The Wolf Of All Streets - Are We In A Bear Or A Bull Market? | What To Expect From Bitcoin

Episode Date: December 21, 2021

Willy Woo needs no introduction. In this episode, he shared his thoughts on why 2021’s price action has broken many of the popular price predictive models that have historically been accurate. It’s his belief that 2022 will be a strong year for the crypto market, backed by compelling on-chain analysis. If you are looking for an incredible summary of the past year and an honest appraisal of what is to come, then this is the episode for you. -- Amber Group: WhaleFin is a digital investing experience offering easy portfolio management tools, attractive investment yields, and access to the emerging digital lifestyle. With over $1T in volume traded, WhaleFin offers personalized, compliant, and secure service across dozens of digital assets in 150+ countries.  Find out more at https://thewolfofallstreets.link/whalefin  -- HBAR Foundation: Fund your project quickly and easily with the HBAR Foundation. Apply for a grant and be put on the fast track to success at https://thewolfofallstreets.link/hbar  -- Horizen: Horizen is the zero-knowledge enabled network of blockchains powered by the largest node system with scalability and flexibility unmatched by others. Blockchains built on Horizen are enhanced by zk-SNARK privacy tech and provide massive throughput without compromising decentralization. Horizen can support up to 10,000 independent blockchains running in parallel and issue an unlimited amount of tokens.  More at https://thewolfofallstreets.link/horizen

This episode of the Wolf of All Streets podcast is sponsored by Horizon, the HBAR Foundation, and Whalefin. Please stay tuned for more information on all three of them later in the episode. What's up, everybody? I'm Scott Melker, and this is the Wolf of All Streets podcast, where twice a week I talk to your favorite personalities from the worlds of Bitcoin, finance, trading, music, art, sports, politics, basically anyone with a good story to tell. Today's guest absolutely needs no introduction and has been one of the favorites on the show before. Willie Wu is a famous on-chain analyst, has his own strategies and models, and has generally been nailing the market for many, many years. Willie, thanks so much for coming back on the show.

No worries. Great to be back, Mr. Wolf. I'm glad to have you. So listen, I don't want to get too much into the specifics of what's happening in the market at this exact moment, but we've obviously seen some diminished price movement over the past few months. While there was a large expectation of a i believe it was october uh moonvember i don't know what we were calling december but obviously we've seen some price drop do you still think that the bull run is largely intact yeah i think it's structurally structurally still intact um you know december was you know i'm told it was um going to be soft um from the institutional money um they want to cash out and book their profits and a lot of the guys that um want to redeploy uh um you know i'm

hearing that that's kind of a january story so and also we've got the tax sell-off kind of um regime right now so um yeah like these sort of news and narrative fundamentally weak um for december but um you know like um if we're looking over the next six months um structurally it's pretty strong um yeah like and you know what gives me confidence about that is that um there's really a lot of coins that have been moved to um long-term holders who have held their coins for five months or more and so um they're at maximum accumulation they're slowly divesting as they do as the price runs up they take some profits but predominantly the coins are with the long-term holders and bear markets don't usually start until like the long-term holders are divested and they're now in the short-term holder sort of category where those weak hands are much more

prone to dumping or selling out and the last sort of crash we had from the you know the 60 low 60s to the eventually the 29 000 was when we'd with like those long-term holders had completely exhausted and so yeah like we're currently pretty charged up with those those guys holding onto the coins. So depending on how quickly they divest, I think we've got anything from three to six months of a run, maybe longer, just have to see. When you see them divesting, we generally see the same whales reaccumulating at the bottom, right? It's not an exit from Bitcoin. It's not an exit from the market. It's not disinterest in crypto. It's just an opportunity for them to make a whole lot of money, right? They see an opportunity to sell at a high and they're the same ones rebuying and reinvigorating the new bull market. Exactly. And we're not really

tracking individual participants in that kind of model. So I see it as like different ways of people coming in. They come in, they hold, they wait for the rally they take their profits and um you know the the if you go back um and you look at five months from now that was really in the thirty thousand dollar range after it dumped and those guys you know howled up to now and they're divesting and taking their profits and it was very similar the last sort of five months so there's these alternating cycles where new people come in they get they get the, they sell, and then people buy into the rallies and they at the 60 000 when we went down to 29 back in may um they were like first these kind of people they were accumulating and then they completely dumped out and now with more of the forensics metrics and supply shops where we can actually

see the different categories of holders a whole lot of you know strong-handed accumulators were lost and then they sort of popped up in the speculative swing trade sort of metrics so I think what's happened is a lot of the smart you know well well-backed money whether they're hedge funds or family offices, did buy the $10,000 range and into $20,000, sold at the $60,000, and they reaccumulated as it was coming down from the $40,000 to the $30,000. So we've got a lot of, seems like, sophisticated swing traders now that are playing the market. So it's looking quite different from what we saw in 2017 and the cycles before.

Yeah, it's quite interesting, this whole cycle. Never seen anything like this before. What do you think accounts for the fact that it's changed so much? Is it because the market's becoming more efficient or we're getting more sophisticated players, right? Perhaps before the whales were, you know, young traders who had just gotten rich in the early 2010s. And now we're getting, you know, institutional guys with, you know, complicated algorithms that are taking tools from other markets and coming in. Is that part of the institutional wave? Yeah, I think that's it, I think like if you were to look back in the deep history of geological bitcoin time um really the early guys were the the the techos you know the

um the guys that mined it and then you know we had the silk road and so forth you had the libertarians you had um the very early smart money i, came in 2016-17 when it started. Bitcoin articles popped up around the Winklevoss ETF in 2017 and saw a lot of that kind of cohort come in. And then we had the derivatives come in with BitMEX and the perpetual swap and like and by I'd say 2019, 2020, we had the infrastructure here for institutionals. And so now we're really deep into this where we've got family offices, we've got large hedge funds, mutual funds, now sovereign wealth sort of coming in like El Salvador's are the first sovereign nation to accumulate and so it's a lot different and the instruments are different now we've got not only the the perps but we've got very well developed options and futures markets well

options aren't quite as liquid but they're coming and you've got the ETF that backs onto the CME like a regulated US exchange so a lot of institutions worldwide are deploying through like futures instruments because it's fully regulated and it's very easy for them so I think that's the whole thing's changed right and how that demand and supply filters through to the underlying asset is um through a different chain and um you know like anyone who's been in the market since 2018 notice has noticed that the price shape has changed and the the moves are very sharp and the liquidation events. And that's a signature of futures being dominant. And so it's a very different kind of environment now. And yeah, it's much more complex. Yeah, it's much more complex. And as you sort of touched on, futures are driving the market,

but it still feels like we're very early in what could be as far as the complexity of the derivatives that are available and the size that people are trading with, which is encouraging in my mind. I think there's still a whole lot of inefficiencies in the market. That's why we see these liquidation cascades because big players still know how to make a whole lot of money by moving the market. I think eventually that's all going to disappear, which is probably better for investors and institutions, but probably will actually make it a less exciting market for traders. Yeah, I think a part of what you might call excitement is

the majority of the volume is unregulated. And so there's all sorts of fun trader tactics to shove the price around, which, you know, that kind of outlawed and regulated exchanges. So what we see in Bitcoin a lot is some of the large players and, you know, putting up buy walls, sell walls and kind of shepherding up buy walls, sell walls,

and kind of shepherding the price around, which is a lot harder to do in a regulated environment. So it is particularly volatile because, you know, large whales are out there to, like, take you out. They're looking at where retail is positioned, and they're going, well, they're vulnerable, let's take them out. And so that's the game that's creating this volatility. And on the other side of that, you've got this crazy amount of inefficiency that's built up as the price works thousands of dollars over a minute. And, you know, that opens a lot of spreads that can be closed by arbitrage plays.

And so you can get this other side where traditional people don't, you know, some institutions don't want to be exposed to Bitcoin, but they see the kind of yields that they can get by running ARB across the inefficiencies. And so now we've got like people who are not even interested in bitcoin coming in because they they they can they just want to pick up the money like they can get 20 40 60 100 plus annualized yield on the us dollars which kind of shits all over anything you can get in the traditional world so you know that's bringing more players in. They generally have to hold the underlying in a lot of the strategies they're doing. So it's bringing money into the system. Like the volatility is almost a honeypot

to bring in traditional money who's not even interested in Bitcoin. Yeah, and which is so interesting when you put it in that context, because the big story for the maximalists and those of us who've been around for a while, it was always MicroStrategy and Tesla. They're buying Bitcoin and they're putting it on their balance sheet. And we haven't seen much of a repeat of that. And I think there was this expectation that we would keep seeing companies buying.

But to your point, that's not really where the money is to be made. If you're a hardcore believer in the inflation hedge, maybe you buy Bitcoin, put it on your balance sheet. But right now, institutionalist money is coming in, but not in the way that maybe many people expected. They're coming in, as you said, like with the free money on a cash and carry trade, arbitrage strategies like that.

But also you look at the amount of VC money that's pouring in and it's absolutely insane. Every single day I see some news report of some fund raising another billion dollars or some new unicorn. I think that's really the institutional adoption narrative now. It's them investing in the picks and shovels approach, investing in the exchanges and the infrastructure and the platforms. And they don't even, why buy Bitcoin if you can buy a company that's going to be huge for pennies on the dollar? Yeah, like there's the picks and shovels

and the VC game. They're probably not interested in Bitcoin now. Like Bitcoin, we do 100X from now, it's $5 million per coin. And, you know, 100X isn't that exciting to a VC. They are interested in 1000X. They're are over eight years five to eight years they want 1000x and so why not back something that's nice and take higher risk and they'll get that kind of return um you know people who bought i don't know what's was solana bought it solana seed round was 20 cents and it went to 250 right yeah i just talked to kyle

samani yesterday about that and i think they had three rounds he said in here as he recalled it four cents five cents and 20 cents was the last round and they let all of them so yeah so you know that's the stuff you can see why that kind of institution money is coming in. I mean, that translates to a lot of development and experiments of DeFi layer one protocols. And I'm all for that, actually. I agree. I like the innovation that's happening. I think in the Bitcoin ecosystem, we like to,

well, we dislike this kind of stuff because we're so viewed as anything that's not Bitcoin is running upon this scheme, which, you know, it's legitimate. You know, you look at some DeFi projects and they're offering a few million percent APY, whatever. They're running this thing to suck in a lot of people into getting these yields and then it's like you know it does become like a um you know like a game of chicken who gets out first um sure so there's a lot of that but there is a lot of innovation that's happening as well and i think um that that bit's

exciting um but yeah that's interesting isn't it It's like a lot of institutional money is coming through VC side. I actually think with MicroStrategy, they brokered this or they broke into this area. And now they're brokering this and that. Now it's very easy to buy a convertible bond offering from MicroStrategy or even just buy the underlying stock for if you're any only simply 500 company and you want some sort of Bitcoin exposure, just why not just click one button, buy, call up the broker, buy the MicroStrategy offering, whatever that is, whether it's a bond or the underlying equity. And you don't have to deal with like figuring out cold storage, the because regulation is already there you can buy stock you can buy a bond offering for your treasury it's just and it cuts six months from your um you know you know due diligence work you have to do from um you know at a board level so

like i i don't think that when microstorage is buying more and more and more Bitcoin, that it's just like high net worth investors. I actually think this is Fortune 500s buying in. Yeah, I agree. Why do it yourself if you can let Michael do it for you, right? Yeah, Michael's going to do it for you and he's happy to do so, right? So we should be celebrating, oh, another company bought in. We don't know who it is but and that's probably good on the um buying side because they don't they want that level of um you know privacy around um their treasury

potentially i don't know i don't know enough about how um public companies operate and exactly how they place their treasury. But yeah. Yeah. And I think what's so interesting also about sort of these VC deals and the opportunities to get in early that people don't realize, you know, if you buy, if you invest venture capital into a company and you're waiting for not in crypto and you're waiting for some sort of exit event, right.

To be able to cash in. That's always been the model. You invest, you pray, you hold for a really long time. In most of these VC deals or coins, people are actually getting liquid relatively fast. It doesn't mean that they're selling, but they actually have assets. They actually have access to their coins, right? So in theory, you get the benefit of being early and you get the flexibility to exit whenever you want i mean that's got to be very very attractive to institutional money that hasn't experienced that before yeah it's like they cut the investment cycle down by a third you know like usually maybe let's call it six years to get to a liquidity event now it's like

two years sometimes one a lot of the vesting schedules around one year so it starts to get ridiculous because the discounts are so high that it's just a no-brainer it's just very little risk especially if you're a large VC put your name on it your clout will just literally open doors community rally into it so it's a way of monetizing your clout should be able to get an easy 10x upwards if you just want to dump the first listing and so yeah it's it's it's definitely an unfair advantage I think of if you were to run a fund I see these two kind of very repeatable ways of making money one is the VC side where you're closest to the projects. No one else can get access.

So you've got ACG. The other side is the trades you can't lose, which is arbitrage. You know, that's the allumators of this world. They run up, market making. And yeah, they're like, you know, quant traded computer algorithms. And so every trade is a winner and everything else is taking a lot of risk, you know, like directional risk.

So like, I think those are the two areas of like, if you're going to run a fund, these two are repeatable. One is the VC gain, which takes a year and it's more liquid than what they used to, but it's mainly illiquid. They have to wait. The other is the extreme liquidity. And everything else is swimming somewhere in the middle with sharks on one side, I guess, and whales on the other, just trying to survive like a game of Frogger. The rest are really, really effectively the food chain. That's right. Yeah, it's so true. But you mentioned before when we were talking more about Bitcoin, obviously, that the longer term holders have moved their coins into cold storage and they're not really divesting as much at the moment. One of the huge narratives, and you said the word supply shock, right?

Supply side shock. That's been one of the huge narratives over the past few months, but I haven't really heard anyone talking about that as much anymore. Is it still happening and it's just ceased to be a narrative or is there something that's changed on the supply side? There's something that has definitely changed. We're constantly seeing more and more coins move off the exchanges and weird things happening, right? Prices aren't following. And I use Glassnode data and um you know i use glass node data and they have something called liquid supply and it also measures like it kind of does a forensic trace of all of the participants and figures out all the addresses and goes oh that's one person that's one person and

and then let's look at the history and they can kind of characterize the guys that aren't selling and the guys that are semi-selling and the type guys that are totally speculative in their wallet activity and it used to be for a long time the liquid guys that are just stacking was very correlated to the exchange the exchange and balances like as more and more coins got went off the exchanges you know they they were actually liquid supply. The liquid supply was tracking that very closely. But nowadays, it's not. There's a divergence.

I'm not sure what that is. Maybe this new animal of swing traders, they're pulling off to the exchanges. I'm not sure yet. But when I look at supply shock, I really look at the liquid supply. We've got a forensic trace of their behavior and we're not at the levels we were prior to May. It looks like that if you were to run the calculation using Glassnode's workbench,

but there's some amount of drift that happens with that data. Because if you think about how, you know, if you were to withdraw money into a new address, you have no clue whether that's a new person. Right. An existing person. And eventually you go, oh, no, no, that's Bob.

We can see that now. So it wasn't a new person. And so you'll find that it's over optimistic as coins moving into a new to a new wallet that's obviously a liquid because you've never seen them spend those coins and then later you go oh no that's the that's bob you know someone we know and then so there's a natural drift down in the liquid supply as that that data hardens up um so like if you were to run the calculations, it says we're at all-time high of supply shock.

But if you account for that drift, which I do, and it was surprising, we're not, we're about, you know, the kind of supply shock we had back in January, December, back when the price was maybe $40,000 to $50,000, I would say, $50,000 to $55,000. Let's say $45,000 to $55,000 is the level of supply shock that we're historically at. It's not at all-time high,

nothing like we had at, say, March of this year. So I'm still waiting for that to cover. Yeah, so that means that we've still got some more upside, which is a good thing. Yeah, I mean, I'd like to have to break through that all-time high and just keep going. But yeah, it's like what you don't want to see is that start to, you know, move to the other side where it's reducing because that's kind of a lot of

softness in the market and it's been strengthening. And just with this recent, just prior to the recent dip, there was a little bit of softening in that supply shock, but nothing to be like to say we're going to crash right now. So I'm waiting for that to strengthen a lot through to January. But that said, all of the models that have become so popular that have specific prices attached to specific dates, right? I mean, it doesn't matter, right?

What matters is the overall trend, the things that you're talking about. It doesn't matter right what matters is the overall trend the things that you're talking about it doesn't matter if we hit this price by this day that doesn't invalidate for i think a lot of new people you know i love plan b i love plan b obviously you know um but a lot of new people saw like him nail that price for a few months and then acted on the assumption that you know know, 98K in November, 135, 65, whatever it is in December were inevitable, right? And I think if you've been here a while, you might say those prices actually are inevitable. Just be a little more patient. Yeah. Anything can happen in these markets. I had a full model too, you know, I had a full model

and that broke. I know technically, in my view, it didn't break. I'll just tell you that it didn't break. Like the model only works during a bull market and when that breaks it really sounds like a bearish market and it broke when $50,000 broke and then we cascaded down and we're not actually in a bull market right now. We're setting up for a bull market because that model is not crossed over into a floor they will hold yet um and yeah like with the these new derivative instruments like man you know what do we we crashed from 6 000 to 3 000 back in 20 telly into 2018 right um that's the power of derivatives you know it was like 48 hours and a three thousand dollar 50 drop um and that's going to break any model like like my models work off on chain and fundamental spot demand and

you kind of think of that as like what the price will mean revert around like if you can build a model around demand and supply on chain that's where the you know long-term investors want to hold like value it and when it drops lower then eventually they come in and they buy it up and though yeah so and it gets too high maybe they'll sell some but um everything else is a random walk of you know it used to be liquidations of um retail on bitmex now it's liquidation of retail on Binance. And it's just crazy whipsawing. And there's no sense to the market other than this game of traders

using huge levers to take the other guys out until you get too far. You get too far out of that, then the fundamentals do come in and people will spot buy and FOM. And like we didn't recently, you know, when we had that latest pullback below 40, even 42 on some exchanges, retail bought that really. They went and bought it spot. You could see that on chain. So the models work.

They work, but any kind of price target, it's a risky business. And time, you know, but any kind of price target, it's risky business. And time, you know, timing, like you say, like it's, this stuff is very much, you know, no one can predict price and time. If you do it, you're lucky. If you do it consistently well, then you're probably a whale making sure that your bet wins, which you do in options market, right? We know that.

We know that. I'm betting on this strike price. Let's make that happen. And then I get my cash out and then I'll let it go find its norm again. So, yeah. But what you just described, I mean, that's the argument

for the end of the 2017 bull market, right? Was that CME futures were launched and it was relatively illiquid on the future side, but you could guarantee, basically, if you had enough Bitcoin, you could very much easily guarantee that whole time and price, which everyone on Twitter seems obsessed with. I get on a lot of shows and they say, this price target, that price target. And it's like, no, I just gave a model and that's what the model spits out on upper bound if we top out at this random date. But like, it doesn't matter for an investor. Like you don't really want to know time and date.

That's kind of like the new becoming and going, when it hits this price, I'm going to sell. And they don't. Because you're wrapped up in emotion. And what you need to know, what's much more valuable is, are we currently in an area of strength? Yes, good. Buy more. Is it softening? Okay, take that into consideration. When I have to rebalance, maybe I'm going to like, you know, consider my risk, you know, everything is about

adjusting your risk, you know, your risk exposure. So yes, we're in a strong market. Then we can allocate more. We may even add some leverage, small amount of leverage. I always say, if you're going to add leverage, then unless you really know what you're doing

and doing like 3x, 10x, I'm going, you want to handle any kind of pullback or even 50, 60% leverage. It means it's way low leverage it's all risk it's all about risk like i've seen many traders go win win win and then um they think that they're better than the rest of the market, which they probably are by winning trade after trade, but then they're wiped out and fully liquidated and they're zero.

That's all just handling risk. And so that's what these models are really best used for. It's like we're in an area where you can go risk on because it's strong. Here is risk off and then take some money off the table, reallocate. I mean, I'm I, I'm even, I know we hate and we should on fear, but I, I, you know, I still have a 10% bucket in cash at all times.

I believe in 15. I believe in 15. You can't, you can't buy the dip if you don't have money. Right. And, and furthermore, we now live, we're now in a market where you can park USDC or USDT or whatever with yield instead of going to dollars. Right. And furthermore, we now live, we're now in a market where you can park USDC or USDT or whatever with yield instead of going to dollars. Right. Exactly. I'm saying 10% is my minimum. If I'm below 10%, I add more and it's always in yield. And I'm trying to get above the money printing rate, which is I think 37% year on year currently.

So if you can get a 37 year good luck to you but we can we can in these markets right we can um so i mean i as long as my cash is getting yield that is somewhat close to the inflation monetary dilution rate i'm fine parking in cash and like you know i i think 15 is that's actually my target as well 10 is the bare minimum um that is my threshold yeah so i like to target i mean it listen it changes a lot you know and i don't rebalance as much as i always did but i always believed you know 70 investments don't touch it. For me, that was always Bitcoin sort of became some Ethereum and whatever was left over from great trades, right? Otherwise 15% to speculate and 15% in cash. But that was emotionally so much

more difficult in previous cycles when you didn't have the yield. To me, that's like maybe the most groundbreaking thing that nobody talks about in this market is that in 2017, when I wanted to take profit, I had to somehow suffer through mentally the idea of going into dollars. And the whole reason I was in Bitcoin was because I didn't want dollars. But now, like I said, you go into USDC, okay, even conservatively 10%, just sitting there, who cares? That's great. 10% a year. You know, 10 years ago, if you told an investor, you can get 10% a year guaranteed on your money forever. Your money will double every seven years.

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Yeah. I think it's, you know, right now, the kind of yields we can get out of here is like it's the golden era of yields in crypto. It's going to go down. Yeah. It's going to go down. Yeah. It's going to go down as more players come in to effectively pull the inefficiency out of the market. There's two types of yields in crypto.

One is the Ponzi yield, which is in DeFi. I'm going to create this thing and I'm going to get the community in buying the token and then I'm going to incentivize them by printing tokens out of thin air and so that's creating yield and you're making it by selling those tokens to the new guys coming in and so you can get the you know 10 000 yield on that but you've got to watch your fundamental risk of smart contract hacks and being bragged but then there's the real yield that's um you know maybe if you're going to put something into block fi or celsius effectively that money is going into these markets um through institutions that are doing quant strategies to

you know arb all sorts of things from you know the options to the futures to the spot to the um to you know like running um you know volatility um positions so there's all sorts of things you can do in these markets now that they're sufficiently sophisticated to generate this yield and anyone who's getting yield through like a retail provider like that that money is actually finding its way into these um these institutional contractors that are extracting 50 to 100 per annum um so yeah like it's like yeah that beats 40 it's a lot of work to beat the the fed printing money know this to be done within crypto or you know very closed um proprietary funds quant funds on wall street yeah i mean i think people just don't realize how it's happening you just described it and most people just kind of you know cool i'm getting yield and they don't

think about how that might be happening i mean mean, at the answer is these, these platforms are either they have a trading desk, right? And they're getting it themselves, right? They're, they're actually actively pursuing these trades. Like I said, sort of largely the cash and carry or for a long time, the GBTC premium or whatever is the flavor of the month. And then the rest are literally just lending it with high interest to people who need money to short, right? Or they have to be able to short as a part of their strategy, right? As a part of that strategy. So as long as the inefficiencies last, the yield lasts, but once those trades start to disappear, the yield is going to go with it. I mean, block-wise, their yields go to almost nothing.

It's right. You can see the swings in the yields we get. Particularly if you're on exchange and you're spot lending, they very much respond to those kinds of the yields that are available in the market. And it's really what you're doing is providing leverage, whether it's someone's in short the market or actually to these quant traders that are extracting 100% and they go, oh, I'll buy at 10% without collateral. And I can run a 2X leverage minus 10% funding rate per annum. Maybe I'll go 3X and then I can really juice this thing from my original 40% cash and carry to 160 with 4X leverage. And then you're really starting to outperform Bitcoin at that point

with very little downside. So yeah, there's many ways to slice this in Bitcoin and crypto. We think hodlers retail think we're smart because we're hodling, which is great because you're stepping off the bus of being killed by the whale trader who's going to take you because you're hodling, you're invulnerable to being completely squeezed out of the market for liquidation but there's also the quant traders that are able to get these kinds of yields with leverage with the funding markets and if you can get above 110 percent APY that's effectively Plan B stock-to-flow ratio going up, stock-to-flow model going up to 2026. So that's kind of what we're expecting, 110% per annum over the years ahead. These quant

traders are actually, you know, doing that, like the proprietary ones downside yeah and it kind of makes you realize when you really dig into it that i mean retail traders just have no chance right i mean you're you're a tiny little fish in this in this world of sharks and whales and you know you you're offered all this leverage and we all look at our charts and we look at whatever models we have and you try but the reality is at any given moment, everything can change because one guy decides it's fun time. Yeah.

If one guy decides it's fun time, they're waiting for the opportunity and no, they can't always do it. It's just when the opportunity presents itself. Yeah. They'll do it. Absolutely. But so historically though,

anytime you see this massive leverage rinse, even if it continues down or it shakes the market, those have generally been the best buying opportunities. Because as you said, you have your models that are based on on-chain metrics and on spot, they get quote unquote broken temporarily by leverage, but they always mean revert, right? So isn't the mean reversion trade of retail and leverage being eliminated from the market one of the best trades you can possibly make? Yeah, I think so. And that's exactly what's happening this current week. And I'm seeing retail actually doing it. As it was dumping, the retailers were buying it up. The guys with anything under one bitcoin was really sucking up those coins and moving into the wallet so um yeah retail is kind of retail um

by the dip you know accumulators are trading like geniuses through this this mother love to see it yeah i mean it's great right if you you're not gonna sell we will never sell max kaiser yeah don't ever sell you're huddling you're immune to this kind of um kind of fuckery by by the big wild traders and um you buy the dip you win on the other side it's the other guys that want to take extreme risk and trading against them and getting squeezed out of the market that they're giving the coins to the hodlers and obviously the the whale trader um yeah yeah it's that's the best um i mean it hasn't changed through the years the huddle strategy wins for retail um yeah but even last time you and i spoke you were talking about the fact that there was supply side shock price hadn't caught up you gave

examples of when that happened in the past. Basically, these mean reversion trades, anytime price is lagging, what's happening fundamentally, I mean, forget even the leverage rinse, that's obviously a good one. But you've said in the past, you predicted the last bull run in our conversation, right? You said, listen, it hasn't happened yet the price hasn't moved but this is what's happening people are moving their coins off the big whales are accumulating and then price followed yeah i forgive what i said but i'm glad it played out um yeah but yeah no it's like when you can even see it right you totally see it like um and everything was under price i've never seen it so out of whack before it was fundamentally priced50,000 when it was in the 30s for so long.

It's like, man, that's almost a 2x trade there. If you're just happy to not leverage it up, you really need to know what you're doing if you're trading on leverage. I haven't been, like, I've been trading since 2014, the crypto markets, and I don't think I was consistently profitable to 2019, 2020. Oh, same. You know, it's like, it takes a lot of years.

You know, you go, I'll win, I'm winning, I'm winning. And then bang, something happens, I'm losing. Everyone's a genius in a bull market, right? I came in in late 16 and 17, and I thought I was the god tier trader. And then it happened. Yeah. Right. Like the beer market makes, you know, we were even saying in 2017, Oh, I can't wait for this beer market. Like we're kind of getting tired.

I'm seeing that sentiment now. I'm seeing that sentiment now actually from like people who are building, they're saying, I need a break to actually like focus on development and business and not just be like consumed with price action yeah yeah no it's uh and i i think um it's like it's all kind of bad news because i i can't see a one year bear market again um like i think with the advent of this new sophistication in the market it's a lot harder to get a um you know a main year and a blow off top which you know when it gets that out of bounds it takes a year to mean revert back to where it should be and go below and then come back up

um so like i think what we've got right now is like these big sort of collapses of 50% in a multi-month, maybe three or four months of recovery. Well, we bought it. It took us, what, three months and then another like two months to recline. So it's like that. So it's kind of here to stay is my opinion that I don't think we're going to have this four-year laptop and then one-year gap. It's just the always-on phase now. I'll take it.

And it literally is, right? Yeah. It's funny. Yeah. The last drop, I'll tell you a funny story. The drop recently from 53 to 42 was during Art Basel in Miami. I was there. And so there was this huge party.

Diplo was like DJing this huge outdoor venue and it was sponsored by FTX. It was their huge thing. And everyone was there, right? Everyone was in Miami. And so we're in line maybe midnight, Friday night. So, you know, Saturday morning in the rest of the world. And like nobody's phone works.

Nobody's like, you can't get any service. And all of a sudden you hear this ripple through the crowd of like 3000 people, like Bitcoin's crashing, Bitcoin's crashing, Bitcoin's crashing. Right. And you see like all these people trying to get service, doing the thing where you put your phone up in the air and trying to figure it out. And what's funny is like, so it went from 53 and then somebody was screaming, I can't believe it hit 50 and it had already hit 42. Right. So everybody thought it had crashed like, you know, eight, 9% and it had gone all the way down to 42 and it took hours for people to be able to get service and figure it out.

So it was like, there was this massive party going on. All of FTX minus like Sam is there, right? The CEOs of all the other exchanges and whatever. And it was just this hilarious event where they were all in one place where it almost felt like somebody was trolling. Like because people were trying to see if they had been liquidated, if like like when I was with my friend Colin Random Task, who works at Hero Magnus Capital, he was like, I had a limit stop order on a leverage position. I don't like it wasn't a market stop. I wonder if it hit or if I got liquidated. It was just this like crazy mayhem. And then it was like by morning when everybody woke up where they could actually sort of figure out what had happened.

But being in a place like that while something was a like emotional, I was laughing. Like my wife even turned to me. She was like, do we have anything to worry about? I was like, and I joked diamond hands, you know, like I'll sit at the club. I was like, whatever. But like, it was very, very entertaining to see it in that environment. It's almost a caricature. Yeah. It is. You couldn't have drawn it better.

Like you could literally couldn't have drawn it better. So earlier you touched on the fact you actually said sort of like casually and in passing, well, we're not in a bull market right now, right? We're in a bear market for you. What is the definition of bull and bear market? How do you determine that? I mean, obviously there's the classic definition down 20% for the top for more than three months in the stock market. Maybe they say that's a bear market, right? So i guess everybody has their own way of viewing that yeah i use my own definition when i say that um like i'd say we're not in the like the main run of the bull um market like there's a main run phase where it's just gonna go up um the momentum's strong um we're in a we're just coming out of reaccumulation. Like we just had this massive sell-off in May.

The sideways reaccumulation has happened. And then there's that sort of tentative first climb out. And, you know, often there's another sort of accumulation and then we're off to the races and everything's strong. And that's the main phase of the bull run um we're not there yet um we're recovering we're recovering um and setting up for it um and so i think we're not going to get that till 2022 um you know early phase january february might be interesting but yeah we're still waiting that sort of explains why we had like you know a 65k top in may and then we had this kind of new bull run but it really only got slightly past that right and then you

know maybe there was some doubt and the market kind of dipped back again so maybe we get that put in that higher low here you know after that 30k is reaccumulation and then we can get off to the races for me like losing 53 area, you know, had sort of been the higher high. That's where I sort of have taken some pause and it made me think we might kind of be here for a while. Yeah. It's going to be consolidation for another month, at least probably more. Um, yeah, that's, yeah, it's, it's going gonna be a little bit boring um but nothing will give people anxiety and cause more fear than ranging sideways in these prices yeah retail yeah yeah it's just the i think it's a waiting game that people don't like and it's actually a very small

part of the market that is that main bull run you know it's it's most of it it seems that nowadays is in the sideways ranging until we set up and we've been doing that a long time now and probably got another few months ahead before that's really we get that pent-up demand to go really to sort of blow past the prior highs. It's going to take time. And there's a lot of money that needs to come in to push Bitcoin around these days. Significant money.

Yeah, you know, we talk about, it's very easy to say, well, it's just a 2X or it's just a 5X. Bitcoin just did that. I mean, I'm guilty of saying that, right? March 2020, we were at 3,800. We pulled a 17X or whatever to the top. A 17X from here in terms of market cap and volume, it ain't the same, right? I mean, I love to joke about it, but it's not the same.

Yeah. It's like Bitcoin is a very low ratio from its market cap to the actual capital that's been stored in it. I was just checking earlier today in a prior call that the average price of buying has been around $24,000-$25,000. So it's like, if you work that out across all the coins, it's like $0.45 trillion. And bitcoin's i think a shade under a trillion dollars right now so it's a kind of a two to one ratio if we're going to go what do you want let's say if we're 10x so right we're talking about um effectively five trillion dollars need to come in to give us that 10x four or five trillion um That's a lot of money, right? That's like the entire, it's got a really,

like the entire financial cap of gold. Gold's, you know, only a certain percentage is used financially. The rest is industrial. You've got to eat the entire gold cap, financial cap to push Bitcoin 10x. So we're really i think that when you think about in that perspective it's like okay we've got to be really set up to take capital away from equities real estate um you know some of the big bond markets i think that's going to happen with

the yields but it's going to take time before that sort of pulls in that next level of capital um yeah so or or maybe or maybe we just somehow get all the money that's being printed to go into bitcoin and we don't even worry about eating them because they'll print enough that we could get all the new money to come only into Bitcoin. More status checks, right? Yeah. But you know, that's like, also that's kind of a unit bias really. It's just like everything gets devalued. But I'm talking about like real,

we want to eat the capital and existing store of values. And I'd be interested to hear like some of the more, you know, experienced people in the macro markets like plan b where i'll see like what their views on is how bitcoin will eat um that size capital and the kind of path they will weave um i think that'd be pretty interesting it would but the good news is is that they do believe it will will happen. Right. And I think we all still do. And I think that's sort of the important lesson here that we've both made before is just like, it doesn't matter when just be there when it does.

Hopefully it's going to happen like within the next five years. I would, I would hate for this to drag on too long because I think, you know, we do really need a bit of money. We've got a competitor called surveillance money, central bank digital currencies. We can't hang around forever. This thing needs to get big enough to be like past the point of no return to be, you know,

we need more countries involved. El Salvador is one. That's great. You know, sovereign wealth, fiat of one country, but now we're at centralized risk because we've got one country. And so what if El Salvador's experiment goes bad? I talk about that all the time yeah we we cheer for it we assume it's going to be great but if it goes bad it's a lesson for nobody else to do it right yeah so we need others immediately so there's a more of a decentralized network of um nation states um so yeah like sooner be like it's like now's the time yeah i think yeah i agree yeah

clock's ticking clock's ticking and and the momentum is there right like you guys talk about another like a one to three year bear market uh we might not get there right right exactly like um the central banks will be busy while we're bearing it out um so yeah but luckily i don't see that happening. You know, I hope that plays out. Good. Well, I hope we didn't depress anyone with the ending conclusion because I don't think that's what's going to happen.

But I do agree with you that now we need to strike while the iron is hot. So Willie, I know we're up against it here with time. Where can everybody follow you and keep up with your work after this conversation? I'm sometimes on Twitter. Don't post much, but that's Woonomic, at Woonomic on Twitter. I don't post much, but that's at Woonomic on Twitter.

I write a newsletter. There's a link to it from my Twitter profile, that newsletter. It's effectively all the quant sort of on-chain analysis I do in association with Glassnode. This gives a sort of mid-macro macro to even the short time frame forecast based on the data coming in um and you know it's it's mainly the the spot markets through the on-chain forensics so it's mainly pitched at investors um but if you trade it sometimes helps you bias your trades um so yeah yeah i can't recommend enough it's very very helpful i think it's definitely for traders because you have to have context before you have any sort of thesis on which direction the market's going. Right. I think so,

but I just want to downplay it because I don't want to attract people into trading it and get, I didn't read. Okay. Okay. Well, I'll, I'll scale that back, but I stand by it. The whole podcast has been don't trade unless you really know what you're doing and i think that you know that i think that's a valuable lesson i mean 95 percent of traders fail and when you hear the context of what's actually happening behind it you can see why yeah exactly thank you so much for taking the time to do this uh we're gonna you know maybe six more months down the road we'll do another uh catch up and see if we were horribly wrong or if we actually nailed it okay sounds good look forward to it scott have a great day

thank you