive tends to get squeezed but it can also sometimes be be a leading indicator like if you'll see um like right above where it says August 30th, you'll see like highly liquid supply started moving up before the liquid supply shock ratio. So sometimes it can be a leading indicator. So I like to look at that as well. And then also the exchange supply shock ratio. And this is just comparing

the amount of coins that are available to be bought on exchanges relative to overall circulating supply. And so, yeah, like earlier this week, we got a bullish impulse in that, posted that on my twitter and then at the same time we had price kind of going sideways bearish and so um i think we're starting to see some resolution of of uh you know that supply shock um also or impulse whatever you want to call it um also it's interesting because this comes in confluence with um a volatility squeeze that we've entered about five days ago and like just based off of the historical time frames that they usually resolve um that that looks likely to resolve in the next week. While at the same time, I kind of have a similar timeframe with the effects of

this impulse. So, um, you know, the volatility squeeze is just saying we'll have a big move, but when you look at this, I think this kind of gives some clues as to perhaps the directionality of that breakout. Got it. When we look at the exchanges, this is probably my favorite thing to look at is just seeing that the exchange flows are going one way and it's not onto the exchanges. It's off the exchange. Explain this. Yeah. So we have four charts here. So in the top left you'll see the balance on exchanges and then it's the stacked version so you just see like each individual exchange is a different color um the top right is the exchange net position change so this is looking at the 30-day difference between you know what our exchange balance is today what

our exchange balance is 30 days ago and so that's useful because you know it can get noisy i would i don't recommend anybody to look at this stuff intraday um and then also you know like day in day out, it can get a little noisy too. But when you start to see a trend on the net position change, which is the 30-day change, as we just said, you can be a bit more confident in that trend because it's a broader trend that's being sustained. And then on the bottom, we have Coinbase balance. And then on the bottom right, you'll see Binance's balance. And so there's this interesting kind of dynamic here where you've started to see buyers show back up on Coinbase while at the same time, coins have been moving back onto Binance. And so to me,

of this kind of illustrates twofold. First of all, you know, one thesis could be you have buying in the East, selling in the West. I'm sorry, the reverse. You have buying in the West, selling in the East, or also it could just illustrate the fact that there's demand for the speculative products that Binance offers. Got it. If we move ahead to the short-term holders and long-term holder ratio. What are you seeing in this? It seems to be trending upwards. Yeah. So this is comparing the amount of supply that long-term holders possess in comparison to the amount of supply that short-term holders possess. And so what you see is you kind of get this like zone where very similar to a liquid supply, you get this zone where you have a supply

shock effect on the market. And when you look at this, you'll see at the bottom, I put in these little brackets. And the reason I did that was to illustrate the difference between now and the late 2017. Because when I show a lot of people this chart, they say, oh, well, long-term holders buy into the bear market. Why is this a bullish thing? And that's true. But when you look at the rate of change in terms of where this bottomed out and how fast it recovered to get into that zone of supply shock, it's not even close, right? And then also where you look at the base that it grew off of, it's much higher than the base that it grew off of in late 2017. And so this is just another way of looking at, once again, we're getting this kind of, uh, lockup of supply in

the market. Um, and so, yeah, over the next month or two, I suspect we would probably get to that top part of that green little highlighted range. Got it. And so we're going to pull up the, uh, the chart here that you're talking about. Basically what you're saying here is, um, the brackets of the supply shock ratio, uh, chart, it really shows that there is like a time period of growth uh yeah this one right here there's like a time period of growth on the brackets and then that shows this like massive move upward and what you're talking about is this green highlighted area is really the area that you're looking at and it looks like we're about to enter back into there yeah exactly yep got it okay um and then let's look at the spent output age bands

i know you've been talking about this for a while and it seems to uh to be confirming a lot of the same stuff yeah so what we'll be looking for here is like our long-term holders who set the floor are they starting to take exit liquidity um and so when you look back at late 2017 to early 2018 when you had the dead cat bounce up to whatever 17k you saw the spent outputs from um six months and older that went all the way up to like 45 so you had this basically all the long-term holders jumped ship and took this took the opportunity to to take their profits and get out of the market because they had no confidence that we're going to see continuation. And so right now what we've seen is just one kind of what appears to be just a one-off spike about two

weeks ago actually has been declining since then, but not seeing anything that resembles that kind of, you know, jump ship, abandon ship behavior from these long-term holders. It doesn't look like they're taking exit liquidity. It looks like they're just holding strong. And then the last thing, uh, is minor profitability. Uh, miners seem to be real excited, um, right now more so than they were, you know, back in a Q1, maybe what, what do you see with minor profitability? Yeah. So you'll see like three different colored lines. Um, the purple bluish, whatever you want to call it mine that that's hash. Um, the orange line is, is minor balances. And then the green line is minor profitability. So it's just looking at revenue per hash. And so

you get this dynamic kind of this inverse correlation between as, as hash rate comes back on. Profitability, so revenue per hash goes down. So you've seen hash slowly come back on the network, still far from where it was peak earlier this year, but it is slowly coming back on. And at the same time, that means that revenue per hash after we just had this difficulty adjustment last week is starting to trend down. And then at the same time, you're starting to see miners trim their holdings just a little bit, not anything that's going to have any kind of serious impact on the market. They've sold about 1,700 coins in the last 10 days. So just something to keep an eye on. But this isn't anything that's anything to be concerned about. Miners sold

into the early bull run in February earlier this year as well. It's to be expected that they're going to take some profits on a move up. And this selling pressure isn't anything that's going to cause some major down draw in the market. But I do think it's just interesting to follow what miners are doing. For the last couple of days, you've been tweeting about a move back to 50,000 and you essentially have identified that as like one key area. And it appears that we've overtaken the 50K. Where do you expect us to go from here? And how are you thinking about, you know, 50,000 and the importance moving forward? Yeah. So like when we looked at the on-chain volume earlier, what you'll see is like there's a gap between 50k and 54k um so i wouldn't be surprised if we if we

see a move there in the coming days um i'm also keeping an eye on funding though so like if open interest starts to starts to spike in comparison to market cap and you start to see like funding skyrocket then perhaps we'll get some short-term pullback but at the same time these broader supply metrics are showing that you know i i have very strong confidence that we're going to see continuation over the coming weeks um you know but we'll have to keep an eye on on the derivative stuff but yeah i'd be looking from an on-chain perspective um for 54k um and then i think from a technical perspective the the last real resistance is like 58 to 60k um you know once we break that it's pretty much blue skies so yeah those are i guess kind of some of the levels i'd

be watching is it fair to say that you're a 19 year old kid who dropped out of college for a semester because you're anticipating the Bitcoin bull run being absolutely breathtaking to the rest of this year? Yeah, definitely. That had a lot to do with my thought process. It's like, I think, I think, you know, if we were in a bear market, I may have not made that decision. Right. But I think like, I'm going to be very busy over the coming months. And so, you know, for now, I think like just taking a break from school is probably the best choice, at least in the, in the, you know, in the midterm. But yeah, I think we're going to have a wild Q4 just based off of um you know when you look at this data in combination like of you know with what i kind of

hear anecdotally from some you know some people with many more connections than myself um it seems like both of those are kind of aligning to you know there there's some uh perhaps big buyers that that came in you know down and over the last couple months um and you know i think we're going to probably see uh some interesting announcements towards the end of the year but we'll see what And as that happens through the end of Q4, everything that we're seeing on chain right now, the reason why you think that a lot of your time is going to be focused here is just that we continue to move significantly upwards because there's so many people holding on to Bitcoin with strong hands. And as that new demand comes in, the price has to accelerate rapidly to kind of accommodate everyone. yeah exactly and like one chart like we skipped over but if you look at the broader trend of illiquid supply um the liquid supply shock ratio what you see is that we've been in this kind of

like descending channel for all of bitcoin's history um and then after covid of last year we actually broke above that and we're kind of just free floating uh way above this this channel so to me what that's showing is like the broader huddling behavior is is unlike dare i say this time is different um it's unlike anything from any previous uh bull run that we've been in um so yeah like you're seeing really strong um you know buying and holding from from these new market participants like also really strong maturation of coins so like when you look at like the realized cap huddle waves you see the market participants that came in over the last six months or the last year they're starting to those coins are starting to age um which which is a good sign once again

net. Like people are coming in, buying and holding. You know, it seems like the whole narrative about, you know, people just buying, you know, Bitcoin with a long-term, you know, thesis on, on how it's going to be, you know, an inflation hedge or whatever it may be. I think the data to an extent does reflect that. Got it. Joe, John, you guys got any questions? I'll go first. Will, you're a legend. Congrats on, on taking, making the decision to take a semester off. I think you're making the right decision. I think we're going to see some uh, interesting price action, like you said, and you will be very busy with that said, uh,

what, what worries you like, right? Like a lot of this data looks great. Everything we're hearing sounds great. Is there anything that you're watching and you're just, uh, you know, keeping an eye on for the bear case and you're, and protecting the downside a little bit? Yeah, for sure. Um, you know, first of all, it would be like, are these long-term holders, like kind of what we touched on, are they taking exit liquidity? That's kind of the last real, like bear case in my mind. Um, also you can make an argument that because, uh, like transaction activity is low that that's somewhat of a bearish thing but i kind of see both ways because i also think that um the the fact that there's no you know the men pool is freed up it's it's kind of

showing that there's no like speculative mania in the market right now it's just you know experienced market participants um you also see that in in like i'm laughing because i know i'm like turning this into a bullish thing but you also see like um you know a large portion of volume is from from larger mark participants so like the amount of value transacted is mostly large transactions so yeah i think like there's a lot of speculation out of the market but um yeah some people some people would would see that as a bearish thing that there's not a lot of you know monetary value flowing through the network um and also it doesn't look like there's like really strong um demand to to use the network right now when you look at like the mempool um or like number of transactions and

stuff but yeah like some people say that you know that's just a reflection of there's no speculation in the market. Um, you know, you have like transaction batching that's now, um, used by Coinbase, although I don't know to what extent that that's the case, but yeah, I think you can make an argument there. That's, that's potentially a bearish thing. Yeah. Well, what's up? Congratulations on, uh, leaving school and big step. I wish you nothing but the best. Um, my question is on resistance levels and like whales and other big players in the space taking profits, right? So what is what is the next resistant level if we get past and when we get past 50k and then uh at what point do you see kind of people taking profits or is it just hey they're going to take

profits the whole way up and maybe when we get to 100k you'll see like a bigger drawdown yeah i think like you know when it comes to when it comes to like price discovery it's really hard to to guess where price is going to take a pause you know i think well first of all before you know theoretically we get to all-time highs i think um the the trillion dollar threshold which is ran on like 53 54k i think it's at like 53 200 um that that's probably going to offer some resistance and that kind of aligns with unchained volume too so i think that may give us like some short-term trouble but i don't think it'll be you know crazy resistance level but then the last kind of final boss is like 58 to 60k i guess you could say um but yeah above that like if we if we were

to get into price discovery i mean all you can really look at is like like fibonacci retracement levels or also just like psychological levels you know bitcoin like almost any other asset that um you know uh you know reacts really really strongly to different psychological levels like 50k right or 60k 70k these round numbers um so yeah like i don't know the that that would be the only that's the only way i could i don't know kind of estimate where um you know perhaps we'll take a breather but i don't know you know keep in mind like we're gonna have corrections along the way Like, you know, I'm bullish over the coming months, but that does not mean we're not going to have, you know, 15, 20% corrections along the way. You know, well, if you had to rate your bullishness right now, one to 10, 10 being the bowl of bowls, one being, uh, not so hot, where are you putting yourself?

I think we're cooking up like eight and a half, nine. That was a big number there. All right. Uh, you want to change the timeframe too. if we're talking like the next couple of weeks, yeah. Like short term, I don't know. Like through the end of the year, eight and a half, nine, that's pretty good, man. That's pretty good. Uh, all right. Last, uh, last question, any changes to your end of year, uh, thoughts yet, or you still think we're going, you know, a hundred K plus, uh, before the end of the year,

nothing changed there. I'm sticking to my little, uh, the little rainbow price model that I showed you like a couple of weeks ago. I think, um, if we can get above this, I call it the Delta top main which is the difference between um the historical model that's time the tops and the historical model that's time the bottom um that's right around 58 60k which is in confluence with like that final boss in terms of ta levels um if we can get above that which served as resistance in the 2017 get dead cat i think that's like full confirmation we're back in the bull market and so if we can break above that then i would be targeting the next step up in the model um and that's i think right around uh well it's like 90 96k but by you know by the time we theoretically

reach it'll be above 100 so yeah that would be like my next target and then if we broke above that i'd be targeting the final or the top model which right now is at like 180k oh yeah that sounds like a good number to me i tend to think that uh you're gonna be more right than wrong but let's uh let's see what happens um all right man where uh where can we send people to follow you on twitter let me drop your uh twitter handle right now into uh into the comments and uh where can they subscribe to uh email what do you think of the new header by the way i think it's pretty dope it feels like a little like futuristic there what is that is that japan yeah i just looked up like tokyo neon lights i just thought it looked cool hey man listen you you uh you drop out or

take a semester off next thing i know you're gonna be on in asia uh with everyone in korea like trading a bunch of uh bitcoin like hour by hour yeah right i definitely i'd like to this is a whole nother side conversation we can have but i want to travel so i got to get some some recommendations from you guys oh man you ain't going back to school dog it's over listen tell the teachers goodbye tell them hey listen i'm gonna take this semester off but maybe i'll never see you again so let me just say bye either way yeah i'm on twitter at w clementi iii and then the link to the newsletters in my in my bio is well. He doesn't want to say anything cause his mom probably watches this or his dad and they're

going to be like, Hey, he promised he was going to go back. Yeah, I did. He's definitely going back. I promise. I promise. I'm the way out. You should tell him to sign up for your newsletter. So you're like, listen, you're teaching 60, 40 portfolios. I'm teaching about the future. Why don't you sign up for the newsletter? May you get educated. Yeah. All right, man. Listen, thank you very much for doing this i think that uh uh you've been all over this supply squeeze and uh so far been very right so uh i think just keep at it the the charts look great doing a great job people are enjoying it so uh we're going to uh we're gonna do it again next week any uh any last words any college party plans this weekend anything we should know i can't say too much but

you know it's memorial day monday so it's memorial day every weekend there's something every weekend it's it's well there's people at ecu it's labor day by the way party for like columbus day like they'll party for any you're so you're so focused on the plans you forgot that it's labor day and not memorial day but oh let that slide the end of summer not the start this is the start of will summer will summer's just starting he's he's done with school uh what do your friends think by the way have you uh have you taken the semester off they even care no i mean yeah they think it's cool like i don't know a lot of them don't really know what to make of it but you know i mean like dude to be honest like half people don't even know what i do so

like my parents don't even still know what i do but they just know i do stuff with bitcoin they just they just think it's cool i don't know i don't talk about it too much because like if i start talking about it with them they'll just kind of fall asleep so they see everything growing and they're like, all right, it all looks good. Yeah, pretty much. It's all right, man. You're doing a great job. Keep it up. Uh, I, uh, I think you made a good decision here. We'll, uh, we'll see. Will's mom, Will's dad was a great kid. You should definitely be proud of your son. He's going to go back to college when, uh, when Bitcoin goes to zero. Uh, and, uh, and we'll talk to you next week, buddy. All right. You guys take it easy. Have a great weekend. You too. Later. See you guys.