The Pomp Podcast - #713 Bitcoin Whales Are Taking MAJOR Gains w/ Will Clemente

Episode Date: November 6, 2021

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 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.

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's quickly become one of my favorite writers on all things bitcoin including deep dives on various on-chain analytics in this conversation we discussed 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. All right, let's get 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.

The young wizard, Will Clemente. What's up, man? How are you? Gentlemen, how's it going? Let's get into the Onshade metrics this week. You start off your newsletter with this whole idea around the Fed announcing the tapering and then what we're seeing in the futures perpetual funding rate. So walk us through this. Cool. So what we're looking at here is A, just some price levels, and then B, Bollinger Bands with the WIC high timeframe indicator over it. It just is looking for these volatility squeezes. So you're essentially looking at where price is getting compressed and AKA where volatility slows down and we're primed up for an expansion because consolidation leads to expansion, expansion leads to consolidation. um and and so what we're looking at here is this indicator identifies when we're getting ready to have one of these squeezes um and then the bands are these are bollinger bands i think almost

anybody who does ta or is familiar with bollinger bands but essentially they're looking at the standard deviation from price and um you know by definition when price is at the bottom of the bands price is relatively low when it's at the top it's relatively high um and then so yeah what we're looking at here is these previous three volatility squeezes. We had one in April, one at the bottom of summer, and then the third one in September. What I want to point out here is a couple of things. A, the amount of exactly how much time they take to play out kind of varies. Like if you look in April, it took, you know, a good week or two for that to play out versus over the summer, it took about four or five days, right? And then the one over September, in September took about

a week. And then the other thing I wanted to point out was oftentimes these squeezes break out in one direction to grab liquidity from the breakout traders before going the opposite way. And so if you look here, for example, in April, we broke out above the bands. So it looked like, oh, we're squeezing to the upside, right? Trapped all the traders that are looking to trade that breakout. Market makers grab the liquidity or whales grab the liquidity. And then we go the other direction. Same thing over summer. It would look like we were breaking out to the downside, grab that liquidity, and then we flip to the upside. And so right now we're sitting smack dab in the middle between both bands, at least at the time of writing. But that's just something

to keep in mind if you're watching this moving forward. When you start to look at how the underlying kind of fundamentals are looking, the first thing that you wrote about was that uh, Bitcoin futures, perpetual funding rate, how much, before we kind of go into what exactly that's telling us, how much do you look at like the price and things like Bollinger Bands, et cetera, uh, being driven by these underlying fundamentals? Or do you think that there's some reverse, uh, element that people are actually reacting to price? Like, are they driving price or reacting to price in your opinion? Um, when you're actually looking at kind of like a macro analysis of Bitcoin? Well, it's both. I mean, you know, some people sit in like the, you know,

efficient market hypothesis and they say everything's priced in you know then there's people like you know i'm reading george soros's book alchemy of finance right now and he's talking about essentially you know people aren't making decisions based off of what's best for them they're making decisions off of what they perceive to be the best decision for them to make and so like with that being said i think you know when we're talking about like news i mean people are just reacting to what they think is the appropriate reaction to the news not necessarily what's the correct reaction to news um as far as the fundamentals go i think you're kind of are you like implying like like on chain when you're when you're saying fundamentals correct okay cool

yeah i mean so i look at it two ways when we have like we're talking like supply and those kind of things like supply getting locked up that those things or supply you know becoming liquid those kinds of things tend to be leading indicators but at the same time price can affect um you know market participant behavior um you know if we start to see like prolonged downtrend you know people that were previously really strong hodlers you know they may you know let's say someone bought in five months ago right and they've now become a long-term holder they bought in now they'll be in june and so they've held since june you know that you know they've held through the bottom of the of the bear but they pretty much like you know just experienced up only um and so then you know

let's say we start to reverse pretty heavily well then you know those what were previously long-term holders they may say oh well forget this right like okay i'm i'm out and because they were just expecting you know some some major reversal off of the off of the summer lows and so what i'm trying to get at is just like a lot of times on chain is a leading indicator but there are certain occasions where you know fundamentals are are affected by price um or if you have news events too you know you can you can see the reaction of that stuff in the data so it's like oftentimes i don't really look at news too much i mean i i do watch news you know like major headlines i have like you know like alerts on like market watch but generally speaking the way i kind

of think through that is you can you can really get caught up in in um your biases around like news and and you know it's one thing to keep up with the bitcoin market but then to try to like become a global macro you know expert like that's like you know you're just not gonna be able to do that and so what i what i look for is what is what are the market participants actually doing in reaction to the news and then i can then i kind of use that as a way to gauge like okay is you know is the market completely changing behavior based off this news well you know maybe that's something actually serious versus you know we got china banning bitcoin for the 20 million it's time no one cares right and you can see that in the data so i i would say like i i tend to look

at the data to gauge what the reaction is from you know from the news or whatever i think that's a great way to uh to kind of frame it as to as to how you look at it all right let's talk about futures perpetual funding rate what's going on here right so this is based off the delta between the spot index so a weighted average of all the the spot price uh that's the index and the actual mark price on the individual PERP exchanges. So that's the mark price and the weighted average of all the spot exchanges. And that's the delta between the two. And that's used to create the funding rate. So what you're basically looking at is how aggressive are PERP traders relative to the spot market? And so we've talked about this, God, I don't know, for probably months now,

but what I really wanted to show here is that we got this little reset after the Fed announced that they were going to do tapering, you know, okay, they decided they were going to stop printing and it's, you know, as much money as they, they were, you know, still printing insane amounts of money. Uh, the mark, you know, market reset a little bit, got bought up, uh, pretty quickly after that correction, we've now seen funding come back a little bit. I mean, it's not like outlandish, you know, it's not ideal. I just, I don't think there's any strong signal from it at the time where, where, you know, in the past where I think funding really has, um, is actionable is when it's diverging from price action.

It's like when you have a dislocation between, let's say, price is grinding down, funding is rising. It's showing you that the effort that the perpetrators are trying to exert is being overwhelmed by selling from spot. Or conversely, if price is rising and funding is decreasing. Those are the kind of things that I try to look at in terms of when funding is actionable. Just because funding is positive doesn't necessarily mean it's bearish.

Right. Like if the funding is up, that doesn't mean that we're automatically about to nuke. But with that in mind, where I do think it can it could be kind of like a cautionary thing is when you when you kind of zoom out and look and see that we haven't had negative funding in over a month. We briefly reached negative funding kind of ironically on the fifth of last month. But, yeah, I mean, at some point we'll probably get at least a slight flush of aggregated funding into negative territory. And I'm not, once again, I'm not saying that just because funding is positive that we're automatically going to go down, but it's just something to keep in mind. You know, we talk about this with SOPR too, right? Like at some point, it's going to come back down and retest that one threshold.

Similar thing with funding. At some point, we're going to get a flush back down to negative territory. And it's kind of just something you look at and say, okay, like with that in mind, you know, we're in a broader context, like we're susceptible to some kind of flush at some point in the future. You have a brand new chart that you included, this order book visual. I've never seen this before. So you're going to have to explain to us what exactly is going on here because it looks beautiful, but maybe confusing both to me and to other people. Yeah, totally. So this chart

actually isn't the order book stuff. I think I've thrown the order book charts in there before. I used trading light for that. But I talked about order books because it kind of relates to the bottom section. So to start off with what I was saying about order books, you see a pretty strong confluence of bids right across 60K, across several major exchanges. But as we've talked about before, these orders can be spoofs. And so basically, like you can use these big bidder ask walls to generate liquidity for the opposite. Let's say, I like to use examples to explain things. Let's say, you think price is going to go higher, but price is starting to run away from you. And you're this huge whale where you can set a giant ask wall. It's essentially this sell wall

and you can kind of cap off the price. And no retail guy is going to want to sell into that because it's a huge order. And so what they're actually doing is they can use that to actually fill buys on the other end of that because they're generating liquidity right below their ask wall in that case. Or conversely, let's say the market's starting to go down and they want to get out of their position, but they can't start market selling because they'll incur a lot of slippage and price will just start running away from them. What they can do is they can set a massive bid wall and they can actually be filling cells as they're generating liquidity because retail doesn't want to sell into that giant wall buys, right? And so they can use these things to

kind of maneuver in and out of positions. It's not as straightforward as, oh, you see a bid, bid, a large bid. So that means that it's automatically bullish and there's like a huge wall of bull whales sitting there waiting to scoop up coins. It's a bit more nuanced than that. But with that being said, I do think like a lot of traders are seeing these bids in confluence with 60K just being a really strong level. Like Suzu was joking around saying like the great wall of 60K. I think over the last week or so, you've seen that hold up as a pretty strong level. And keep in mind, we're just ranging the last couple of days. But that 60K level, when you look And this gets to this chart. This chart is looking at all the liquidation levels. So we can see, let's say price gets below X number. Well, there's a lot of liquidations there. And so what you see, and I kind of highlighted this in this little black box, is all those pink lines are showing you there's a lot of long liquidations, and particularly people who are 25X long in that little cluster there.

and that's right below 60K. And so what I'm trying to say here, and I know I kind of sound like I'm saying, well, price could go up or down, right? And first of all, I don't have a very strong opinion about the price in the short term, other than we're probably going to get a large move because we talked about the volatility squeeze. But with that being said, if we do get below 60K with volume, we see a high volume breakout, then I think you'll probably start to see these long liquidations. You'll start to see like a cascade of longs get liquidated because you can see all those levels set just below 60K in that chart there. So this is something that I've started looking at recently, but had never thrown in the newsletter before, but I look

at it in confluence with funding. And then also like we've talked about the convexity that coin margin open interest has, I look at it in confluence with that. So, you know, like, you know, theoretical bear case would be like an enormous amount of liquidations under a certain price level. You know, you're seeing funding rising as price keeps going down and they're all coin margined open interest, you know, coin margin contracts that are being opened. And you can see that in open interest, like that would be like a theoretical, you know, bear scenario. But yeah, just another thing to use in confluence with some of those other metrics. Before we continue, you're getting better, man. I love it. Let's keep going. I can tell you're

learning a ton because you're killing it right now. The adjusted Sopra, you and I in Sopra, we were just chilling there cheering Sopra when you walk into the parties at ECU. Adjusted Sopra, what's going on here? Yeah. So Sopra is our spent output profit ratio. So we're looking at when a coin was last moved and when it's being moved now. So we can look the amount of profit or loss that that coin is realizing you know coin last moved at 50k now moves at 40k just random number um you know okay it's realized it's realized ten thousand dollars of net loss coin last moved at 40k now moves at 50k it's realized ten thousand dollars of net profit and so we can run the ratio of all the coins that are being spent on a given day

and we get soper which is spent output profit ratio and then we and then we're looking here at the adjusted version, which filters out all the transactions or outputs below one hour to kind of filter out some of that noise. And then on top of that, I threw a 14-day moving average because that really smooths it out to give us this broader picture. You can look at it on just the regular daily version, which I do that. But we're talking about in this section of the newsletter, I wanted to kind of navigate from... I try to structure it so we look at the short-term stuff and then move more macro. So here, I'm just trying to paint the picture of what's that broader context, but you can use the daily version. What I'm looking at here is we're still

in bullish territory as long as we're above one, we'll be bearish once we come back down below that one threshold. And then again, if we come back up and have a failed retest of that one line, but I remain macro bullish using SOPR as long as we stay above this one threshold, because we came back down and retested 1S support when we retested 40K, whatever, a month ago or so. Very similarly to, as you'll see after the September correction before the major run-up we had last year, right at the beginning of October, it was very similar.

We came back down and retested that one threshold right on the dot. And then over summer, too, you'll see, as I talked about, bearish confirmation would be coming back up and failing to break above that one threshold after breaking below, which you can see we did over summer. So, um, yeah, I mean, as long, yeah, once again, like as long as we're above it, I'm in, I don't see anything to be entirely concerned about. When you look at the short-term holder profit loss ratio, this seems to be following a similar trend. Yeah. So this was created by David, uh, David Poyle, I think in the last couple of weeks,

um, what you're looking at is all the ratio of all the short-term holder, uh, the, the short-term holders in profit versus loss. So rather than in SOPR, we're looking at all the spent outputs. So we're looking at all the coins being spent on a given day and the profits or losses being realized versus in this chart, we're looking at specifically short-term holders. You can look at short-term holders SOPR, by the way, not to get confusing, but we're looking at just the short-term holders and the profit and loss that they're sitting in, not realizing if that makes sense. And so it's very similar in the sense that we have this one threshold that kind of operates as this cutoff for bullish or bearish market trends. And once again, just like SOPR, in bullish market trends, you want to buy the dips along one, and you want to sell or perhaps hold off buying for long-term holders the retests from the underside below one.

And so right now, once again, as long as we're above this one threshold, I don't see anything to be entirely concerned about in a broader context. When you start to go ahead and look at the illiquid supply shock ratio out of all the charts today, this is the one I had the biggest question about. It just keeps climbing and climbing and climbing and climbing. Is that good? Or at some point, could we cross over into like, no, it's actually gone too high and there's a negative side effect? Yeah, I think there's a bit of confusion around this. A, that, and B, people like to say, oh, well, the ratio is now at the same level it was at 64K earlier this year or whatever, 65K when we topped out. How is that not bearish? And then also, how are we at a higher ratio than we are now when we were in 2017 at $20K? The way I look at this is you just try to think about what is it showing from first principles? It's just showing that supply is moving to these illiquid entities.

So it's moving to these entities who sell less than 25% of the coins they take in, or they hold at least 75%. So they take in four coins, they hold at least three of them. Um, and so it's only factoring in supply versus there's obviously a whole nother, you know, part of the equation, which is demand. Um, and so, you know, to me, this, you know, this doesn't necessarily mean that, oh, we're at a certain level that translates to something in price. To me, it's just showing that more supply is getting locked up. I look at it more of like, what does this mean from first principles, rather than looking

back at a certain value and attaching that to price per se, because we don't have, we don't have the demand equation as well. But one thing to note though, is obviously declining a liquid supply shock ratio is bearish because it's showing that supply is becoming liquid from entities that were previously illiquid. So coins that were previously locked up are now getting unlocked or AKA are now being spent into the market. And so we're currently getting above where we were earlier this year, we're reaching 2021 all-time highs, which also means that we're now at the highest point in the ratio since we were in late 2017. It also resembles a similar structure where we had this peak in the early part of early 2017. I don't know. I can't tell

the exact time. But then we came back down just like we did over summer and then had another up thrust in that before having this prolonged downtrend. And so I would be kind of looking for something similar. If we start to see this declining for say a week or two on end, then I'll probably get pretty cautious because it's showing supply is becoming liquid. I kind of like to use a liquid supply more than exchange balances, to be honest. If you'll notice, I haven't really thrown exchange balances in my analysis for a good month or two. The reasoning is just because you're so reliant on the heuristics from whatever data provider you're using, whether that's Glassnode, Coinmetrics, and CryptoQuant. And these guys are brilliant.

They're excellent data scientists, but it's never perfect because exchanges are constantly shifting how they're holding custody or how their transactions are. All these different things are constantly changing. And so you can never get it perfect. And Glassnode is missing a couple of major spot exchanges, one being like FTX, which is a big one for me. And so I kind of like to use liquid supply as a better proxy for exchange balances because the exchange balances are defined, are in that liquid supply cohort. And so you can kind of look to see if liquid supply is increasing or declining. And so inadvertently seeing the illiquid supply shock ratio increasing is also saying that coins are coming off exchanges, if that makes sense. That does make a lot of sense.

We've got this long-term holder supply shock that kind of continues to roll over, as you mentioned. And I think one of the pieces, Dylan LeClair said this at one point, and there's some questions that people have, so maybe you can explain it, which is when you see the long-term holders holding, increases the illiquid supply, new demand comes in, price has to go up to accommodate everyone. I think most people can wrap their head around that. But when you start to see the long-term holders rolling over and they're distributing some of the Bitcoin into the market or into new investors' hands, that's, as you put in the letter, a natural bull market behavior. But to some people, it feels like that's a bad thing. So how do you evaluate it and kind of explain what's going on here? Yeah, totally. So the way this works is that in bear markets, long-term holders are buying because by definition, they have long-term conviction in the asset.

They're looking to buy when Bitcoin is discounted, when there's no hype and mania around it. And that's when Bitcoin tends to be the cheapest. And that's, by definition, in the bear market. And so they lock up a large enough portion of supply that we get this supply shock effect in the market. And as that occurs, the incremental demand is going to have to keep bidding higher and higher. And as price starts to run up, that kind of initiates the momentum of price in the market.

And that starts at the very beginning by long-term guys locking up a large enough portion of supply and initiating that supply shock effect. But once that, you know, Bitcoin is a highly reflexive asset. And so, you know, once that momentum kind of takes off, you start to get, you know, outside capital come into the market, speculators come in the market, retail enters the market. And then the bull market, basically the momentum has taken a life of its own. And the long-term holders no longer have to keep locking up supply to initiate that momentum. And so once that kind of momentum or reflexivity, however you want to define it, kind of takes a life of its own, then the long-term guys can start to distribute into that strength. And so that's what we see throughout every major peak throughout Bitcoin's history. Saw it in both peaks in 2013.

Long-term holders locked up supply in between those two double pumps and then sold into the second double pump again. in 2017, you saw the same behavior as well as 2019 and last year. And so it's very natural to see these guys start to distribute as the short-term guys or the speculators are coming in and buying their bags. And it's also saying that if you're seeing price appreciation with long-term holders spending, well, that means that new outside capital is now coming into the market. And so that kind of leads us also to the next metric that I pulled up, the spent volume age bands, it's another way of showing the same thing. And so we've talked about the spent output age bands, which is just looking at the percentage of the outputs on a given day. But this is actually

looking at the volume. And so this is a bit more, this is a more accurate version of spent output age bands. In my opinion, you're looking at the amount of volume on every, on every given day, that's like coming from each, each denominated cohort. And so when you look at the amount of volume coming from or the amount of coins being spent from one month or older entities, you're starting to see that increase as well. And I put a 14-day moving average on this as well. So you have to have a pretty strong trend for this to really reflect in the chart. And it's just another way of showing you're seeing these older coins being spent just like you see in the long-term holder supply shock ratio. And so when you start to look at this, there's this entity-adjusted

ASOL, which you've got here. And what is fascinating, as I kind of just eye it up, but again, you're much more versed in this than I am. In January of 21, this thing absolutely spiked very high. And that's when we went from kind of 10 to 30, and then we continued from 30 to 60. Why is it that the entity-adjusted ASOL would spike between, let's call it like the beginning of November to January, but it wouldn't spike from January to March? What's going on there? Sure. So ASOL is the average spent output lifespan. And so we've talked about several of these different lifespan metrics. We just looked at long-term holder supply, spent volume age bands. This is another way of kind of looking at the same thing, except there's no volume weighted to this.

You're just looking at all the coins traded on a given day and just the raw average age of all those coins being spent. And so as I think we've talked about before, the long-term guys don't perfectly time the top. They don't perfectly time the bottom either. They buy into weakness and they sell into strength. That's why I always say into, and I don't say they sell the top or buy the bottom. They don't perfectly time these things. They kind of average in and average out. And so that's what you saw at the beginning of this year. Yeah, they didn't perfectly time the 60K top, but they started selling really aggressively. And that's shown by this spike here. Once we had that first up thrust up to like you know or i think it was like the earlier or mid uh 40ks so

that's all that's showing um and then you know overall you had like increased spending from these older guys as we went into the summer though you saw this decline so you saw less spending from uh from these from these older coins which doesn't necessarily mean that you see accumulation um it just means that you're not seeing spending so you know high high spending from older guys is is a bearish thing but low spending from from older guys when we're looking at this metric isn't necessarily bullish because it's just saying that they're not spending it doesn't say that they're buying and so that's where you know you look at like long-term holder supply that's where that like comes into comes into play um but yeah i mean you've started to

see if you look and on the right half of the chart in confluence with the other two charts we just showed, once again, long-term holders or these older coins are starting to be spent. And then two other ways you can look at it too, if you are interested is CoinDaysDestroyed and then also Dormancy, which is the volume adjusted version of CoinDaysDestroyed. The last one you have is this on-chain cost basis. What's going on here? Yeah. So this is Dylan's metric. I think this is actually one of the main metrics I'm going to use to kind of look for when we're getting overheated uh over the next couple months or maybe into the beginning of next year uh by the way like often oftentimes people like to say or people ask me like my buddies will say

when when is the bull run gonna end you know is it is it december is it january and everyone of course wants to know you know what's the exact price i don't really look at it that way per se what i'm looking for as like an on-chain analyst is what are the behaviors that are occurring that that have previously resembled euphoria or exuberance in the market. And so this is one of those oscillators or metrics that you can use to kind of identify that. So we're looking at the short-term holder realized price, which is the capitalization weighted by the last time coins were spent or last time coins were moved. And so let's say you're Roger Ver and you bought 100,000 BTC at a dollar, and you've never moved those coins. Well, although those coins are now

worth billions, if you haven't moved them since then in realized cap terms, it's still only adding $100,000 to realized cap. And so you're basically getting this volume weighted average price via on-chain. And so you can then separate that from short-term holders and long-term holders and compare and realize price is synonymous with cost basis when we're looking at this. And so it's just showing the realized price or cost basis of short term guys measured up against the long term guys when the short term when the short term cost basis or realized price goes below the long term holder realized realized price or cost basis. It's showing essentially that the short term guys are leaving the market and capitulating at the very bottom of the market because, you know, it's no longer fun. you know bitcoin's not just going up only and so that's when the long-term guys really step in and are dominating the market and are setting the floor as we talked about and then at you know

along the top part where we have this this little red line on the screen and that's showing when when short-term holder realized price is blowing out relative to long-term holder realized price so you have a lot of new market entrance a lot of exuberance etc joe john what questions you guys guy for Will. Will, what's going on, man? Hey, how's it going? It's going well, man. So my question's about, you tweeted earlier about the volatility squeeze coming up. So we've seen the last three or four, it's not a directional indicator, right? It could go either way, but there's been massive moves. Kind of how are you looking at this and do you have a prediction on kind of what's going to come out of it? I think I kind of tried to allude to this,

but I don't really have a strong opinion about the very short-term price. I think we'll know more. I know this sounds silly, but we'll know more once price starts moving in one direction or the other. I do think, though, that we've seen this pattern where prices started to break out to one way of the squeeze, grabbed liquidity, and then gone the opposite direction. So based off that pattern the last three times, I'd be a bit biased to say if price starts to break upwards initially, then probably I'm going to lean more towards going down. And then conversely, if it starts to break to the downside first, then we probably get a reversal to the upside. But I mean, yeah, Ben, I don't really have a strong opinion here about the short-term price.

You know, I try to, I try to, you know, just, just be honest. Like if, if I don't know, I just, you know, I just try to say, I don't know, you know, but the long-term hasn't changed. I would say what metrics though, are you watching once that break happens? Yeah. Okay. So funding, first of all, like that, you know, I'm always looking at funding, liquidations as well some of these liquidation levels we talked about you know if those start to get tagged you know are we starting to see a cascade kind of start to initiate you know obviously like if funding is starting to rise you're seeing you know more liquidation levels pop up below then you're probably going to see further downside and then also you know looking

at some of these on-chain metrics like soper you know is soper bouncing off of one also you know we can look at like what's going on with the order books or a bunch of bids starting to step in CVD, the cumulative volume Delta. We talked about that last week, you know, is, is the spot CVD starting to increase aggressively? So are we starting to see a strong spot bid and people interested in buying volume too? Like if we, if, if we, if we start to break below 60 K and we have really low volume,

then we probably are going to see a reversal like that. You know, that's what happened when we were consolidating over summer. And we had that move down to 29K. It was on pretty much no volume. So no one really wanted to sell down there. But, you know, if you see a really high volume move down below 60K, then that, you know, we'll probably see further downside. Those are some of the things I'm looking at. But volume is definitely important here. Gotcha. John? Well, how you doing? Glad to see you safe from Halloween weekend. Can you talk about the whales and then smaller coin holders and what they're doing in this bull market and what they've done historically? Do we expect to see a lot of long-term holders and whales distribute their coins to those new entrance participants, I guess? Or do we expect them to just hold on? Right. So I guess we can start with the small guys. When you look at this chart, this is a pretty easy explanation. You just look at it, it goes up into the right. And the reason is because you have this really hardcore base of people that are just DCing every whatever couple

days or once a week, or they're taking a passive amount of their income every so often and just throwing it into Bitcoin no matter what. They're stacking during the bull market, bear market. Of course, you see this uptick a little bit more in the bull run, but generally speaking, it's pretty much just up and to the right. No, never any major drawdowns in that sense. With the whales, though, they're a bit more strategic with their positioning. When you really zoom it out, you look at all of Bitcoin's price history and all of their history of behavior throughout that entire existence of Bitcoin. What you see generally is similar to the long-term holders. When they start buying really aggressively, that's usually when we start to initiate a multi-month rally. And so you've seen this in 2017, at the beginning of the 2019 mini bull run, like at the very bottom of 2018 coming into 2019, you saw a big uptick in Wells Holdings. And then also at the end of last year, you saw that behavior as well. We saw that at the end of July. And so now with that being said, you had whales buying at the end of summer really aggressively. I forget the number off the top of my head. But you have started to see them distribute a bit and take some profits. And then actually over the last two or three weeks, they've started accumulating again.

So like over the last call, a month and a half, they've kind of just been like ranging their holdings, if that makes sense. But they really popped after July. And that that kind of correlates with a lot of the behavior that you see, like historically throughout, you know, Bitcoin's Bitcoin's existence is that they kind of are the ones. Well, by definition, they're the big buyers. Right. They initiate these these, you know, multi-month rallies. And I wouldn't be surprised to see, you know, whales distributing. I've actually kind of been surprised that they started buying again over the last month and a half, to be honest. Because usually you start to see them distribute throughout all of the strength throughout the bull run.

When you when you look at like we're just talking about like Bitcoin supply distribution over time, when you take up when you take the percentage of Bitcoin supply that's held by the small guys. So we're looking at like 10 BTC and less. And you plot that out. What you see is that retail holds a larger and larger portion of supply over time. And so this is one way to look at, although Bitcoin is still very young, the supply distribution is heading in the right direction. You get a lot of these people, they'll come out and post bad data, usually based around addresses that'll say, oh, well, X amount of Bitcoin supply is held by this small amount of people, which is complete nonsense, right? because all those those large addresses or even if they're using like any of these data but usually these people you know by definition because like usually they don't know what they're talking about they're using addresses um you know it's like exchanges or custody solutions it's like well

yeah i mean they're holding bitcoin for like hundreds of thousands or millions of people when you're talking about like you know coinbase or or binance um or you know if it's like a custody institutional custody provider you know they're holding bitcoin for you know several different clients with with large holdings you have like grayscale right who holds like over 600 000 btc so you know it's it's more nuanced than like some of these people who try to say like bitcoin supply distribution is is so concentrated it's not it's definitely not perfect it's definitely not you know completely ideal but it's trending in the right direction and over time i think we'll get there just because you know throughout bitcoin's monetization you know you're gonna have people who

got in earlier on, and this kind of sounds like a Ponzi scheme, I'm not even going to lie, but this is just how all markets work. The people who get in earlier, they're going to sell once they're way up, right? Either they're going to reinvest their assets into something else. Once Bitcoin's monetization slows down, then I think you'll start to distribute Bitcoin into stocks or other business ventures once we have better valuations on these things and we have interest rates based off of Bitcoin and not just manipulated Fed nonsense. But yeah, I think over time though, you'll see this supply distribution continue to trend in the direction it is. Cool. Appreciate that. Will, when you think about where we are right now,

it seems like you are a short-term question mark, long-term bullish. Fair? yeah for yeah this week definitely yeah all right well you're smiling like that's like a is that a good thing a bad thing but i i don't know i just like usually i kind of have a strong opinion when i come on here but yeah this week not really i think you're doing a great job man all right buddy thank you so much for uh for coming on anyone who uh who does not follow will please go follow him his uh newsletter is linked there in his twitter account uh with blockware go check out all the great work he's doing he just continues to uh do a a fantastic job well thanks for coming on today you brought the heat all right buddy we'll talk soon all

right take it easy have a good weekend later