The Pomp Podcast - #720 Is The Bitcoin Bottom In?! w/ Will Clemente

Episode Date: November 13, 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 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. 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. Will, I think we got you here. Hey guys, how's it going? We're doing great. How are you?

Good, good, good. All right, let's get it. We got a whole bunch of stuff we got to get through today. So let's just start first with the kind of price structure. You went ahead and you've got this tweet that, or I'm sorry, this chart that shows kind of price movement over the last couple of months. What are you seeing here? Right. So if you remember from last week, what we talked about was we were expecting volatility. I kind of said I had no real strong opinion about where price was headed in the short term. But, you know, I was expecting some volatility. And that's when we were right smack dab in the middle of these the two Bollinger Bands. And so the squeeze is highlighted by that yellow shaded area. And I'm using the WIC high time frame indicator to identify that.

What we talked about last week was that for the past three volatility squeezes we've had, we've initially gone in one direction to grab liquidity from the breakout traders and then gone in the opposite direction. And so once again, this actually happened again on this fourth time on Wednesday. We broke out above the Bollinger Band, looked like we were having the squeeze to the upside, grabbed liquidity and then reversed. um and so yeah i mean i'm not saying that i necessarily like called this but it's just like we were prepared for this and and what you know what we had talked about last week was like we were in the middle of the bands but to to kind of check your you know check your bias in terms of like you know it it did look like it was breaking to the upside but you know if we if you had been paying attention to what we mentioned in the newsletter last week then you wouldn't have you

know just been you know fully bullish like you would you would have been aware that there's potential that we would have this reversal, which we end up doing. So now we've had four of those in a row where we've broken out, grabbed liquidity in reverse. As far as like price structure, these are just levels that I've had in here for like weeks now. You know, I think as long as we're above this kind of green, this green zone, which was that point of breakdown from earlier this year, I remain bullish. I mean, I'm not saying that this will happen, but I think we could correct as low as like 51 to 53 K and still have, uh, still maintain like bullish market structure. I think if that happened, you would see some, some, you know, sideways consolidation. But

I think as long as we were maintaining above that level, just from like a pure price structure standpoint, um, you know, I'm not like macro bearish. Got it. Okay. And then you have this piece here where essentially once we saw that, uh, break all the way up to $69,000, which is of course, Bitcoin hitting $69,000 is almost like the meme. Too bad we didn't hit $69,420. That would have been even better. Dude, the memes write themselves. Of course, $69,000 is the Bitcoin all-time high. We got a large influx of open interest. So what are you seeing here with this futures open interest perpetual on the exchanges? Right. So as we broke all-time highs, you just saw a real big influx of open interest. Basically, people trying to buy that breakout,

as we mentioned a second ago. Especially on Binance, you saw a real high increase in open interest, particularly the coin margin contracts or crypto margin contracts. So we've talked about this before. When you're margining a futures contract with crypto versus stable coins or USD, you have more convexity to the downside, which just is a fancy term for saying, as the trade goes against you, you're basically longing your longs, right? You're longing Bitcoin with Bitcoin. Let's say the trade starts to go against you. Well, not only is your P&L going down, your profit and loss going down, or the profit of the trade is going down, but your collateral or how collateralized you are is decreasing in tandem with that. And so that can

create these washouts. And so, yeah, we had a large increase in open interest as well as funding was rising a bit. And then you pair that with, we had like the CPI data as well as the Evergrande news. And then we also had a couple of major exchanges that went down, including FTX, which from my understanding that's like the first time um ftx has gone down during any kind of like significant uh market move usually ftx has always been the one exchange that hasn't gone down and so i mean i don't think you can really like pinpoint price action at least one specific thing but like those factors kind of uh you know gave the perfect recipe for a flesh out got it now sopra this is the entity adjusted sopra uh which i feel like you and i sopra we're uh we're on a

journey together here, but what's going on with Sopra? Right. 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. So, okay, let me say this. We're looking at all the coins that are trading on a given day. So the coins that are being spent today, you're looking at the profit and loss that those coins that are being spent today hold. So if a coin was bought at 50K, it's now being moved at 60K. Well, that coin's realizing $10,000 of profit. If a coin was bought at the Pico top at 69K and then now it's sold down here at 63K, well, it's realizing $6,000 losses. So you're only looking at the coins that are being spent on each given trading day. And then you run the ratio between the profit and loss and you get

SOPR, which is spent output profit ratio. One is kind of that threshold where if you divide one by one, it's neutral, right? So if the profit and loss is balancing each other out, then you're at one. Above that, the market's trading in a state of profit. Below, it's trading in a net state of loss. And so what you want to see in bullish trends is coming back down and bouncing off that one threshold on any kind of major correction. In bearish trends, what you're looking for is a failed retest from the underside of one. And so what you'll see is, you can't see this on the chart, but we bounced off one in September of last year. We had a continued uptrend in the ratio. as you can see we had i didn't i didn't label this actually but you can see this bearish

divergence where the oscillator was making lower highs as price was making higher highs so that was kind of an early warning sign we had this reversal broke down below one and that's what i have marked as that bearish break so at that point you know you can have a bearish bias but you don't quite have absolute confirmation yet coming back down you know that initial failed break above that range we were in over summer, we had that failed retest from the underside of one. And now it's confirmation that we were in kind of a broader bullish trend, got a second confirmation of the underside test of one. And then very shortly after, we actually got a bullish break above one. And so from there, then you have bullish bias

generally towards the market. But we are once again waiting for that confirmation. we came back down and retested 40k about a month ago at the end of September and that's when we got that bullish confirmation now we're kind of hovering you know a bit above one you know I would love to come down and retest you know on some kind of correction and hit that one threshold but when you go back to last year I mean after we had that retest after September we had like a 25% correction right before the major phase of the bull run at the end of last year and we never came back down and retested one again we just continued an uptrend so what i'm looking for is if we have a price correction to come back down and retest one in general though i'm expecting

this probably just to trend higher and you know as we get further into the bull run i would be looking for another bearish divergence as as you can see we had on the left hand side of the chart you know when we were in like april uh march april kind of time frame so when we look at this utxo realized price distribution uh you've got it squared off and you said 18.36 percent of the supply why are you calling that out and explain what this chart showing us sure so this is realized price distribution so we talk about realized price which is uh the capitalization of bitcoin based off the last time coins are moved so you know with this in mind what this is showing is if a coin is last moved at 1000 you know it's in the it's in the 1000 uh bar volume if it's then moved once

again at 20K. Well, now it's pulled out of the 1K bar and moved into the 20K bar. So that's where the realized aspect is coming from. So you're essentially looking at where each denominated price level, how much of supply has last moved there. And so as you can see, above 50, I forget the exact number because it changes as supply increases of what exactly the price level is that the $1 trillion market cap threshold is, but it's above 53K. So I just cut it off at 54K, but roughly 18.3%, 18.36% of Bitcoin's money supply has moved above that $1 trillion threshold. And so to me, that's showing that there's confirmation from the market, well, from market participants that this asset class is here to stay and that Bitcoin is

is establishing itself as like a as a maturing macro asset i think you know that that one trillion that one trillion threshold is kind of a line in the sand as you can see that's kind of where this cluster that we're currently in starts got it and when you look at this price distribution uh that cluster what are you looking to see happen over like say the remainder of the bull market like what is your expectation there um i mean the way i just see it is like by definition you're showing where a lot of market participants or capital inflows have come in so ideally like these zones of volume are kind of uh support or resistance levels because they're they're levels where market participants have interacted heavily with so if you're coming up from the underside to

a large you know cluster of of uh you know realized price distribution and saying you're probably going to face some resistance some people that are taking profits and then conversely if you know if we're correcting then you know i look for some of these uh some of these zones as like you know, support levels, um, on, on the, you know, on a move down. So, uh, that's kind of the way I see it. Um, but yeah, I mean, this will definitely change over time because, you know, you'll have coins that are, um, you know, in whatever 40, 50, you know, in those, in those, uh, price levels that are going to move once we go higher. So, you know, this is, this is just something to watch in terms of like identifying where a lot of this investor behavior is going on. Got it. And so

when we look at this new chart that you have, I appreciate in the newsletter that you published this morning, you said, next, we take a look at a new variant of illiquid supply that I created yesterday. Like you are moving so fast to create some of this stuff and continue to analyze it. What are you showing here in this new illiquid supply shock, kind of this new variation of it? Sure. So usually we look at a liquid supply shock ratio, which I created with Willy Woo over the summer. What that basically is doing is it's comparing the illiquid guys, which are essentially the strong hands. So they take in and don't spend at least 75% of the coins they take in. So for every four coins they take in, they hold at least three. The liquid guys take in and spend

50-50. And then the highly liquid guys spend over 75% of the coins they take in. So for every four coins they take in, they only hold one. And so you run the ratio of the liquid, aka the strong hands to the weak hands, which are the highly liquid and liquid guys. And that's what the liquid supply shock ratio is uh but i just was tinkering around with it and like took it a step further by applying an rsi to it um you can apply different time frames i just thought this one was the clearest the two month or 60 day version of it you can look at it like the 30 day version or whatever um but what i'm what i'm just trying to point out here is similar to uh what we talked about in soper with the bearish divergence and also you'll see in the chart after this another

bearish divergence than on-chain. What you're looking for here is seeing that the RSI, which is essentially measuring the momentum. So in this case, you're looking at the momentum of a liquid supply shock. So you're looking at the momentum of the supply dynamics, right? So if you have a bearish divergence, which is when the oscillator is making lower highs, then it's showing the amount of supply or the strength of the supply shock is getting weaker. um meanwhile you know price is making higher highs so you can see that happen in 2017 um once we broke that downtrend in 2019 at the bottom of 2019 then that kind of marked the bottom of the bear market we had a continued uptrend in the ratio um and then as you can see kind of at

like the the beginning of this year actually you could you could say it started as we broke all time highs in december at the end of last year we began this this bearish divergence between the oscillator um and price once we broke below that the green line i have um which is which is you know showing the uptrend of the metric once we broke below that uh then we had that may capitulation event so showing that the trend of supply getting locked up uh broke um and then since then we've we've broken back above that downtrend uh which is like you know a bullish break above very similar to what we just talked about it you know at the beginning of 2019 when we broke that downtrend so uh you know we're in we're in bullish territory now and we broke that

at the end of september after we retested 40k and so you know what i'm looking for moving forward and like i posted this yesterday and like you know maybe maybe it's a big miscommunication on my end but um you know it seems like some people kind of miss nuance in the sense of like i wasn't saying that this this is bearish i'm just saying like what i'm looking for moving forward so like you know we've we've been um you know i kind of got caught off guard by the move in may and then over summer i really kind of grinded out my understanding of all this stuff because you know i i kind of you know i was kind of pissed that you know i missed the whole move and then i really got like dove deep and on chain created a lot of these new metrics and like really took

it seriously uh and so now you know with that being with that in mind like i'm looking for moving forward you know what are some of them trying to stay objective as possible and look forward you know what are the things moving forward that we we can identify that are showing that the market's starting to get overheated or when we should start becoming cautious. And with this specific metric, what I'm looking for is another bearish divergence as we had in 2017 and also earlier this year. So, you know, we're in bullish territory for the metric now. And as you can see, you know, it takes a couple of touches of, you know, on that downtrend

once we begin the bearish divergence before it actually plays out. But, you know, after we have two, three touches per se, you know, I'll probably start to become pretty cautious, especially paired with some other metrics. But that's what I'm looking for specifically with this metric moving forward. Got it. And then Checkmate has this market realized gradient. I'm unfamiliar with this. So how do you describe this? You put a little bit in the newsletter in terms of the actual language that's used to describe it. But how do you think about this in a way that people can use it? Yeah. So this is a great metric created by Checkmate. And Checkmate's been doing on-chain since like 2018. And Checkmate was actually

bearish earlier this year, mostly because of this metric. And so what essentially you're looking at here is the rate of change between realized cap and price. And so we've talked about realized cap. I'm not going to explain it because I feel like we talk about it every time I talk about two minutes ago, but you're looking at the rate of change. So the amount of new capital inflows relative to the speculative bid on price. And so as long as realized cap is increasing along with the rate of change of price, then it's fine. We're in an uptrend and that's what you're seeing right now. But earlier this year, you had the rate of change of realized price was going down as price was increasing. So you had this bearish divergence between the realized

gradient and price. And so that's what I'm looking for moving forward as we get higher over the coming months, which I'm expecting. I'm looking for this oscillator to start making these lower highs. Essentially, you're just looking at the delta, which just means the difference between the rate of change of realized capital or new capital inflows and the speculative bid that market participants are bidding up the market. And then when you start to look at this on-chain cost basis, I think we talked about this maybe last week, but there's definitely been kind of a reversal of the previous trend. So describe this one. Yeah. So Dylan had this good idea about a month ago or so to compare the short-term holder and long-term holder realized price.

And if you can't tell, realized price is one of the most important metrics in on-chain analysis to understand. But specifically by comparing the short-term and long-term holder realized price, you can get some interesting signals. So another way to think of realized price is, A, you can think of it as for someone who's like a more technical trader, a VWAP, which is a volume weighted average price, or you could just think of it as the cost basis of investors. And so by looking at the short and long-term holders, what you see is that when short-term holder cost basis goes below the long-term holder cost basis or realized price, that's generally a good time to start buying heavily. And that's highlighted by that,

you know, you'll see that green line at the bottom. What that's basically showing is like all the the short-term holder were the speculators um you know that were that were you know likely in the in the previous bull run or or they had kind of bought on the way down you know thinking that it was just like a another buy the dip opportunity or whatever uh they kind of capitulate you know when the market seems like it's never going to stop going down right because i mean you know newbies usually buy when they think the market isn't going to ever stop going up and they sell when they think the market isn't going to stop going down which is the complete opposite of what you should be doing but nonetheless um you know this is just showing that you know there's the

short-term guys completely leave during the bear market and we that's also reflected by like short-term holder supply and like hodl waves uh but they leave in the bear market and then conversely um we can use this to kind of identify when the market's getting overheated in the bull market uh when short-term holder realized price kind of way you know overshoots uh long-term holder realized price so just showing that you know the the short-term guys are dominating the market and and they're basically you know buying the buying the long-term holders guys bags and there's a lot of exuberance and new market entrance um in the market so got it and then we got a red print on the long-term holder net position change um is this bullish or bearish

i guess is my first question and then like what why do you see uh what why do you think we're seeing this like can you explain like like what's driving it yeah um yeah i posted this one this morning and um there's definitely some confusion as to like what this exactly means um but what we're looking at here is the 30-day change of long-term holder supply so we're looking at for example you know what was long-term holder supply on october 12th and then we're comparing it to today and we take the net change between the two um and so what we've talked about for the past two weeks. Well, let's back it up. Over summer, we started this reaccumulation phase and we saw that the long-term guys were starting to lock up supply via illiquid supply

and also just the long-term holder supply metric via the last node. And so what we talked about is that we're looking to reach this peak huddle level, which we've reached, I mean, honestly, faster than I thought we would. We reached an all-time high in the long-term holder supply shock ratio. And since then, we've started to see old coins being spent. And this is something that we've talked about, this is natural bull market behavior. What you see in these natural dynamics between market participants is that the long-term guys buy weakness, they set the floor in the bear market. And then once the reflexivity of a full-blown Bitcoin bull market or momentum of a full-blown Bitcoin bull market takes off, then you have the short-term guys or new market entrants

that come in and buy the long-term guys' bags the whole way up. And so we peaked out, like I said, We peaked out, reached an all-time high in the supply-shock ratio. Now we're starting to see those long-term holders distribute. We can see this via long-term holder supply, long-term holder net position change, average output lifespan, spent volume age bands, coin days destroyed, dormancy, all these different metrics that are just showing that you're starting to see these long-term guys sell off. And that doesn't mean that the bull market is over.

That's just, like I said, natural bull market dynamics. Um, and as you can see, when, when the long-term guys actually initiated, uh, or started to sell, uh, previously, uh, you know, that was at actually kind of coincidentally at the end of October of last year, you know, that was at the very beginning of the bull run. And, and, and, you know, we always talk about how these guys don't perfectly time the tops and bottoms. Like they don't perfectly buy the Pico bottom of the, of the bear market. And they don't perfectly time the Pico top of, of, uh, the bulls.

they kind of scale into the bear and scale out in the bull. And so you're just starting to see them scale out and that, you know, that, this is, this is a bullish chart over the coming months. But, you know, once, once we, once we start to see real heavy selling, like, as you can see, like in January, the beginning of this year, then, you know, you can start to become cautious. And then when we flip green, that's actually generally kind of a bearish signal because that's showing that The long term guys, you know, have started buying back again. And that's like naturally what what bear market behavior looks like. So, you know, this isn't something to be like entirely concerned about at all. It's just like, you know, just keep an eye on this over the next couple, you know, next couple months. And this is kind of the start of the end. But, you know, it doesn't mean to say that we don't have a long way to go because these guys don't, you know, they've just started scaling out and they definitely don't perfectly time the top.

So, yeah, I tend to think that that's right based on the data that we have from previous kind of upward movements. We've got supply shock ratios. What what are you seeing here? Same kind of reversal right there at the bottom. Right. Yeah. I mean, this is just another visual to show the same thing. So this is like the complete zoomed out version now. So green is long term holder supply and purple or fuchsia, whatever you want to call that color. uh that's the short-term holder supply and so you i'm just threw this in there to show that dynamic um you know you see in 2013 uh the long-term guys were buying up until the main phase of that that first leg up they scaled out during that and then they re-bought during that uh kind of mini bear phase between the two 2013 double pumps and then they sold again um into that rally while the

short-term guys bought their bags the whole way up long-term guys started scaling in through the bear market short-term guys left at the you know very pico bottom of of short-term holder supply that's when the market starts to reverse because all the short-term speculators are completely gone and you know the people that are buying down there have strong hands you know because they're buying when the market looks completely dead and these are guys with like long-term conviction so they kind of set that floor as we head back into the the main phase of the bull then you start to see the long-term guys scale out again short-term guys buy their bags up and so you see this pattern right um throughout all bitcoin's history and as you can see we're we're just starting to reverse

the short-term holder supply uh but you know another way to look at it is the metric that uh i've been thrown in for a few weeks just the long-term holder supply shock ratio where we kind of reached that's comparing the long-term and the short-term guys through a simple ratio and so through that you're basically adjusting adjusting this for supply um and and because you know by definition like long-term holder supply is going to trend up you know as there's more more supply and circulation. So running the ratio between short and long-term guys kind of alleviates that, like, you know, the disadvantage that you have by not, like, adjusting it for supply. But yeah, you're starting to see that reverse. And this is just another way to show

what we just looked at. But like, this is just the zoomed out version, essentially. Got it. When we look at transaction fees, I remember during the summer, one of the things that you had said was, hey, you know, I got to see transactions pick up because that would be like my biggest bearish argument against Bitcoin right now. This is transaction fees. What are you seeing here? It looks like it's ticking up a little bit. Yeah, I mean, going back,

I think I probably would adjust what I said in the sense of like, doesn't necessarily mean that the market itself is bearish because like low, you know, low demand or low activity could also just mean like all the speculators are gone and it's really just like the smart money that's left in the market. And like if I could have changed the way what I was saying is it's more of like bull market, you know, bull market behavior, you know, throughout Bitcoin's history as included, you know, increasing network activity.

And so we are starting to see a pickup in that. I mean, very slight. You see in the bottom right, it's very slight compared to what we've seen in 2017 and the end of last year leading into the beginning of this year. But I'm watching to see if we get that continued uptrend. You know, it looks like once we kind of broke that uptrend previously, that's that's, you know, when when the market started to reverse as well as like, I think you can also kind of use this as a as kind of a topping signal where you have that, you know, huge blow off spike. And that kind of means that there's like, you know, exuberance and mania and like a lot of new speculators in the market. And so the market's getting a little frothy. So, yeah, I'm looking for, you know, a sustained uptrend in fees because I think fees are like a good way to kind of proxy like block space demand, as well as like some kind of major spike, you know, in the months coming ahead. Got it. And then we've got the exchange net position change. That's in the red. It has been for a while now. Kind of same thing, continuation of what we previously saw.

Right. I mean, yeah, like we're seeing outflows in the short term. But also what I just wanted to show here with the full zoomed out version is like after March of 2020, I don't want to use the word paradigm, new paradigm, but we've kind of seen this trend change in market participants behavior. Where aside from like at the end of 2016 leading into 2017, where you saw some pretty heavy like consistent outflows and there's no comparable time in Bitcoin's market history to the last year or so, where we've just seen sustained outflows, as well as before the major, you know, down draw that we had over the summer. We had the highest day of daily inflows to Binance. So that's like another, you know, you know, if we start to see real large inflows to exchanges, you know, day after day, then, you know, it's probably time to be a bit wary. But for now, we're still in kind of this sustained period of outflows and zooming out after March. It seems like we're kind of in this, you know, new trend and behavior from from market participants. I mean, I think you could partially just attribute that to like institutions being in the market driven by the whole inflation hedge narrative, et cetera. and you know they're looking to take custody of their btc in general got it and then when you

think about this uh very last chart you have around miners uh it looks like um you know we've got everything in here from uh uh where the chinese minor migration or the chinese mining ban that occurred all the way back to it coming back online pretty aggressively which looks pretty bullish is that your general read yeah um you know i think i think um like hash is definitely correlated to what the value of the Bitcoin network is, because the more hash there is on the network, then the more secure the network is, right? And so, you know, seeing hash come back online is great in that sense. And then also just for the decentralization of Bitcoin, you know, mining was really heavily concentrated in China. And so that was one of the biggest, you know,

FUD narratives that, you know, Bitcoin, excuse me, that Bitcoin bears would throw at us, right? And they'd say, well, all the all the miners are in China. And so it was pretty funny, honestly, over summer that, you know, you had all these people that use that as kind of their their one of their main like bear bearish narratives around Bitcoin or arguments against Bitcoin. And then you start to see hash leaving China and going across the world and decentralizing itself across the world. And then they're saying, you know, oh, well, all the all the hash came off the network. So, you know, it's just like it's completely contradicting yourself. But but, yeah, I mean, just seeing hash come back online is a great sign because it just shows the resilience of the Bitcoin network. Right. You know, it doesn't matter what centralized entity, you know, bans Bitcoin. I mean, Bitcoin hash is going to find a new home somewhere else. And the network is doesn't have any centralized point of failure.

So, I mean, yeah, I mean, it kind of sucked. We had, you know, hash drawdown and a bit of selling for miners over the summer. But, you know, the network has come back out even stronger from that. And so, you know, Bitcoin has a lot of these events where it's kind of like what doesn't kill you makes you stronger type deal. And for long term investors, you know, this was a real bullish event in my mind. And a reflection of that hash coming back online aggressively, as you can see in difficulty and the purple or blue line, whatever you want to call that. we've had eight consecutive positive difficulty adjustments. So it's just another reflection of how aggressive hash has come back online. Got it. Joe, John, what questions do you guys have?

Yeah, well, so we looked at the chart earlier about long-term holders selling into strength and it looks like it has just started. Is there any historical evidence of how we should think about this? Like how long it can go, what metrics you should be looking at, et cetera? If you're able to go into, I think it was the newsletter two weeks ago, what you see is that I have the long-term older supply shock ratio basically plotted out and kind of like this descending wedge, if you will. And so whenever we tag the upper trend line of that and for anybody listening and like if you're by chance not able to get it up, look at week 12 newsletter and then scroll down. It's like the sixth or seventh chart in the newsletter. When we tag the upper trend line of that, that's usually where we've kind of peaked out. And because that's showing that you have a large amount of supply that's moving to short term holders.

And then conversely, when we tag the bottom of that trend line, those have actually been really, really good bottom signals. So it's shown the bottom at the end of 2015, as well as at the bottom of 2018. And then also during the COVID crash, we came back down and tagged the bottom of that trend line. We hit the bottom of that trend line about a month ago. And so now I'm looking to reverse back to the upper part of the trend line in this kind of descending wedge. um and so once we kind of get up and you know at least in the upper half of of the wedge you know that's when i'll start to start to kind of look to be cautious just based off of the behavior of long-term holders um that's that's that's you know probably the the best visual to get like a clear

signal on like you know when when to become cautious or or you know optimistic about the market gotcha and i i trust you will educate us on that when it gets closer yeah all right john what you got yeah what's up will um so what was your takeaway so what did the on-chain metrics say about this week's volatility we saw go bitcoin go as high as 69 69 000 and then as low as 63 000 was that like i probably wasn't expected and we know it's volatile but what was your takeaway from all that yeah i mean i think in the i think in the short term when you have kind of these whipsaw moves um a lot of that is is more so driven by the derivative stuff um you know we do insane amounts of volume and there's insane amounts of liquidity in the perpetual futures

market. And so in the short term, when those traders get offsides, you have these kind of flush outs or reversals. And so that happens often. That's part of why Bitcoin is so volatile. I think in the past, like in the BitMEX glory days, Bitcoin is pretty much just like a free walk trying to liquidate the most traders. I still think we have that to an extent. And so like that, you know, I think that drives a lot of the short term volatility. But you know, when you're trying to just zoom out, and like, you know, you don't care about the day to day fluctuations, that's where on chain more so comes into play. I mean, you did see you did see like some increased spending, as we've talked about from these long term guys, as well as, you know, some slight like exchange outflows before the event. But more than it more than anything, I think a lot of these short term moves are just driven by the derivatives. thanks for that well if you zoom all the way out we are now into q4 of 2021 what's your general read we're you know hitting all-time highs is this kind of what you would have expected in the beginning of the year into the spring like q4 of uh the year after a halving we're

hitting all-time highs yeah i mean i think i know a lot more about the market than i do like than i did earlier this year i'm like i kind of look back on myself and cringe a little bit um but i mean yeah like we've been talking about how we've kind of been expecting higher prices into the end of the year um i think some of these on-chain like supply specific dynamics that we're seeing and as well as like like you know coin days destroyed and stuff um some of those things kind of point to maybe this extending out into the first few months of next year um you know i don't i don't necessarily look for for timing and we've talked about this before like i don't look for timing as to okay the market's going to end the cycle is going to

end in december because that's when it's historically ended i'm just looking for these behaviors so um you know i know it's this time time again but it's like i don't have specific time or price targets it's more so like what are the behaviors that have you know previously resembled exuberance or greed in the market and once we see those i don't know if that happens next month you know that could all of a sudden happen within a matter of weeks or you know it might take several months for us to get to that point but historically in terms of how long it's taken for these dynamics to kind of play out I mean I think I think there's a reasonable argument to be made that we kind of extend out a few months into next year but yeah I mean my my

conservative kind of price target for the end of the year was always I said all-time highs to about 75k and I you know I still think that's in the cards but I mean as far as the absolute like pico top i mean we'll have to just you know keep monitoring these behaviors to know thank you so much for uh for coming on and uh we'll do it again next week i think everyone is uh we're all waiting what is will going to drop next either what metric is he going to create or uh or is he going to tell us something's going to happen before it happens so we'll keep up the good work and uh you know this weekend don't do anything that my brothers and i would do thanks guys and you know i appreciate you like you know continuing to push the on-chain stuff um you know outside of just like doing these

interviews but as well like on twitter and stuff you know i think the further we we can push this information out to new people then it's just you know it's a it's an additive thing where you know other people come up with metrics you create something based off of their stuff and you know we can kind of it's it's it's still so early in terms of uh like you know the the metrics we have like the information and data we have that you know i think it you know it's it's a it's a win win for everybody and and we can kind of all win together at least at least for now maybe like years down the road the alpha will get uh we'll get uh you know squeezed out a little bit as more people take on seriously but no no no we're all in this together my friend joe john you guys got

anything left no man have a good weekend will appreciate you joining us thanks buddy all right guys take it easy see ya