The Pomp Podcast - #699 Bitcoin On-chain Metrics w/ Dylan LeClair

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. Dylan LeClaire is the head of market research at Bitcoin Magazine. In this conversation, we discuss Bitcoin, on-chain metrics, funding rates, Bitcoin futures ETF, long-term holders, bull market price action, and what we should expect through the end of the year. I really enjoyed this conversation with Dylan, 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 Choice.

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Starting point is 00:03:18 own Bitcoin by visiting compassmining.io today. compassmining.io. Go there today if you want to get in the mining game. compassmining.io. All right, let's get in this episode with Dylan. I hope you guys enjoyed 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, Dylan, let's start with just before we get into any sort of slides or anything, can we just talk about where your general sense

Starting point is 00:04:02 of the bull market is? Like, like, how are you feeling right now in terms of the sentiment on Twitter and how people kind of are thinking about where we are? Yeah, I mean, not much has changed in the last week, except, you know, just the price action, really. But I mean, the bull market is just beginning, you know, one little leverage flush, you know, a little people get a little excited, overextended, uh, and derivative markets. That's, that's nothing, uh, you know, fundamentally nothing has changed with, uh, the Bitcoin bull market. And I think we're right at the beginning. All right. So we're going to pull up, uh, some of your slides here. We've got this Bitcoin long-term holder supply. When you show this to people, I think they're going to say,

Starting point is 00:04:37 wait a second, a long-term holder supply is going down. What does that mean? So describe why long-term holder supply is so important to pay attention to. And then this dip that we're starting to see, what is exactly, is this telling us? Yeah. So, um, you know, Will has been covering this extensively i've been paying a lot of attention to this and covering this myself um and it's somewhat like counterintuitive in the sense that long-term holder supply drawing down is actually a sign of of a bull market um so basically you know when you're talking about a supply squeeze supply a supply squeeze we keep repeating it right on-chain analytics is like you know this is this is what we're covering over and over again and why is this driving the price action well basically

Starting point is 00:05:15 what you're what you're doing hodling stacking what it's doing is it's engineering a supply shock And so that's basically the driver of every single bull market is there's a fundamental imbalance between supply and demand. There's a lot of, you know, new money coming in and they're having to compete against basically, you know, not a lot of the supply. So I, you know, a lot of these charts I put together, I showed like a one month view and then I show like, you know, the entire history of Bitcoin. And right now we see like basically four straight days, three straight days of drawdowns and long term holder supply. And people might think that's bad. But really, what you're seeing is that the long term holders are engineering the supply squeeze. And then when the bull market comes and Bitcoin gets bid up, they'll take a little bit of profit off the table. You know, just a proportion of their holdings they distribute to new market participants.

Starting point is 00:05:59 And that's fine. But that, you know, that's kind of, you know, this is one of the telltale signs of the bull market kind of kind of beginning. So when we look at the second chart you have here, it's still showing this long term holder supply. But I think this is really where you can see that as the long term holder supply draws down, that's really where price kind of punches upwards in the market. And I think this is what you're talking about with that long term holder supply contracting a little bit actually signals the start of that kind of epic move upwards. Yeah, I mean, so the price action is almost like the spark of why they distribute the new holdings, right? Like you've accumulated during the bear during consolidation and Bitcoin goes parabolic. you know it's okay to take a little bit off the table um you know some people will hold forever um but you know you know if you see an asset that you hold go up 10 000 percent a thousand percent

Starting point is 00:06:47 you know double 5x whatever it is um you're gonna maybe take some take something off the table so that's what you see here every time bitcoin goes parabolic um just like it did you know when it went 6x from september of last year to you know march or april you saw long-term holder supply draw down basically the whole time and new market participants came in and basically you know acquired all that Bitcoin. And so now, you know, when we were talking last week or a couple of weeks ago, and every time Will comes on, he's talking about, and he's showing you these same charts and he's saying, Hey, like, look at, uh, we're seeing kind of like almost like a bear market dynamic where, where long-term holders are, are stacking, are stacking their butt off.

Starting point is 00:07:20 And so, you know, now I think we're right at the beginning stages of this next parabolic advance, where you're going to have a, you know, a club, a demand of new money come in and they're just going to, you know, it's, they don't have much to bid. They're going to have to bid reflexively in a small, super small flow to free supply. And that's really what happened back in October, November, December, and into Q1 of 2021, right? Was that there was very little supply available that was kind of liquid.

Starting point is 00:07:45 People came in, they were like, hey, I'll buy it at $12,000. No one was selling 15, 20, 25, 30. And then we just ran all the way up to $64,000 because literally it took that much price movement. Or I like to think of it as like the US dollar price has to move upwards to accommodate everyone in terms of the new demand, and then also unlocking, right? It's almost like you have an

Starting point is 00:08:06 asset, you really like it, and they're bidding on it, right? Literally, they're saying, I'll pay you a certain price. And Bitcoin is like, I'm not selling, I'm not selling. And then eventually, they're like, okay, fine, I'll sell it to you at $64,000, like idiot, right? And that's where they're actually going to go ahead and sell. But everyone has a different price that they'll do that at. Yeah, the Bitcoin price moves up when the marginal seller is exhausted. And I think that's the key. You know, there's a few willing sellers in this market, and you can see it on chain um you know a couple million bitcoin are basically being wash traded back and forth and the people these traders you know they'll set limit orders they'll they'll you know market

Starting point is 00:08:36 sells where they take some profit um and there's obviously there's leverage on top of that so you know when you're looking at certain price action like just like the last couple days why is bitcoin going down i thought all-time highs were broken well you know there's derivatives on top of that which we'll you know we'll cover in a little bit but you know the fundamental driver of a bull market is you have the free flow to supply is has you know gone really really thin and you're having this new kind of club of demand coming. And so they have to just reflexively bid up the price of Bitcoin. And so when you see long-term holders start to distribute a little bit, that's fine. And that's just showing you that the new money is coming in and acquiring that supply. Bitcoin's

Starting point is 00:09:10 changing hands. So we have this chart, the long-term and short-term holder on-chain cost basis. What is this showing us? Yeah. So the cool thing about on-chain analytics is we can see basically the average price of these cohorts. We can see the long-term holder, basically cost basis, the price that they acquired their coins and the short-term holder cost basis. So the short-term is the pink and it's basically pretty, it follows price, you know, pretty closely. And the long-term holder supply is obviously lags a little bit. And you see, you see during bull markets, you see the short-term holder cost basis, you know, get bid up huge while, while the long-term holder cost basis kind of stays flat or, I mean, rises marginally.

Starting point is 00:09:45 And so a bear market dynamic is when, is when these two are converging upon each other in a market dynamic is when is when one kind of the short-term holder cost basis really really really gets bid and so when you put these two in a ratio you can kind of see over that over the history of bitcoin you can see like a really interesting pattern uh of bull and bear cycles um based on on these two cost bases uh you know for the for the long-term and short-term holders got it and then we've got a second visualization of kind of the same thing this cost basis ratio uh what what is this showing us that's a little bit different from that first one yeah so this is just the two in a ratio and so the green uh in this chart is essentially showing a bull market dynamic where

Starting point is 00:10:22 where these short-term holders the price of their you know uh of their holdings is is going up a lot because you have all this new money coming in right this is the dynamic we were talking about with the long-term holders and the short-term holders coming in and really trying the new money coming in and really trying to you know acquire their stake they're having to to bid against each other competitively and so the price of bitcoin skyrockets their average cost basis skyrockets And you can see this with green, right? The green zones are when the short-term holder cost basis is skyrocketing relative to the long-term. And so, conversely, when there's this red zone here, that's when the long-term cost basis is creeping up against the short-term. And so that's kind of like a consolidation or a bear market dynamic. And interestingly enough, the last couple of months over the course of the summer, we saw basically like an on-chain bear market, even though price action wasn't too bearish over the last couple of months.

Starting point is 00:11:14 You saw just basically this is showing like a massive accumulation by convicted long-term holders. And so now we're just now like a couple of days ago, we kind of this ratio turned up and is actually now it's like you can think of it as green. So we're in this I think we're in the beginning stages of the bull market and a lot of the stuff we look at on chain is saying the same thing. And this fifth slide is this is just zoomed in a little bit right there on on the kind of that turn up in that green signal. Yeah. So this is just like the really up close version of it. And so we can kind of see that that ratio is just starting to turn a little bit. So so I kind of think of this as the reflexive kind of parabolic phase of the bull market is just starting up. we just kind of entered that zone. Yeah. It's incredible to kind of just see how clearly you can identify this with the on-chain metrics. Let's talk about the perpetual futures funding rate. I

Starting point is 00:12:04 don't think a lot of people understand how this works. Now, all of a sudden, there's a Bitcoin futures ETF. So let's take a little bit of time and really kind of explain like what is this perpetual futures funding rate? Yeah. So it's perfectly understandable to be a little confused by derivatives. We saw the other week, uh, one of the, you know, so-called greatest traders, investors of all time, Michael Berry, legendary, uh, you know, main character in the big short comes out and says, Hey, does the short Bitcoin, do you need to be collateralized? How does it work? Do you have to pay a, do you have to pay a rate? And so, so Michael Berry doesn't understand perpetual futures. It's, it's okay if you don't. And so we're, you know, we're here to break it

Starting point is 00:12:38 down. So essentially, uh, you know, there's futures contracts, like, you know, what, uh, the standard commodity markets have, whether that's for any commodity or Bitcoin, uh, and that's you know dated into the future and then with bitcoin uh arthur hayes of uh you know former ceo bitmex came out with a perpetual futures contract so it's a futures contract that never expires but it essentially it rolls over about every eight hours and so what you see is in order to keep this this market this derivatives market where you can leverage up long or short um so you can you can take you know a 10x leverage position which means if bitcoin goes up one percent your your contract value goes up by 10%. It's just leverage on the market. And so to kind of balance

Starting point is 00:13:20 these books or to keep the price tethered to the spot market where real dollars are trading against Bitcoin, there's a funding rate. So if the perpetual swap market gets too overheated and there's too many longs relative to shorts, the longs are going to pay the shorts a percent of their notional position size every eight hours. And so that's the funding rate. So when you see the really high green spike, long positions are paying short positions a pretty good amount of money just to hold their position. And so this kind of incentivizes the market to stay tethered to what the actual spot price is because everybody wants to be long Bitcoin, naturally. But if too many people in the derivatives market are long, well, then there's going to be a really strong

Starting point is 00:14:00 financial incentive to be short. And so you can kind of see based on where these funding rates are, what the kind of the, maybe not the majority of the market, but what's kind of the bias in the derivatives market, who's long, who's short, um, and what side of is kind of more over levered. And so, you know, this is a kind of a more zoomed up view. And recently when we were at like 66,000, I, I think I posted that chart and said, Hey, a little overheated here. I think people are getting, getting a little greedy. And so, you know, this pullback it's, it's not anything, uh, anything fundamentally has changed. It's just, you know, derivatives and leverage and human psychology and greed get in the way. And so that's, that's kind of the cost for this pullback.

Starting point is 00:14:37 Yeah. And so when we look at this kind of zoomed in version, what's fascinating to me is like, you could literally just clearly see there was a massive spike in that, uh, that futures, uh, kind of interest there. I mean, literally it's just vertical, uh, in that big spike on the far right. And then what you can see is very clearly outlined right afterwards is the price decline. And it, you know, in some ways almost like, uh, uh, keep it simple, stupid, right? It's like, look, if you start to see this, which you, you know, uh, so clearly called out of like, there is still the possibility that we get these kinds of head fakes. It's not a long-term or medium term head fake, but definitely day to day price movements can be affected by these futures.

Starting point is 00:15:13 And now we've almost added more complexity because you have this Bitcoin futures ETF. You've got more people who are going to start speculating in the market. And if you overlay that with a price break of the previous all time high, everyone just gets levered long real fast and thinks that we're going to go straight to 100K. But of course, you know, the the most entertaining outcome is the is always the outcome. And so we get a we get a little bit of a price depression before we then most likely go upwards from here yeah and here's like the interesting thing with with these funding rates right is like so you know most people trading this stuff if you're in the bitcoin derivatives market you're you're most likely a bitcoin you're most likely a crypto bull right you know where this

Starting point is 00:15:50 is going you have a significant stake in this asset uh you're bullish long term but when funding spikes like this um what you can do and a lot of people do do this um you can you can go market short with you know just a small amount of your portfolio and you're getting paid like sometimes when this is, you know, this spikes, this funding rate, you can get paid 30%, 50%, sometimes 80% annualized just by being short. And you're just hedging, right? You're not short your entire portfolio. You're just short with just a small amount of derivatives. And you can be almost like in a market neutral kind of way, you know, you're long and you're just short with a small percent of your portfolio and you're basically harvesting this kind of yield, right? That the longs have to

Starting point is 00:16:29 pay the shorts to keep their position open. And so, you know, the funding rate is, you know, it's kind of this, this, uh, you know, genius and invention by, uh, Arthur Hayes, like this financial market innovation. Um, but it's just kind of a way for, for the speculators to stay balanced a little bit. Yeah. It's fascinating. When we look at the futures open interest, explain this one. Yeah. So, um, a couple of people I saw on my feed, they were, they were saying, Hey, well, you know, be wary, uh, Bitcoin broke it's all time high, but look, uh, the futures open interest it's it's right below it's all time high. Things are getting a little frothy. and they're correct. The open interest is now near an all-time high, but there's a couple

Starting point is 00:17:05 of things under the surface, which is why there's a big difference between where we were in April and where we are today that I think are kind of significant that aren't really understood. And the biggest thing is the percent of open interest that's margined with Bitcoin, that's collateralized with Bitcoin. So open interest, you're basically, you pledge collateral to enter these contracts, whether that's a perpetual swap futures contract or just say March 2022 futures contract, you have to pledge collateral. And you can do that with Bitcoin or you can do that with stable coins. And so at the top of the market in April, so even though we're at an all-time high at the top of the market in April, what you saw was like 70% of that open

Starting point is 00:17:42 interest was collateralized with Bitcoin. So as the price drew down, not only was your P&L, your profit and loss in the position drawing down, but what you also saw was your collateral was drawing down so that leads like a pretty explosive dynamic where uh you know the long side of the trade gets gets uh gets wrecked basically and so um now with cme uh this futures etf coming in um and just you know the not like not so much uh like like with binance say you know there's not as much bitcoin derivative or bitcoin collateralized derivatives and it's more like stable coins like tether and so this leads to far less kind of you know explosive long liquidations and actually more short squeezes so this is kind of you know this is fundamentally why the the

Starting point is 00:18:21 futures market the the kind of the dynamic here even though it's close to all-time highs is quite different it's because like under the surface the makeup of these these contracts is is a lot different and that's that leads me to be bullish um you know if we see this this spike in a significant way it's kind of a sign that things are getting a little frothy uh kind of a little a little toppy in my opinion when you look at this uh one that we have here with the bitcoin uh margined, uh, futures interest, the 70% and 45%, is that kind of a good reading of like the band that this trades within, uh, normally, or are those kind of outlier type, uh, high points and low points? Yeah. So it's, I mean, it's still just such a nascent market. Um, you know, and,

Starting point is 00:19:02 and it's like every single day, um, just like with the futures ETF coming in, right. Um, there's just, there's so much capital that that's coming in and, and really like, we don't have a, you know, a large precedent back in the day when Arthur launched the first kind of with BitMEX and a perpetual swap market. Basically, everything was Bitcoin derivatives because we didn't have there wasn't really like any sort of stable coin. There was no fiat on ramps to these derivative exchanges. All you had to use was Bitcoin. And so now, you know, with more regulated stable coins like USDC and increasingly like derivative exchanges popping up all over the world with Tether, you see kind of this dynamic change a little bit. And so this is a very, very healthy

Starting point is 00:19:39 development for the market. I think the CME futures, the paper futures, we talked about a little bit when I was on the show last time, even though people think it'll lead to price suppression or all this other stuff, I actually think it's quite good because it means that these kind of drawdowns that you see throughout the history of Bitcoin that sometimes are very, very volatile. I think we're going to see less of that because of the makeup of this derivatives market. And when you look at the exchange Bitcoin futures open interest, we've got it here kind of broken down across the different exchanges. Is there anything that we can read into this other than just like, where do people want to go? Where, where's kind of the most popular venue or there

Starting point is 00:20:13 are other kind of takeaways from this? Yeah. The biggest takeaway is, and I don't have a chart of this over time, but the biggest takeaway is that CME is now the leading open interest derivatives exchange futures exchange. And this was, this is like a very, very new dynamic. And it just kind of shows you, um, I forget off the top of my head what this was looking like a couple of weeks ago, But I think at the all time high for CME open interest was like, you know, three billion at the market top and it was trading around a couple a couple billion. And so this just kind of shows you like in a week with just one ETF product and now the second one starting to trade today, it's five point six billion. There's so much demand for this for this product is so much, you know, financial demand to come get exposure in any, you know, any sort of way to Bitcoin. And so now that with the CME leading these derivatives markets, it's a new interesting development.

Starting point is 00:21:02 And it's and it's also interesting because you can't short you can't use Bitcoin as collateral on CME. And so you can't long with with Bitcoin. You can't long your longs, which kind of led to April and the follow up May crash being just so explosive. That doesn't exist anymore. And when you short, you actually have to short with dollar collateral. So you have to keep pledging collateral, which which is bullish, which is actually leads to explosive short squeezes. So just an interesting dynamic. I mean, I'm going to keep watching it. But CME and, you know, kind of American institutions are really showing they want Bitcoin exposure. It's true in mining. It's true in trading. Joe, John, what questions you guys got? Yeah, Dylan. Good to see you, man. So my question would be around.

Starting point is 00:21:40 We went over the chart earlier about long term holders kind of offloading some of their Bitcoin and distributing it to new people. What levels should we like? Should we track that on? Should we be concerned at a certain level? Like how closely do you watch that going into the new bull market? Yeah. I mean, if we take a proportion or a total of circulating supply, it looks a little different. And you can kind of see these sort of levels off the top of my head. I'm not really sure, but if anything, this is just a couple of days and the long-term holder supply might continue to tick up as coins kind of age into this quantification of long-term supply. So, I mean, there's no specific level. It's just something that you kind of have to watch and it's bullish

Starting point is 00:22:19 because it means that more demand is coming in. It's not like long-term holder selling off means the bull market started. It's that we have this bull market coming in. And so long-term holders naturally just kind of take a little bit off the top because there's so much capital coming in and Bitcoin trades parabolic because of the supply squeeze. So there's not any specific levels that would say, hey, I'm selling my Bitcoin, but it'll be interesting to kind of watch over the coming months and see what happens. Gotcha. John? Yeah, Dylan, what's up? Nice to see you again. Um, so less since 2018, this is the lowest supply of Bitcoin that's actually been held on exchanges.

Starting point is 00:22:54 What are your thoughts around that? Um, is that something you kind of expected to see? Yeah. I mean, it's really interesting because, um, you're dead on it's, it's at the lowest point since 2018. And, and really, uh, in March of 2020, we kind of saw this like paradigm shift of, of Bitcoin on exchanges. It had been basically increasing for the entire history of, of Bitcoin exchanges.

Starting point is 00:23:12 Um, and as more and more exchanges came on and with Coinbase holding like more than a million Bitcoin. But in March of 2020, and I kind of have a thesis that it was kind of sparked by the macro event that occurred with COVID and all of the money printing that followed. But we saw this trend reverse in a huge, huge way. And so I kind of think that we're in this kind of new secular, maybe paradigm, if you want to call it, of lower and lower Bitcoin supply available. And the exchange balance is just another kind of way to quantify what's happening. You know, more demand, not enough supply. That's just kind of, that's just kind of Bitcoin, uh, wrapped up for you. Dylan, one of the things that, uh, I find fascinating is if you look historically, uh, the

Starting point is 00:23:53 plus 50% drawdowns in markets have come after massive bull markets. Uh, and they're usually, you know, 75 to let's say 90% type drawdowns. Uh, what we saw in 2021 was obviously there was a bull market kind of run up from 10,000 to 65, 64,000. But we got a drawdown of only about 55%. So it wasn't kind of a full 75 to 90%. Do you think that that was almost like a bull, a bear market that was condensed into a summer rather than it be a multi-year bear market? Or is that something that just know there is this kind of external shock in terms of the Chinese ban to miners, et cetera. And that was more of an outlier than we're just getting these tighter cycles in terms of kind of price drawdowns. I think it's a little bit of both. I'm kind of in the camp

Starting point is 00:24:46 that I think that the four-year cycle may, the way that people kind of traditionally think of it, sparked by the halving, you know, Bitcoin trades, goes parabolic and then kind of dies for three years. I think that era may be coming to an end here. And we're kind of in this, you know, age of like the, you know, secular adoption where everything's happening so, so fast and we're going to kind of get these mini boom and busts. And, you know, price goes parabolic with derivatives, with all the layered bets on top of it, with just natural human psychology, you're going to see 50% drawdowns. You're going to see 60% drawdowns, especially if there's some sort of macro event, right? Like Bitcoin, if March of 2020 happened again and Bitcoin's at 60K, well, it's going to

Starting point is 00:25:22 get cut in half probably. And that's fine because, you know, it's an open free market and, you know, we know what happens next after that. But I think, I think basically, yeah, we had a bear market kind of condensed in a summer. We saw, you know, minor capitulation, like 50% of the hash rate just had to migrate overnight. We saw, you know, Elon FUD, we saw ESG FUD, we saw all of it. We saw sailors going to get liquidated FUD. But ultimately what happened is that, you know, hodlers and stackers stack the dip that, that supply squeeze that, you know, doesn't lie, this open free market. Well, you know, we kind of ran it right back. And so I think we're at, we're at the start of another bull market, but I do kind of think we're in this, in this new era

Starting point is 00:25:59 of, you know, kind of maybe rounded tops and rounded bottoms. Maybe we get a parabolic blow off top, but I don't think, you know, we're going to see another three year, 80% bear market. I don't think Bitcoin kind of goes away and dies like it did in the past when it was when it was a lot, lot smaller and less significant. In 2017, we saw a number of 20, 30% drawdowns as it went from a thousand to 20,000. So kind of 20 X for the year. But there was a bunch of these kind of 20% drawdowns. Usually those weren't considered any sort of like cyclical bear markets. They were more so just like you would get these boom and bust cycles that add up to that 20x upside do you anticipate as we move higher once we broke the all-time high that we'll get some of those

Starting point is 00:26:37 kind of uh healthy 20 corrections along the way uh or is this something where it's more so uh there's so much illiquid supply that it just goes vertical and uh and it feels different than maybe 2017 did yeah i think i think we'll get 20 30 drawdowns um you know i basically until the dollars dead in this um and i think that's gonna you know be 10 maybe 10 years maybe maybe 15 i think by that time bitcoin's a lot bigger but just with the way bitcoin trades uh in this kind of parabolic manner because of the supply and demand dynamics and then you layer on top the derivatives right like we were talking about it kind of makes this complex market structure that um you know you know with human greed just just kind of you know naturally naturally pretty cyclical so um

Starting point is 00:27:20 that's what you're going to see. I don't think Bitcoin won't go straight to the right. It's going to be, there's going to be volatility. And I think that should be embraced. Volatility is, is a price you pay for, you know, these immense returns, these once in a lifetime type returns. Got it. And then what do you think is the, uh, uh, kind of end of year price of Bitcoin now that we've broken the all time high, you changed anything? Uh, no, I think, I think, uh, maybe 100k is, uh, I mean, I think we pretty much have a great shot at overshooting that, but 100k has kind of been my my base since uh since midsummer and we started to run up again i think i think it'll get kind of crazy and with like the the reflexivity of a bitcoin bull market with it

Starting point is 00:27:56 going parabolic and this kind of supply squeeze we've been talking about i think it'll happen a lot a lot lot sooner but no free ride that's why that you know this this recent pullback and the derivative traders you know getting caught off sides we can't let anyone uh get a free ride dylan you telling me 100k laughing and smirking like that tells me that you think it's a much higher number than 100k but you feel like you have to say 100k yeah i mean i i have i have a good amount of uh bets if you want to say on on high prices but um you know i think conservatively i'll say 100k so i wrote in 2019 100k and that's kind of how i felt as well was like that's a pretty conservative pretty uh lay up like hey that'll be a good receipt to pull up when we

Starting point is 00:28:37 cross over 100k on our way to something much higher i think part of what's uh uh very interesting is we had pete rizzo uh come on the show recently from bitcoin magazine and one of the things he thought he said that i had never heard anyone articulate it this way is almost that you need a psychological attack on bitcoiners everyone already thinks 100k is going to happen and so in some weird way uh it increases the odds that like the market manifests a certain price because everyone thinks that's going to happen uh so they're holding until it occurs but nobody thinks i think the number he threw it at one point was five hundred thousand dollars and that's like a shock and awe type number. But his point was basically, look, whether it goes to 500 or

Starting point is 00:29:13 something in between 100 and 500, it's got to be a number that a lot of what are now deemed hardcore Bitcoiners or long term holders are like, whoa, this is a big number. And they're willing to actually sell some of the Bitcoin into the market. And that's where you kind of get that rounded top rather than, oh, we're just going to go to 100K and I'll go to the park for a picnic and like, no problem, right? Like you almost need to take the breath away from the market in order to actually get the top before you get some sort of correction. Yeah, I mean, Pete's been around for a while

Starting point is 00:29:41 and we talk all the time and he's seen a few cycles and I think he's dead on. I think what he's saying there is just kind of what you see in the data with like during a parabolic bull market when you see these long-term holder supply drawdowns, right?

Starting point is 00:29:52 It's just like, it's like a psychological attack. They're like, oh my God, Bitcoin is at $200 in 2015 and now it's 20,000. Like, holy hell, I need to sell some, right? And so like, you know, that's just kind of what you see. And I tend to agree.

Starting point is 00:30:05 um, 500 K in 2022 would be, would be pretty wild, but I mean, I'm not counting it out. That's for damn sure. 500 K is a number that, uh, I mean, when he said it, I was like, Whoa, okay. Like that's a big number. It's pretty funny. I mean, you know, it, it, in some crazy way, it's less than 10 X from where we are now. So like in Bitcoin terms, like that doesn't sound like super crazy. I think it's the explosive move that would be needed to have it happen in the last 75 days of the month or of the year. Right. It's such a short period of time. We're almost at, you know, November 1st. So literally you're talking about almost 60 days, uh, and to move up in hundreds, if not a thousand percent would be, you know, pretty, pretty ridiculous.

Starting point is 00:30:47 Yeah. I mean, I think 500 K is more of a 2022 thing. Um, I mean, maybe, maybe, maybe 2021, maybe I'm being a bear. Um, but I think, um, you're just going to see it rip and you're going to see there's the whole world's short Bitcoin. I mean, you had a, you had a pretty great call with the pension, uh, pension funds, I think back in 2018, that just, we just saw, uh, what was it? Houston firefighters. Um, am I mistaken there? Um, and, and guess what? Like every pension needs to allocate and they're, they're all underweight. And so you're going to have this huge wall of money come and no one's selling. So, I mean, until there's a psychological attack and we're at 500 K or whatever it is. Right. So, um, you know, the whole world's short Bitcoin. Um, I'm

Starting point is 00:31:28 not, but you're not, we're, we're all, uh, we're all stacking and huddling here, but everyone else is underweight. And so that's, you know, that's where the fun starts. I think that you're right. Thanks for doing this, buddy. Thank you.

The Pomp Podcast - #699 Bitcoin On-chain Metrics w/ Dylan LeClair

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