The Pomp Podcast - #665 Bitcoin Whales Are Buying Like CRAZY 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 the lead insights analyst at Blockware. 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, the on-chain metrics, what happened this past week, and what the on-chain data is telling us to be prepared for moving forward. I really hope that you enjoyed this conversation with Will, as I always do. Before we get into this episode, though, I want to quickly talk about our sponsors.

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Starting point is 00:03:54 purposes only. Let's jump into on-chain metrics. What do you got for us this week? Sure. So this week I actually had our good friend Nick Batia featured. So it's a little shorter than usual because we actually hit the limit on the newsletter for Substack. But So first off, we have our URPD chart that we like to look at pretty often. This is basically just on-chain volume. And so what you see here is that we have like four pretty distinct clusters. The first is like kind of the pre-bull market cluster between like 3K and call it 11K. We have one while we were consolidating, you know, in that little mini bear market, whatever you want to call it, between May and mid-July.

Starting point is 00:04:36 And that cluster is between $30K and $40K, obviously. We have the one we're currently in, which is between $44K, $50K. And then lastly, we have a smaller cluster above us. This is kind of like the last zone of resistance, I would say, between $53K and $60K. And so we actually got rejected last week off of the beginning portion of that upper cluster. And so on this right here, how should people think about these clusters? Like what does that tell you when you look and identify them? One way to think about it is like this is where market participants kind of built up their cost basis, right? So like you'll see the gray line, the gray bar, that just means like that's where we are currently. As you can see, like that's the largest bar of volume since like 9.5K, like all the way on the left-hand side of the chart. So that's just showing like there's a lot of capital inflows at these price levels. There are also a lot of capital inflows between 30 and 40 K.

Starting point is 00:05:33 And so to me, this is showing, you know, you can kind of identify like support resistance areas where people bought in. Right. Because, you know, when we come back and when we retested, you know, this cluster on the right hand side and we retested 53 K last week, you know, that's where a lot of people had bought in. So obviously there's going to be overhead supply. And this is like essentially like when you're mapping resistance levels. It's very similar to the premise for technical analysis, just saying like there's people that bought in here. So once price gets back up to that level, like natural market psychology says people are going to take profits that held all the way down. They're like, OK, well, got to back up to our cost basis. I'm getting out of here. So I don't think it's like super surprising to see some some, you know, rejection off of that initial test of that. But that's the way I think of it. It's just this is kind of where capital inflows came in at different levels.

Starting point is 00:06:25 Got it. And then what about supply shock ratios? It looks like we're continuing the same trend. Yeah, it did seem real, just pretty much just continuation here. We're kind of started this next impulse, I guess you could call it, as you'll see in the liquid supply shock ratio. This is essentially just tracking movement of coins from weak to strong hands. And this is defined as like entities based off of their spending behavior. And so liquid entities take in a lot of coins, don't move many out. Highly liquid and liquid entities are moving coins in out all day long right so you're tracking the movement of coins from um those those entities that are moving coins in and out all day to those um strong hands or long-term investors

Starting point is 00:07:03 wherever you want to think about that um this is also like the metric that pop i remember back down in in uh you know like mid-may or early june when we were talking about this bullish divergence and people were calling us crazy uh but this was like one of the main metrics that we kind of used to call the reversal down there and so as you'll see we had like two impulses one kind of right above where it says June 28th, one above July 26th. And then recently we've just got this third kind of impulse where we just moved up actually yesterday as well. But I'm watching to see if we yet follow through. I'm suspecting that that'll probably play out over the next couple of weeks. But also you're seeing an uptick in the red line. It looks like it's smaller. It's

Starting point is 00:07:43 just because to be honest, I put it on the wrong scale, but it's of the same magnitude as the blue one. This is tracking the movement of coins from the highly liquid entities. So these are the people that are like really in and out of the market all day long, right? A lot of this is probably market makers. And then the movement of coins from those entities to what I consider more of like the short-term investors, right? These are the people that sell more than 50% of the coins that they take in. And highly liquid, by the way, is they sell over 75% of the coins they taken illiquid is less than 25 so you're seeing the movement of coins in this red line from those highly liquid entities to liquid and then you want to see that translate into blue right so you want

Starting point is 00:08:25 to see coins go from highly liquid to liquid and then move into a liquid and so you are starting to see um what looks like some translation from um the the red you know seeing that uptick and so what this you're saying is that the coins are moving from liquid uh i mean i'm sorry jesus from highly liquid to liquid to illiquid. So that's a good sign. And then we have our purple line. This is the exchange supply shock ratio. So what you're looking at here is a lot of people get this misconstrued. This isn't the percentage of overall circulating supply that is exchange balances. This is subtracting exchange balances from circulating supply. So you're getting the amount of supply that aren't on exchanges, and then you're running a ratio of that to the amount

Starting point is 00:09:11 of coins that are on exchanges. So essentially, similar to our liquid supply shock ratio, right, which is measuring weak to strong hands, here, you're measuring the amount of coins that are available to be bought on exchanges to the amount of coins that you can buy. And so like seeing this uptick is basically just another way to look at the fact that coins are moving off exchanges. And the last week, we have 26,150, roughly, it's 148, if you want to be exact, of coins that moved off exchanges, totaling roughly $1.25 billion at a 48,000 Bitcoin price. So you're starting to see continued coins move off exchanges. Coins are moving to these longer-term investors, which is, of course, a good sign. And I mean, this has been pretty

Starting point is 00:09:52 much up only since kind of mid-May, right? So when you look at the whales, you take people who've got more than 1,000 Bitcoin, and you take out the exchanges, people that we know have the exchange wallets. It looks like the whales are going absolute bonkers and buying Bitcoin right now and soaking up whatever they can buy. So if you look at this, I know in the chart I put in there that you have on the screen, it's kind of zoomed in. But if you go back to like mid-May, whales did a lot of the selling on the way down. I think a lot of that, this is a whole side thing, but I think a lot of that had to do with like some arbitrage opportunities that closed, because that kind of aligned with where we saw the number of whales and whales holdings drop off.

Starting point is 00:10:30 But yeah, since like mid late July, you started to see whales, you know, pretty aggressively buying. And as you mentioned, like what we're looking at here is all the entities. So this is forensically clustered addresses, which are what entities are. And then you're filtering out, as you said, exchanges and then also like grayscale, the purpose ETF, also QBTC. And so you're just basically getting the raw whale balance. And so what you see here is that since July 17th, which is two months ago, whales have added 184,699 BTC, which is roughly $8.8 billion. Once again, using that $48,000 Bitcoin as the reference for that. When you look at the ASOL, remind everyone what ASOL ends up actually being and how you look at this.

Starting point is 00:11:18 And then what is this chart telling us? What we're looking at here is we're trying to track the age of the coins that are moving. And so there's a couple of ways you can look at this. I just decided to throw an ASOL because I hadn't put that chart in the newsletter for a while. But you want to kind of use all these metrics in tandem. So, for example, we have like our spent output age bands, our spent volume age bands, coin days destroyed, dormancy, liveliness. And each of these different metrics have a different purpose. So, for example, like ASOL is just the average of all the spent outputs on a given day.

Starting point is 00:11:51 But there's no weight given to it by volume. So, you know, if you have what appears to be high spending from older coins, you need to also look at the volume of which they're selling, because if they're selling like 0.001 BTC, who cares, right? But if you're seeing the volume of, and that's where you look at the spent volume age bands, and also you can look at like coin days destroyed, you can see the volume of older coins is perhaps increasing or decreasing. And then look at, is that in correlation with like the ASOL or your spent output age bands, which are literally just looking at the average or the average in case of ASOL, but also spent output age bands. You're just looking at the amount of spent outputs on a given day. So, you know, nuance, nuance, nuance, yada, yada, yada. But it's just saying you need to use these different age related metrics in tandem. But overall, the conclusion here is just the fact that long term holders are sitting tight. Right. We're seeing declining in the age of the coins that are being spent on each on every given day over the last call a week or so.

Starting point is 00:12:56 And so you see that in tandem across, you know, across the board and all these age related spending metrics. And that's just the kind of point I was trying to get out here. So a lot of the spending is coming from these younger coins. When you look at the futures market, I know that there was a bunch of futures and derivatives that played into some of the price movements previously. What are you seeing right now in the futures market? You know, on-chain is obviously like it tracks broader trends, right? And so for these kind of short-term price fluctuations, obviously you need to watch a like short-term price structure, but also derivatives data. And so last week we got a complete flush in the derivatives market.

Starting point is 00:13:29 We had, you know, this massive, you know, liquidation cascade. Since then, we've started to see a recovery in funding and then also in futures open interest. So futures open interest has recovered by roughly a billion dollars from the wipeout, but it's still three billion dollars from where it was at before we had to sell off last week. And then also funding is slightly recovered, but it's still pretty far from where we were at, you know, leading up to that cascade last week. So, you know, keeping an eye on some of the stuff, like you can just watch basic, you know, just watch funding and futures, you know, open interest. And if you see like a large increase in both of those, you know, perhaps that's the time to be a little more cautious in the short term, right? But, you know, I think like, and this kind of goes into the next chart, the broader on-chain structure, in my opinion, like when looking at the supply dynamics, You have things like, you know, supply that hasn't moved in at least a month, hitting an all time high at 93 percent of supply has moved in, you know, at least a month.

Starting point is 00:14:27 You have long term holders supply hitting an all time high. A lot of these things are just, in my opinion, undeniably bullish for the coming months. But perhaps, you know, on the on the shorter term time frames, you know, you can get these liquidation driven moves because, you know, the liquidity in the futures market is massive. So it has a large impact on price in the short term. When you think about the current state that we're in, I think over the last couple of weeks, we've really talked about this kind of supply squeeze. It seems like about 90% of Bitcoin hasn't moved in the last 30 days or so. Only the earliest, youngest coins are being sold. The whales are buying up as much Bitcoin as they possibly can.

Starting point is 00:15:09 And is this just a recreation of a lot of the market dynamics from October of 2020, which then was followed by like a 500% move? Do you see a lot of similarities between those two things? Yeah, for sure. Like, you know, I think like a lot of the metrics that like I'm looking at, they kind of resemble the end of like a bear market almost. And so like my kind of like framework for the current, like where we are right now, it's kind of that we're transitioning out of like the latter half of like a bear phase for the market. But, you know, like zooming out, it kind of appears some things are, you know, saying that we're kind of in like the middle of a bull market. So I guess the way I would frame it is that we just came out of a mini bear phase within a broader bull market structure. But a lot of the things when you're talking about the supply dynamics, as you just mentioned, are in fact like resembling kind of mid to late, you know, 2020.

Starting point is 00:16:01 I like that. Joe, John, what questions you guys got? What's going on, Will? Appreciate you coming on, man. I got a quick one about hash rate. So we saw it fell about 50% to 55% earlier this year with everything going on. It's recovered aggressively since then. We're probably about halfway back. So maybe 20% to 30% down from its all-time highs. But how do you think about Bitcoin's hash rate in terms of future price? I guess the way I would think about it is just as more hash comes on the network, miner profitability goes down. When hash first came off the network like north american miners were super profitable because there was less competition

Starting point is 00:16:39 for the same amount of block reward right and so as hash has come back on the network that profitability has not in a big way but it's it's started to get more constrained right as you started to see it recover um and so i would suspect like you're gonna see some some uh you know like marginal selling from these miners perhaps as as they need to cover their cap capex but like at the same time you know now they have you know so much access to the capital markets they can just raise capital to you know uh cover their their operational costs so it's it's i don't know it's hard to say because part of me thinks they're gonna have to sell some of their btc and miners have been selling over the last call of two weeks because you know their profit

Starting point is 00:17:18 their profitability is getting a bit constrained as hash continues to come back on the network but at the same time we know like miners now can just borrow you know as much capital as they need and they can tap into the capital markets that way. So I don't know, man, like it's hard to say. Those are kind of like my two arguments, though, for and against if it has a positive or negative effect. John. Yeah, well, what's up? Thank you for doing this. We all know you're big time now. So so I have I have two questions. One, can you just talk about kind of the resistance that Bitcoin has? I read the other day that people were kind of calling the resistance at forty six thousand. And then also, can you talk about so from February to May of this year, it apparently

Starting point is 00:17:56 seen that a lot of whales were kind of building short positions and distributing their long positions to push out retail traders. Can you talk about that? And if we're seeing what we saw in February, kind of now? Sure. So like, I think on a short-term basis, I kind of look at like these levels are created by a guy on Twitter called SpacemanBTC. So shout out to him. But it's looking at like the weekly high, monthly high, daily open, monthly open, uh, you know, these, these like shorter term key levels. Right. And so, um, we've broken out above the, the Monday, Monday's high and also the monthly open. Uh, and then we come back down and now we're, we're retesting, uh, the monthly open. So, um, if we can, if we can move back off

Starting point is 00:18:36 of, uh, you know, this retest of the monthly open right now, I'm kind of looking at a move up towards the previous monthly high, which is around 50, 55 K. Um, and we're also above the 200 day, which is another, you know, kind of like key level that I think a lot of like legacy finance is probably watching. But the key level from like a technical perspective for me is watching this point of breakdown, which we broke down out of in May. And so that's, you know, right around 40, 49 K call it. Because for me, like that's important because you're, you're showing, you know, price price, the market has now decided that it's moving above where it decisively moved uh you know down into this mini bear phase in uh in you know like in mid uh may so

Starting point is 00:19:19 if we can get back above call it 50k which is also just a psychological number um that would also mean we're getting above the previous monthly high and also the point of breakdown and so if we can move back above that level that would be a really strong sign for me but in the in the short term like i'm watching this retest of the monthly open see how we react but i feel pretty confident here also you know obviously from on-chain perspective But, you know, seeing that we're now sitting above the 200 day and just broke above Monday's high. And also, you know, we did break above the monthly open. But as I just said, we're now retesting it.

Starting point is 00:19:53 But yeah. What was the second question? No, you're good. Does it look like does this look similar to what we saw in February? So someone mentioned in the chat about how maybe some whales are building like short positions and distributing their long positions to push out retail traders. I'm curious what you think about that. It's hard to say. like one interesting thing i have been watching though is like bifinex like i watch sometimes

Starting point is 00:20:15 like the heat maps of like the bids and asks and it's interesting like it seems like the bifinex the large bifinex buyers almost always get their uh their their bids filled um so that that's been one interesting thing and like whenever their bids get filled you also see like an uptick in on-chain like you know the the whales holdings as well but i don't know it's it's hard to like say if they're, if they're like moving the market or not. Um, but I, I guess the only, the only thing I would say is just that it seems like whales are kind of, uh, getting their spots picked pretty well and they're, they are getting their bids filled. So I don't know. I think it's like hard to, it's hard to make that conclusion, but, um, you know, I, I definitely don't think

Starting point is 00:20:55 that, um, you know, it's anything against that argument that, that I've been seeing. Well, last, uh, last question, we'll let you go prediction changing for end of year. Are we still still on track for a big blow off uh top here no prediction hasn't changed i don't know about blow off top though um but i think perhaps like this run stretches out into like q1 of next year but yeah like i think the supply dynamics though from like a macro perspective are setting up for a really strong next couple months um obviously it depends on if we get some catalysts with you know some announcements or you know there's been a bunch of chatter about this supposedly etf announcement coming out, which I'm not an expert on any of that stuff. So we'll, we'll see how that

Starting point is 00:21:38 goes, but from just like the pure supply dynamics standpoint, I think, yeah, we're, we're setting up for, uh, uh, an exciting next couple of months. Awesome, man. Don't have too much fun this weekend. We appreciate you. Thanks, man. You guys take it easy. Bye guys.

The Pomp Podcast - #665 Bitcoin Whales Are Buying Like CRAZY w/ Will Clemente

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