The Pomp Podcast - #831 Bitcoin Market Is In A Trendless Chop w/ Will Clemente

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Will Clemente is the lead insights analyst at Blockware. In this conversation, we talk about Bitcoin, the market structure, on-chain analytics, and where we go from here. I really enjoyed this weekly conversation with Will, as always, and I hope you do as well. Before we get into this episode, I want to quickly talk about our sponsors. Today's episode is brought to you by Coinbase Wallet, your key to the world of crypto. Crypto isn't made to just buy, sell, and hold. With Coinbase Wallet, you can do so much more. Collect more NFTs, earn more with DeFi,

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Starting point is 00:02:42 no Bluetooth. The only person accessing your crypto is you. Buy yours today at GetArculus.com. All right, let's get in this episode. I hope you guys enjoyed this one. is for informational purposes only well what's going on man hey brother how are you i'm doing fantastic it's just me and you today the uh the union is not here just like didn't show up to work today oh god they left you all alone you're going one wolf today hey life goes on life goes on right um all right let's uh let's start with um uh i have a question before we get into some of the charts here, but my main question for you is just when you wake up every day, where do you go look at information and like, what is your process in the morning to get a sense of here's

Starting point is 00:03:49 where we're at? Yeah. Great question. So I don't have like a specific regimen, although I'm actually in the process of writing that out. Cause I think it's important. It's just something that I haven't done just cause honestly, I've just been lazy in doing it. I kind of kind of a general process that I go through in my mind. First things first is I wake up, I read a couple of newsletters that I'm subscribed to. I'll go in and obviously check Bitcoin's price, see what's going on in the futures market. If I wake up early, if I wake up late and the stock market's already trading, hopefully I generally don't wake up that late, but if I do, I'll just check what the stock market's trading at. If not, I'll check futures before 9.30. I'll just read some headlines on

Starting point is 00:04:33 like market watch and some major kind of news providers to see if maybe anything crazy that's going to change the world happened while I was sleeping. And then I'll go in and the first thing I'll check Bitcoin specifically, aside from prices, I'll just go in and start looking at derivatives data. So I'll look at several things. I'll look at, you know, funding or lately I've just been looking at the premium or discount of spot and perps, look at what open interest is doing and then as well i'll also go in and look at the order books see if any orders came in and are out overnight especially across several different exchanges and look for confluence and some of that behavior across different exchanges and then last thing i'll go in and

Starting point is 00:05:16 just look at you know some on-chain stuff overnight generally speaking that doesn't fluctuate much so like glassnode for example their data updates are like 8 30 every night um, Eastern time cause I'm on the East coast. So, you know, overnight, there's not like too much actually changing there, but, um, sometimes in like some hourly things like soper or exchange flows, I'll look at some of those things on like an hourly basis, but, uh, that's, that's pretty much, uh, the high level. And then the other one, I guess, to throw in is just checking Twitter and seeing if there's any, you know, crypto native, uh, news events that came out overnight. you know sometimes you can sometimes you can gauge what happened with price just by doing a quick

Starting point is 00:05:57 scroll through your feed overnight you know you just gotta check sentiment real quick um but yeah i mean just like looking through to see if any like you know twitter personalities like you or whoever have posted any kind of big news events crypto related as well and then uh that's pretty much it yeah it's it's not you know i need to create a checklist for myself because i know that's something that, you know, like more sophisticated traders do is they have kind of a regimen that they go through. Like I talked to Avi Feldman from BlockTower and that was one of my biggest takeaways from him was like, not just the information he was providing, but basically like, you know, how, how structured his mind was and, you know, orientation to the market

Starting point is 00:06:38 and basically how organized his approach was to the market and how consistent he was staying with it. One other thing I'm thinking about starting to do is like journaling. So this is something that several of the traders that I've talked to on my podcast or just privately do is, you know, just jot down your thoughts every morning, what your thought process is, your emotions at the time, how you're feeling, and then you can go back and kind of resort to that. I kind of do that with the newsletter, but it's on a weekly basis rather than daily basis. So I might start doing that on a daily basis, but the newsletter, you know, I like that I can kind of go back, see where my thoughts were at the time, you know, kind of look for patterns and different metrics or price

Starting point is 00:07:18 action as well, and kind of see what my thought process was at the time. And that really kind of helps you, uh, you know, master your emotions. I'm definitely not a master of my emotions now, but I'm, I like to say that, uh, you know, I'm getting better in that sense and, and, you know, journaling and writing down your thoughts, even on a weekly basis, like I've been doing for the last year or so has definitely been helpful. Yeah. It's super interesting. Um, when you start to think about uh the clarity of thought the information inputs but then also going back and revisiting hey what was i thinking then how uh one of the big things is uh for me uh writing um is you know it's not a private journal but writing every morning uh allows me to go back

Starting point is 00:07:57 and and you know kind of be intellectually honest about like hey what did i get right what did i get wrong um so that makes a lot of sense yeah and and the other thing as well is like lately i've been doing these like educational videos on my youtube channel or not to show the youtube channel but um also like on twitter i'll do these little threads and where i'm going with this is not to tell people to go to go look at them but just that like selfishly by going through and doing this i have to go back to the basics a lot of times and either you know i'll have to revisit things that maybe you know i i forgot about or as well you know maybe by going through that process i you know come to new understandings by like revisiting you know the fundamentals of things so

Starting point is 00:08:39 like overall just that again like as you just said that process of writing as well as like creating educational content and going back to the basics and like solidifying that i find that like super beneficial for sure yeah and you find holes in your thinking and all that kind of thing so completely agree all right let's get into uh the market itself uh you recently described it a trendless chop explain what that means uh in terms of what's happening right now yeah so this first section is actually written by uh our equity analyst bleak davis i think he always does a great job but i think he's generally just talking about broader markets um you know not really seeing any trend i'll do that like moving averages or just price structure in general um just kind of just

Starting point is 00:09:22 seeing like you know as he said trendless trendless chop um i think that's that's also pretty true for for bitcoin as well but definitely with uh all kind of the macro uncertainty and you know we've got everything going on with like russia and ukraine i think that's kind of translating into price action and drive five but uh yeah that's personally that's definitely not my area expertise so you'd have to ask blake exactly what he meant there and do you think that that is uh the same thing for bitcoin as like the broader market right now in in what sense you're saying like the trendlessness? Yeah. The trendless chop. Um, yeah, I think, I think, you know, we've been in a downtrend for three months and, um, you know, as we get further into this, I'll highlight a

Starting point is 00:10:06 couple of levels that I think we kind of need to get back above to, you know, definitively say that we've kind of broken out of this downtrend. Um, you know, we've, we've seen some, you know, promising, um, you know, behavior over the last like two weeks, but I still think we need to get back above 47K. That's kind of my line in the sand from a high timeframe perspective. I think there's a lot of confluence there. I'll be that with on-chain as well as price structure, that if we can reclaim that, I think we've regained momentum. So I think in this market, there's value buyers and there's momentum buyers. And this is a mental framework that I stole from I'll be filming at block tower, but I really like it. Um, and I think value is kind of in the low

Starting point is 00:10:51 thirties and momentum is getting back above that 47 K area. Um, and so, you know, for people that are, you know, kind of just looking to get in the market on like high timeframe momentum, I think that's kind of the area that you should be watching. Makes sense. Um, I saw that you were tweeting about and you included in the newsletter, uh, hash rate and just kind of the explosive recovery of hash rate. Talk to me about why is that so telling to you? Yeah, I think it's really incredible. This is one of the, I think, biggest accomplishments of the Bitcoin network, maybe, I mean, in recent history, but maybe in all of its history. The reason is because you had one of the largest global superpowers being China

Starting point is 00:11:31 banning Bitcoin mining. We saw a massive exodus of hash rate coming off the network, as you can see in the chart, between May and July. During that time, I think this is actually a fundamentally bullish event in the moment, because now all of a sudden you have all this hash that's moving out of China. And that was one of the big fuds, if you will, that you would hear from people, oh, all the mining hash power is concentrated in China. So now that argument is gone. And with that as well, over the last few months, we've seen a complete recovery of that hash back on coming back online and what this basically means is that all these machines have been migrated across the world in a completely decentralized way both the physical and human

Starting point is 00:12:15 capital around the world and replugged in and just you know in several months we've seen that not only come back to where it was prior to the prior to the drop but actually we've seen this continue to ramp up over the last few weeks we've seen a really aggressive move up in hash And here at Blockware, we continue to be very bullish on hash. We think over the next year, we'll continue to see this trend as more just entities in general continue to be interested in getting involved with Bitcoin mining. I think, again, it just kind of goes to show the resiliency of the Bitcoin network. And currently, the network's more secure than ever as hash continues to grind up. Yeah. Talk to me about the kind of derivatives market.

Starting point is 00:12:59 Obviously, there's been a lot of activity there as we go sideways that looks like it's kind of lining up with a lot of the price movements. Yeah. So on screen, I think we have the Bitcoin price chart with the perpetual basis indicator below. So first, we can just like talk about price briefly. So, again, I think kind of the low 30s are a value area for BTC. I think 47K is that area that BTC needs to reclaim to kind of establish momentum, especially from a high time frame perspective. So these are some of the just the four kind of major price levels that I think we've got for Bitcoin on a daily level. I think we're currently sitting at an important kind of pivot level. If we go back and look at where 41 to I'm sorry, 40 to 41 K, we've seen a lot of kind of reaction from price from that throughout the throughout the last year.

Starting point is 00:13:50 So that basically defined the whole summer range. We bounced off that at the end of September, bounced off that in January before finally breaking through. Um, and as well, you know, recently we've, we've seen some reaction of the last day or two with this price area. Uh, I think if Bitcoin can flip this 39 to 40 area, then you're probably looking at continuation back up to 47 at a minimum. If we get back below that, well then once below then 40 K becomes expensive. So I think you start closing below 40, you probably see BTC retrace back to these local

Starting point is 00:14:21 lows, but for the next day or so, I'm just kind of watching to see this reaction in this area. I think, you know, if it can hold, then that's quite bullish, probably see a, you know, move back up to 40, 47K. If we start closing below, probably see a retracement back to those local lows. So, you know, with this stuff, you know, it's always probabilities. It's always speaking in if then statements, right? No one knows exactly what's going to happen. We just identify the setups and we set up, you know, probabilistic statements based on that information. And so with that being said, again, I think if we can hold this area, see continuation to 47K,

Starting point is 00:14:56 If we start closing below the 40K area, I think we probably see a retracement back to those local lows. On to the derivative stuff. So at the bottom, you'll see this indicator called perpetual basis. So if anyone's been listening to me on this channel or just in general, and Pomp as well, when you've gone through the newsletter, you've probably talked about this as well, is the funding rate. this is something that I still think is extremely important, but I've kind of veered away from looking at funding and instead of looked at something called premium or discount. So why do I say that? When we're looking at funding, what we're essentially trying to gauge is the difference in activity between spot and perps. And so with that, you know, the funding

Starting point is 00:15:41 rate is calculated differently on every single exchange, some way, you know, different exchanges more than others, as well as just the, you know, the math behind the actual funding rate is different on, on others. And so with that being said, you know, when you kind of just think of like from first principles, like what are you trying to gauge here? Well, you're trying to gauge the difference in activity again, between spot and perps. So instead of looking at funding, why not just look at the raw difference in price between spot and perps? And so that's what the premium discount is. And so that's what I've started to look at recently. And that's, that's what you see on the bottom is that whenever, whenever you see the indicator getting into the

Starting point is 00:16:19 green area, it means that perps are trading below spot. So you basically take a weighted average of all the perps based on open interest. And then you take the weighted average of all spot BTC exchanges based on volume, compare the two, and you get the difference, which is either a premium or discount based on whether perps are trading above or below spot. And so you want to be buying BTC are averaging into BTC when spot is trading at a premium to perps. And then conversely, you probably want to be a little cautious whenever perps are trading at a premium to spot, especially when you see a prolonged regime of that. With that being said, I think you can look at two things very similar to what I always say about funding. So first of all, we can look at

Starting point is 00:17:07 discrepancies between the indicator and price. Second of all, we can look for regimes or prolonged period of times where we're in periods of time where we're in you know one area whether it be a premium or discount and so the kind of general rule of thumb that i personally see with this is that the longer and the more aggressive a trend is in the indicator the more likely the move is likely to be once it once it reverts so an example of this would be going back to like early 2021, we had a prolonged premium of perps over spot. I think funding was at like 250% APR, something absolutely crazy like that. And so for months we persisted with this, with this premium. And so what that's basically telling you, like from the psychological aspect is that,

Starting point is 00:17:55 you know, leverage traders are just getting, you know, basically conditioned to keep leverage longing all dips, right? Because they just get bailed out by these spot buyers throughout all early 2021 a lot of that was you know grayscale coming in and buying btc consistently and as you have a you know prolonged conditioning of that behavior once the trend finally changes you see a really massive move to the other direction it's almost like a pendulum swinging right when you get people really conditioned to one behavior then once that once the underlying trend changes they're so used to participating in that one behavior that's difficult to all of a sudden change your bias and adjust to the new trend. So basically, I think that's kind of the psychological aspect

Starting point is 00:18:37 that kind of baked into that big move, you know, wipe out in May. We had to move down to about 40k and then all of a sudden you had a bunch of leveraged buyers step in. And then that caused that final flush down to 30, because basically everyone was trying to catch a falling knife when price had initially moved down to 40. And so that's just an example of when you have a longer regime of either, you know, premium or discount, I think the more aggressive and the more prolonged that regime is, the larger the move is once it reverts. And so you saw the same thing at the end of the end of summer 2021 or last year. You know, initially traders were cashing in by fading every rally up to 40K. And then towards the end of the range, they were cashing in by fading every single

Starting point is 00:19:20 rally up to 35K. They got extremely complacent in shorting every single move up. And so once that, that, you know, new regime finally came, we started to grind up off the lows where that failed breakdown below 30. Well, they were so conditioned of shorting every single pump that that behavior, that, you know, conditioning of behavior allows for more fuel once that trend finally reverses. And so with that being said, I think currently we're in a pretty prolonged regime of spot premium over perps. And as well, what you, what you also want to see is that going further negative so if you'll see when we swept the kind of 33k lows we actually saw this going further negative and further negative so that's another thing you can look for basically whenever

Starting point is 00:20:03 you go back and see uh the discount going you know further negative and when i'm saying discount i'm saying discount of perps below spot or premium of spot above perps it's either way you want to it's saying you know two of the same thing um you know whenever you see that going further in one direction in this case, further negative. That's another way you can look at this as well, as you're seeing the trend get more and more aggressive, people are becoming more and more conditioned for one type of behavior. But overall though, we're in this prolonged regime of spot premium, which is just something that even at a minimum, you can just consider as kind of a backdrop for other market behavior and put that into context with it, that you aren't seeing any

Starting point is 00:20:46 type of froth and derivatives, you're actually seeing the opposite of spotters leading the market currently. Got it. And so if we take a look, one of the things that I'm not as familiar with, but it sounds like you've been doing some work on is these order books as well, right? And you talked a little bit about kind of the spot buyer stepping in and we start to look at the visualizations of these order books. It seems to tell a very similar story. Is that a fair way to look at this? Sure. So kind of going back to that value momentum mental framework. So again, I think 47K is the area to reclaim momentum. I think for value buyers, that area is kind of 30 to 35K. And so the reasoning behind that is kind of several reasons. And so I'll tie this into the

Starting point is 00:21:30 order of a thing in a second. So first of all, just like price structure. So if we go back and look, BTC is basically just in a very large range between 30 and 60 K and 30 to 35 K is the bottom of that range. It's the bottom extreme of that range. Second thing is this chart here, which is looking at order books. In particular, I like to look at the spot order books over the futures order books, just because you tend to see less spoofing in the, in the spot order books. You do see some, but not, not as much, at least from what, what, you know, my experience in monitoring them. And in particular, I have Coinbase on the screen currently, but across, you know, kind of across the board, based off of several major spot exchanges, you're seeing kind of

Starting point is 00:22:15 confluence as well, the same thing of just spots and spots, bids in that kind of 30k area, low 30s area. And so to me, that's showing that, you know, there's large buyers that are kind of seeing that as an area of interest, as an area of value in their minds. The third thing that makes me think that kind of the low 30s is a value area is when we kind of go to the next chart, which is looking at whales holdings. What's interesting is that you saw them kind of uptick when we swept the low 30s, when we had that move down to the 30 to 33K, very similar to the massive uptick we saw in whales holdings off the lows over summer. And so to me, that's showing you that there's some entities or market participants that are interested in doing business in the low 30s, especially

Starting point is 00:22:59 because as we've moved off the low 30s after the last, it was like two weeks ago that we swept the low 30s, we've seen their holdings just kind of flat. So you see on the right-hand side, like on the very right-hand side, you'll see an uptick, pretty substantial uptick as we move down to that 33, 34K area. We talked about the Coinbase buyer that had been stepping in at the time. And we also talked about this chart, which was whales holdings were moving up. Since then, we got to move up to about 45K, but we haven't seen any fall through in whales over the last two or three weeks since we last spoke. Since then, we've just kind of seen their holdings flat. And so to me, this is interesting because it's showing you that large market participants or large entities on

Starting point is 00:23:41 chain are interested in adding to their holdings in the low 30s, but so far it doesn't look like they're interested in doing business in the low 40s until proven otherwise. But this just kind of adds in confluence to the other two factors that I mentioned, price structure and order books, that it seems like the low 30s are kind of an area of value seen by larger market participants. What are whales doing? Yeah, so that's basically the chart I was just pulling up. So, you know, they had been in a downtrend since September.

Starting point is 00:24:12 They kind of bought, they bought the whole way up from kind of the end of 2020 up to about, you know, February, early March of 2021, basically distributed all the way down into the summer, reaccumulated at the summer lows, bought all the way up until about September. And then from then they had been distributing up until call it, you know, three weeks ago, they had bought kind of the 33, 34 K area when we slept, swept that area. And again, since then, when they just kind of, kind of been flat. And one of the things that's interesting to me is whales. I think a lot of times are uh used as a proxy for experience right do you agree with that or is that a little misleading in that uh the folks with the largest holdings may not actually be the longest term

Starting point is 00:24:57 holders or the most experienced in the market yeah i don't i yeah i don't necessarily think so um it to me it seems like based off of like historical kind of data from you know on-chain perspective um you know it seems like whales are more momentum buyers than than anything uh we kind of you know following whale behavior has you know generally um you know has generally been productive um but they don't well perfectly you know time the the macro bottoms like they weren't you know like buying extremely heavily in like the end of the bottom of of 2018 for example but we did see long-term holder supply increasing at the bottom of 2018 so i think there's just a bit of a you know kind of nuance there and like a bit of a distinguish between whales doesn't necessarily

Starting point is 00:25:41 always translate to longer-term market participants these could just be you know momentum buyers in the market and i think especially over when you look at this data over the last kind of year so it kind of illustrates that as well that you start to see whales kind of buying momentum and then distributing into that you know final push up into strength got it and so uh you've got these charts in here on the quarterlies. Explain what these two are showing us. Yeah. So we're basically looking at the spread between spot and three-month futures. So you can buy spot, short the three-month future, capture the difference. So this is when everyone was talking about at the beginning of the year, the cash and carry trade, where everyone learned about,

Starting point is 00:26:23 including myself, what contango meant when the futures curve is trading at a positive slope out to the future. In early 2021 or mid-2021, this got all the way up to 45% annualized, which is absolutely insane. I don't think we'll ever get back up to those levels because I just think the market is going to become more efficient over time. I think you have more capital coming into the space that's going to look to do these type of arbitrage opportunities. Maybe that will funnel into directional BTC positions. It's hard to kind of make that speculative conclusion, but I do think over time, you will never get back up to those 40, 45% crazy euphoria levels. I think there's more capital looking to kind of orb that

Starting point is 00:27:11 away as the market kind of becomes more efficient. With that being said, though, I do still think this is kind of a good gauge for euphoria or depression in the market, just basically kind of what your trader sentiment is. As we can see, this got extremely low at the bottom of summer, got pretty low at the end of September as well, and got fairly high when we had that push up to 67K. So it just kind of falls price and just basically is kind of a gauge for what's sentiment amongst derivatives traders. This actually broke below 5%, which means it's still more than what a treasury is going to yield you, but it's still relatively low compared to where this has been over the last year or two. Historically though, just something to keep an eye out for is whenever

Starting point is 00:28:02 quarterlies go into backwardation, that's historically been a great buy opportunity. So if you kind of go back and back test whenever quarterlies have gone into backwardation, that's been a good opportunity for kind of like a longer term horizon buy. And then like kind of going off of that as well, I have this next chart. I literally just like threw this together while I was making the newsletter. I was just like tinkering around with it. I think it's interesting basically comparing the seven day moving average of quarterlies as well as the 14 day moving average of quarterlies. um these large spikes um are basically when like the the seven day moving average is trading substantially below the the 14 day and so that's kind of offered these these good at least you

Starting point is 00:28:47 know kind of local local buy opportunities especially when you see like crazy substantial spikes like you know at the end of september 2020 for example and it's interesting um some people would say you like shouldn't like draw trend lines on this stuff but i do think it's interesting it almost looks like this is kind of coiling up uh we'll see i don't know i just i just said you created this to be honest but i think it's something to look in for confluence with um you know if you if you see core release this is the main thing though if you see core release go back related that's almost always a great buy opportunity though let's jump ahead to the mayor multiple which i think is a pretty simple uh uh metric but one that has been uh pretty accurate

Starting point is 00:29:26 over uh time what what are you seeing here yeah so in the letter this week from an on-chain perspective, I try to just like write this out for long-term investors, because that's really my kind of mental approach right now is I think there's just so much going on with macro and it's just, you know, very murky times that I think, you know, I'm not trying to do any short-term trades currently. I'm just looking at this in a very broad sense. And with that, I'm looking at some of these kind of macro, what we call macro oscillators from an on-chain perspective, basically oscillators that track historical Bitcoin behavior for market participants. Um, and I think, you know, these are best used to, I don't think there's certain values

Starting point is 00:30:04 that you can say, oh, this is a, you know, this is the Pico bottom and this is the Pico top. But I think you can look at these things to basically gauge where's the asymmetry, right? And so you probably want to de-risk when the asymmetry is, you know, to the downside and you probably want to risk on a bit or, or, you know, start averaging in when the asymmetry is, you know, drastically to the upside. uh and currently looking at several of these charts and the first of first of which is is the mayor multiple and there's three others that maybe we'll we'll take a peek at uh i think that's

Starting point is 00:30:35 kind of the the point i was trying to make in the newsletter this week is that there's kind of confluence across the board of yeah not every single one of these metrics although several of them are at like very historical lows but you know across the board they're not all at like pico bottoms but they are you know in the kind of the lower 25th you know percent percentile of where they've historically traded. So generally speaking, I just think, especially the low 30s, as we said a few weeks ago, but generally, you know, these areas are good to kind of average into BTC. And I think anyone trying to time the absolute bottom, I think that's kind of a fool's game. You know, I think kind of averaging into these lower areas, lower extremities of these

Starting point is 00:31:16 metrics is probably a good idea and historically has been. The major multiple just compares price to the 200-day moving average. And so basically, it shows you where price is trading relative to what the broader trend has been. And so as you'll see, we're trading near that kind of green line at the bottom. It's really kind of arbitrary, just showing you where Bitcoin has historically kind of bottomed out in a broad sense. And we are trading very close to that after being below that when we swept 33K, still very close to that. And again, that's just kind of showing you that the asymmetry is, is not to the downside in a broader sense of my mind. Got it. And then if we go ahead and we take a look at, uh, dormancy flows, I know that this

Starting point is 00:31:59 is something, uh, that you've started to pay more and more attention to. It seems like we've seen, uh, Tim over at Fidelity. He put out a whole piece on this as well that I think, uh, either you, you had some influence on, or it seems like he had, uh, been learning some stuff here as well. How, uh, how are you thinking about dormancy right now? Yeah. It's pretty cool to see dudes at Fidelity looking at on-chain stuff. And hopefully we've seen more of that. But yeah, so this one out of all the charts that I'm looking at, like these broader oscillators, this one definitely got like the most engagement on Twitter because it looks the best. Like, let's just be honest. And, you know, like when we look

Starting point is 00:32:34 at this, it's at the fourth lowest value in Bitcoin's history. We look at, you know, 2011, 2012, 2015 at the bottom of the bear, bottom of 2018 bear, COVID dump, summer of last year. And now those are all the times that we've seen this dip this low. So this is just, again, showing you that kind of in a broader sense, I don't think that the asymmetry is skewed to the downside versus the potential upside and kind of a six to nine month time horizon. This is basically comparing the USD value of destruction relative to the 365 day or yearly moving average. So it's basically showing you the spending of older coins relative to the yearly uh kind of trend of of that behavior and so at this time you're seeing a decrease in spending from those from those older

Starting point is 00:33:20 coins got it and like when you start to look at this if we go back to the summer of 2021 um you and i spent a bunch of time talking about uh just constant increase in the illiquids uh circulating supply it feels like we're kind of inching more and more and more in that same kind of trend as we were uh obviously there was a pretty large you know price movement uh towards the end of the summer and into q3 uh is your at least directional thought process of like that's kind of what we're seeing happen it's happening slowly there's like a grind but it's somewhat of a repeat uh when we saw when bitcoin had dropped down to the low 30 thousands or so back in summer 21 yeah i think the big difference is the following so yes like supply dynamics look great from an on-chain

Starting point is 00:34:06 perspective and they have for a month or two so probably sound like a bit of a broken record in that regard um when we look at you know again a liquid supply we look at a metric like this which is based off of coin days destroyed showing you a decrease in spending from other coins long-term holder supply huddle waves i mean several different measures from an on-chain perspective are all kind of showing confluence of strong holding behavior. And basically that the qualitative aspect of Bitcoin's float looks strong. But of course, that's one side of the equation. And so with that being said, I think like summer of last year was a bit different from now, although liquid supply and some of these other metrics did look very similar. You saw an

Starting point is 00:34:49 aggressive trend of holding behavior in all of those as well at the end of summer 2021. I think the big difference though, was the macro backdrop, right? So at the time you still had a dovish Fed. And so basically from, from 2020, all the way up to the end of last year, every single time that on-chain had shown strongholding behavior that had translated to price action. And so people were, you know, I think like the peak of on-chain popularity was like the end of 2020, early 2021, because basically every single time that you had supply start to get constrained from an on-chain perspective, that translated to price action. But why? Because there was constant demand, because we had the whole inflation hedge narrative going, extremely

Starting point is 00:35:35 dovish Fed, just very strong monetary conditions as a general macro backdrop for Bitcoin. And so with that being said, when you had the one end of the equation cooking, which was the demand that was constantly steady. Every time the supply end got constrained, you saw that translate to price action. And so I think recently over the last few months, yes. And kind of since the end of November, yes, we've have continued to see strong holding behavior, but I think the demand has been lackluster because of the macro backdrop. And so with that being said, I think the way I kind of view this as the following, I think Lynn Alden worded this well that she's, we've talked a bit in the DMs about this kind of exact phenomenon, basically that,

Starting point is 00:36:22 you know, you have the fuel laid out, but you just kind of need a spark to ignite that fuel because the, the float of Bitcoin from an on-chain perspective looks very strong. Again, you're seeing, you know, huddling behavior coins moving to entities who have a low spending history. But I think again, that, that demand is the demand side of the equation is, has just kind of been, been lackluster with that being said though, you know, I think over the next six to nine months. I think you will most likely see that demand step back in once the uncertainty in the market cools off in the legacy markets. Maybe that just means that we need to get through March after the FOMC meeting and see what the Fed actually does. And then people feel more

Starting point is 00:37:03 comfortable making decisions just because nobody really knows exactly. There's still a lot of people that kind of think the Fed is just jawboning. Some people think that they're going to raise rates six, seven times. I'm not a macroeconomics expert and I'm not going to LARP like I am one. So I don't have the answer for you. But I think once we clear that uncertainty or if we have some type of catalyst for BTC that would cause idiosyncratic or unique flows into BTC, that would be another potential catalyst of demand. And there's several potential things for that. Maybe like an oversubscription to the El Salvador bond coming up or another country following El Salvador spot ETF surprise, which I think that the

Starting point is 00:37:48 likelihood of that is low, but several different things that you can make a case for a potential catalyst. But if not that catalyst, then I think the other thing that's going to be needed to happen to kind of draw in that demand would be kind of a decrease in the macro uncertainty generally in legacy markets. Yeah, it makes a lot of sense. It gives us a lot to think about. Last chart I want to go over is the on-chain cost basis, which, speaking of looking pretty, anytime people see kind of big swoops and drops, I think they say, okay, what's going on here? What are you seeing here?

Starting point is 00:38:18 Yeah, sure. So this one was created by Dylan. Basically what he did was compare the short-term holder realized price, which has been a historical level that prices interact with from like a high timeframe perspective. It's also partially why I think 47K is such an important value, that short-term holder realized price, which sits right around 46, 47K. And then you look at long-term holder realized price, which is the same thing. It's the cost basis of long-term holders on chain. And so then you just run a simple ratio of the two and compare them. And so that's what this blue line is. It's the ratio of short-term holders and their cost basis and long-term holders cost basis. and it's very interesting to kind of see how historically like the psychology of how this

Starting point is 00:39:09 has kind of been embedded into the market whenever your short-term holder realized price goes below long-term holder realized price it's been like historically a good buy opportunity and the reasoning is just basically because you have short-term holders capitulating or they age into long-term holders and then at that time the long-term holders kind of set the floor at the bottom of the bear. And then conversely, when, whenever we reached the top extremia of this, of this oscillator, we get above the red area. That's historically signal that long-term holders are distributing very heavily. And so again, I don't look at these, you know, the red line and the green line is like definitive values. They're just arbitrary numbers based off of historical

Starting point is 00:39:49 context. But what I, what I do think again, is interesting as, as we talked about is just looking at where's the asymmetry, right? And again, like the other metrics that we just looked at as well as, I know we're short on time, but there's two others as well. We're in the bottom 25th percentile of this metric as well. And so with that being said, again, just trying to make that point that I think the asymmetry isn't currently to the downside with a six, nine month kind of time horizon. When you take a look, uh, and you just zoom out bullish, bearish, short-term concerned, like, how do you think about short-term and long-term? I think long-term you and I both, you know, very, very bullish. Uh, but how do you think about the short-term, uh, and are you trying

Starting point is 00:40:35 to trade any of this? Are you just saying, Hey, you know, uh, maybe there's some buying opportunities in the future, but, but ultimately not necessarily trading or what are you doing? Yeah. Um, again, And so like, I kind of, I'm kind of looking at this as the following. I think that, you know, it's very murky with kind of the, the backdrop for BTC. So I'm not making any like short-term trades currently. I'm actually just averaging in. And if we go down to the low thirties, I'll average in fairly heavily again. You know, I think that's again, the kind of a value area and given a lot of these like

Starting point is 00:41:07 broader oscillators that are useful for someone with a longer time horizon, six to nine months year plus time horizon uh i i do think kind of these these you know low 30 areas um the overall kind of 30 to 40k area in general will be seen as a value area you know after a year a year you know plus time horizon especially after we clear some of the things that that we just talked about um but yeah currently i'm not i'm not making any any uh any trades i think um sometimes it's it's as simple as just looking at like what's the what's the profile of potential downside versus upside and again i think like with the with the broader kind of uh um you know time frame i think that that's not to the downside at this time yeah i think that's a uh very measured sober view of

Starting point is 00:41:57 the world i love it um all right i appreciate you taking the time to do this you got any uh weekend plans um yeah so tomorrow i find out uh about which puppy i get oh puppy action little puppy action what kind are you getting do you like do you have a specific type and they just you just don't know which one yet yeah it's uh it's a golden doodle so oh yeah they're a little fluff they look like teddy bears dude they're really cute they're like how big do they get so there so there's mini medium and then there's standard and so i'm getting the medium which is like 30 35 pounds so yeah whenever whenever i pick them up i'll definitely have to have them on the show we've never had ranger on the show so maybe we'll do like a ranger and your dog do

Starting point is 00:42:45 you have a name picked out yet no not yet i feel like um i'm brainstorming it a little bit but i feel like you got to see the dog and then like you'll you'll get a that's how it was with my last two dogs at home yeah you gotta definitely see the dog personally but yeah you gotta see it and then you're like okay like you gotta feel out his personality a little bit well well don't don't tell anyone i named our daughter before i ever met her so you know that's that's human that's the human game with dogs i feel like it's different you gotta see yeah yeah yeah for sure yeah for sure the uh okay so when you name it satoshi well we won't be scared i don't know i don't know about that no please don't do that please don't save yourself

Starting point is 00:43:25 the uh the the headache later when uh when people are like of course your dog is named satoshi like uh my here's here's a piece of advice my dad gave me uh and i've heard him tell many people who've had uh kids this he said the whole key is to uh set your child up for success like don't set your kid back a step with their name uh i think a dog is the same thing right is like you know just have a name that everyone likes yeah exactly yeah i feel you but yeah i definitely have to have a will what'd you say don't name the dog will so satoshi's out and will would be weird too definitely definitely not if you name it joe i won't tell them yeah that's not happening we'll see i don't know man if you get ideas if you got ideas text me and i will brainstorm a

Starting point is 00:44:11 little bit but my girlfriend's on it though she's she's been like texting me names every two seconds for the last like two weeks so she'll probably come up with something if i don't yeah well listen here here's uh here's how girlfriends usually work is if you don't come up with the name quickly she's definitely going to come up with the name so if you want any say in it you better hurry up yeah i need to i need to get on stop looking at the charts all right buddy i appreciate you coming on uh we will do this again in a week or two and uh uh best of luck out there to everyone but i i think that uh the data is pretty clear what do we have 585 now will by the way are you 19 or are you 20 i'm 19 you're still not about uh i was gonna say

Starting point is 00:44:56 your birthday's coming up soon right in the next two months two months all right all right everyone always says you've been 19 for 10 years no hey listen listen listen listen as somebody who's 33 stay 19 as long as you can if you can slow down time let me know what the secret is that's the uh that's the key it's just stay young forever 20 blows because then i got a whole another year before i can drink but we'll see do i do i get facial hair and and legal drinking before the next bull run no i think that uh uh i think that you're fine people are like yeah i just felt like 10 years because of all the volatility but yeah exactly i think you're good it's like it's like uh that movie interstellar you're on you're on the planet for one day it's

Starting point is 00:45:39 like a year that that home that's how it is in this market man but all right thanks again for having me on i'll talk to you soon all right later buddy all right see you man 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 or your favorite podcast player and if you're looking to try to transition to get a new job in the bitcoin or crypto industry we've got you covered head over to palms crypto course dot com we've developed a curriculum with the top teams across the industry it's a three-week intensive training program with over 50 events packed into that three-week time period go to palmscryptocourse.com to learn more and i'll meet you guys for the next episode

The Pomp Podcast - #831 Bitcoin Market Is In A Trendless Chop w/ Will Clemente

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