The Pomp Podcast - #813 Bitcoin Bounces Back To $40k - BTC On-Chain Analytics

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. In today's episode, Will Clemente couldn't join me for our weekly sit down. So instead, I just break down all of the charts that he put together. We try our best to go through the on-chain metrics and explain what the hell is happening with Bitcoin and why has the price been falling. I hope that you enjoy this and please bear with me as obviously I'm nowhere near as astute in these metrics as Will, but I'm doing my best to keep up. So before we get into this episode, though, I want to quickly talk about our sponsors.

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Starting point is 00:02:54 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. What's up, everyone?

Starting point is 00:03:18 Bang, bang. Will Clemente and I didn't get a chance to sit down this week, as we usually do for our weekly conversation. So I want to break down a couple of the charts that he included in his weekly blockware email. First, let's take a look. There's been a three-month-long downtrend dating all the way back to November for Bitcoin's price. It recently went ahead and broke out of that. Now, that doesn't mean that we're in the clear. There's still a number of different resistances that we need to claim, the first being right around $40,700. But then we've got to get to $47,000, both of those important numbers in terms of Bitcoin continuing in a bull market momentum.

Starting point is 00:03:52 Then if we jump and we look at the open interest, what we can see is that Bitcoin's price has been drawing down over the last three months, but that open interest has remained relatively high. Normally when price draws down, you'd expect that there'll be a wipeout of the open interest. We haven't seen that. And so that could tell us one of two things. Either there's still some leverage in the system, or what's more likely is that there's some leverage, but it's on the short side that people could be hedging their positions. And therefore, it's worth paying attention to, not something to be fearful of yet, but definitely not what you would expect when the price gets wiped out the way that it has. Then if we jump all the way and we start looking at actually the

Starting point is 00:04:26 open interest using Bitcoin as collateral, what we can see is that traders have been switching out their Bitcoin that used to be used as collateral for stablecoins. Now, this is important because ultimately, if they're using Bitcoin as collateral, it's got this negative convexity to it. There's a very high probability that you could see kind of these washouts, these liquidations where price goes down very, very significantly, very, very quickly. But now all of a sudden, when you start to actually migrate from Bitcoin to stable coins in those margin contracts is a much healthier backdrop for the market structure from a macro perspective. You would expect in these situations to have less volatility to the downside. Stable coins are stable, hence the name

Starting point is 00:05:04 stable coins. And so Bitcoin as collateral ends up being a little bit more risky from a price standpoint. If we then jump and Will breaks down the on-chain metrics using the entity-adjusted ASOL metric, there's a seven-day moving average. And what he is showing here is that the younger and younger the coin is, the more likely it is being sold. And so this is exactly what we saw in 2021, basically from February and March all the way through the summer until July and August. We saw a big price drawdown, and all it was was the short-term holders, those people who had just bought Bitcoin, the weak hands, they were turning and they were selling, they were dumping their coins in the market, and they're being bought up by the people who've been around, the veterans,

Starting point is 00:05:43 the strong hands. That's what we continue to see here in this metric. Then if we jump and we actually look, well, what the hell are the short-term holders doing? These are people who've held Bitcoin for less than 155 days. What you can see is that the short-term holder realized price continues to trend down. That means that those coins that were previously bought at higher prices are now being sold at a loss. The short-term holders have weak hands. They're selling their coins at a loss and they're getting out of the market. Then if we go and we look, well, the short-term holders are selling. What are the whales doing? As you would expect, the whales are gobbling up as much Bitcoin as possible. They continue to accumulate more and more and more. And we can see

Starting point is 00:06:20 that those whales, every time they start to buy, in the past, we have seen a massive price increase in the future. History may not necessarily repeat, but it is important to understand short-term holders are selling and whales are accumulating right now. And then if we go ahead and we look at the mayor multiple, what we can see is that this metric, which compares the Bitcoin price relative to the 200-day moving average, the potential upside far outweighs the potential downside. You've probably seen Will Clemente tweeting about this tons and tons and tons online. It's something he's got pretty deep conviction. And I tend to agree with him that using all these various metrics, that the asymmetry available in Bitcoin today is more likely to the upside than

Starting point is 00:06:59 it is to the downside. And then lastly, we can look at dormancy flow. We've seen everyone from Fidelity to Will and Blockware and other analysts all talking about this dormancy flow. The reason is that it recently reached the fourth lowest value in Bitcoin's history. So the fourth lowest value in Bitcoin's history for dormancy flow. And so if you think about asymmetry, it is very unlikely that we get in a situation where it's so oversold that there's still so much asymmetry to the upside. And so it's hard to be bearish here. But again, all these metrics are individual data points. They don't necessarily make up a true story. They don't necessarily make up the full story. You've still got to be able to do your own research. This is not financial advice from Will,

Starting point is 00:07:39 from Blockware or myself, but understanding what these metrics are showing you, understanding what they've meant historically, understanding what they've meant historically puts together a really compelling photo puts together a really compelling picture of where the market is now. Whenever there's tons and tons of fear and the on-chain metrics are this bullish, as we saw during the summer of 2021, usually it ends up turning out pretty good for the people who can control their emotions, who can keep a long time horizon view and can simply chill out. There's lots and lots of fear in the market, but ultimately Bitcoin just continues to produce block after block after block of transactions. And all of these underlying fundamentals, they're really damn bullish.

Starting point is 00:08:24 I hope that you guys enjoyed this breakdown. If you haven't already subscribed to the Blockware newsletter or follow Will on Twitter, I highly suggest you do both. You can find links to his Twitter or to the newsletter in the description below. And we'll be back next week with me and Will both talking about on-chain metrics, all the derivatives, and the macro environment every Friday. And so I hope that you'll join us then. Until then, I'll see you guys next week. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify,

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The Pomp Podcast - #813 Bitcoin Bounces Back To $40k - BTC On-Chain Analytics

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