The Wolf Of All Streets - Smart Money Is Buying Bitcoin | Willy Woo

Episode Date: August 3, 2021

Willy Woo is arguably the most profilific on-chain analyst in the crypto space, and uses data to better understand what is truly happening on the Bitcoin network. In this episode, he discussed the beh...avior of whales, what institutions are doing, what the macro environment looks like for crypto, and where Bitcoin is likely headed. Needless to say, Willy Woo believes that the data is pointing to massive long-term bullishness for Bitcoin. Willy Woo: https://twitter.com/woonomic -- Matcha: Matcha is the easiest way to trade in DeFi. Matcha enables you to trade across all the major DEXs so you can be sure you’re getting better prices than going to a centralized exchange or Uniswap. Connect your wallet and start today at https://thewolfofallstreets.link/matcha --- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by Blockworks. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworks.co ーーー Join the Wolf Den newsletter: ►►https://www.getrevue.co/profile/TheWolfDen/members

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Starting point is 00:00:00 This episode is brought to you by Matcha. Stay tuned for more information about 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, art, music, sports, politics, basically anyone with a good story to tell. Now, most crypto enthusiasts watch price action or charts, buy dips, and try to take profits when the number goes up.
Starting point is 00:00:29 Others take a more nuanced approach and read between the lines to really understand the structure and activity of the crypto market. Willie Wu, today's guest, is arguably the best on-chain analyst in the crypto space. With an expert-level understanding of what's going on behind the scenes, it's my hope that Willie can help us all better understand what's happening in the market, what he's currently watching, what he expects for the remainder of the current crypto cycle and beyond. Willie Wu, thank you so much for coming on the show, man. Hey, great to be here. Thanks for having me. So listen, something that just stuck out to me that I heard in the last couple of days, Jerome Powell, the chairman of the Fed,
Starting point is 00:01:00 did a meeting and said that a digital dollar would replace the need for private cryptocurrencies. I'm curious how you would respond to that amazing comment. Well, yeah, I actually did a tweet recently. It was like recalling, you know, Bitcoin encoded that, you know, on the Genesis block, the chancellor on the brink of a second bailout was essentially central bankers on the brink of back then it was bailing out the banks which had failed us and now they're on the brink of essentially releasing the central bank digital currencies which really you know if you think about that like what's happened since 2008 is that the government has fused together the policy of fiscal and monetary, meaning like if you're not managing your books well, you get a free pass and you get to print lots of money, meaning you can steal from the poor and give to the rich and keep going as if nothing's going to happen. And essentially what they're doing now is saying, well, we're going to essentially make that a production technology and we're going to release central bank digital currencies,
Starting point is 00:02:15 a digital dollar, out to everyone so we can actually instigate this very, very efficiently. So, you know, I'm thinking, well, if you would look at that you're you're essentially stealing from the poor giving to the rich and every kind of um if you look back on history every time that's happened it's ended in either revolution or um like a totalitarian society so in effect, what central bankers are doing is anti-democratic. And so it's absolutely no substitute for Bitcoin. I mean, Bitcoin is the opposite to that. It's the exact opposite.
Starting point is 00:02:56 In fact, it's encoded in the blockchain that this is a solution to what central banks are offering, which is a digital dollar. Right. What really made me scratch my head was the idea that it made private coins obsolete, which is so colorblind. Clearly, that's true for the government, because like you said, central banks want utter and complete control of the monetary supply and a digital dollar would do that. But for your average citizen, it's quite the opposite, right? I mean, the entire CBDC makes cryptocurrencies that are private more important for us. Very much so. And it's, we're in a bubble, right? We're totally in a, you know, crypto, Bitcoin, well-educated bubble. And I kind of am out of touch with what you know the people on the street think about this I'm interested to know because it's very very scary for all of us inside the
Starting point is 00:03:52 world of bitcoin that understands a little bit more than the rest on how money works I'm curious to see how the general public will receive this. Because it's scary. I think we are in a bubble, as you said, definitely an echo chamber in our own community. I'm curious if you think, though, in the last year and a half since COVID hit and lockdowns and all of the printing
Starting point is 00:04:19 and infinite QE, the increase in the monetary supply, do you think that your average person has at least some inkling now of the idea that, holy crap, maybe this is wrong? Like, maybe we can't just print money? Because I think your average person never thought about their money in the past. Yeah, maybe, you know, certainly crypto has taken huge gains and a lot more people are looking at it. And, you know, one thing I've noticed is that since COVID's hit and everyone's been stuck inside their houses for over a year,
Starting point is 00:04:50 there's been a lot of, you know, people on YouTube researching, a lot of that's come out in a lot of conspiracy. A lot of people are very conspiracist and antitrusting of their government. So there's that. I can imagine a large breadth of the population really mistrusting government
Starting point is 00:05:07 and going whatever they want to do, we don't trust. So yeah, maybe. Do you think that central banks and I guess governments and regulation in general are still the largest threat to Bitcoin's future? Oh, that's a good question. Actually, if I was to think longer term, I think maybe the threat to Bitcoin's future is really a threat on its own decentralization. I actually don't think central banks is the long-term threat. I think that money is more powerful than the central banks and the money printers. usually sides um sides on whoever has um well let's say totalitarian societies don't really
Starting point is 00:06:11 last very long right and these concentrations of power that are very much aberrations in the long arc of history and we're going through you know this digital revolution and you're talking we're talking about a internet native technology a monetary technology monetary base which is completely native to the internet versus some sort of central authority um kind of clunky it is not really a digital dollar it's essentially a private network um and so i you know it doesn't it doesn't work like we've always seen regime we've had this big technology change like the last time it was the industrial age right we changed the structure of money it went from commodity money bits of gold to paper money that was backed by gold and it's
Starting point is 00:06:58 like a layer two because it can move efficiently across a globalized society with an industrial age, right? So that was necessary for to facilitate trade, but then you'll notice that the power structure changed from kingdoms to you know nation states. So like right now we're in nation states and they want to create a digital dollar and a centralized banking system whilst we're in nation states and they want to create a digital dollar and a centralized banking system whilst we're going through this technical revolution, which is saying, no, we want something a little bit more fluid than that.
Starting point is 00:07:35 And usually what changes is not the technology. Technology goes forward. It's the power structure changes. So I do think that the nation state as we know it is coming to an end much quicker than most people think we think this might be a century kind of thing um the rate of bitcoin's growth um you know one in eight people will have exposure to it in four years um it'll double in the next four years no double every year after it so we're looking at the end of the decade and the jury of the world on this network it's faster than any other network in history so we're looking at a major
Starting point is 00:08:11 power shift in the next 10 years i think that um we'll start to transition from very powerful nation states to like smaller nations um city states um and I think that that'd be profound. I think those would be the areas that are prosperous. So yeah, I feel like this is like the last ditch effort from a dying power structure. And so to answer the question, yeah, I don't think that is the risk. I think the risk is if Bitcoin fails internally from centralization can you talk a bit more about that if if it becomes too centralized um then you know it fails on its original objective which is um really a kind of democratic monetary democracy essentially um if you centralize the control of the money then um
Starting point is 00:09:07 we're back to where we started very centralized control and if if that was centralized and controlled by a nation state then um this whole future that we we think about um where uh we have like a fair monetary system ceases to be fair anymore so yeah i think that's i think that's the biggest risk and i think also the the people don't really understand that as a as as the most important thing in bitcoin is its decentralization so a lot of people talk about oh xyz coin is more scalable it has this or that faster block times or whatever but that's not really important when you're talking about winning the game of being the monetary base which is like 100 trillion dollars you need that to be decentralized so i would rather have a 10 minute block time than, you know,
Starting point is 00:10:07 a nanosecond block time with something that's highly centralized, because that's a failure. Right, or less secure. Yeah, or less secure, obviously. So speaking of decentralizing, then how do you feel about the fact that China has finally, seemingly is actually banning Bitcoin mining, which in my estimation long-term is a good thing because it's less centralized in China. But I'm curious as to, with what you just said in mind, the impact of what's happening in China now. Yeah, for sure. It is definitely reducing the centralization. It's a really good thing that's happened. It's ridiculously bullish in the long term, short term. Short term often moves in the other direction, which we're seeing. Yeah, it mitigates a lot of attack. It mitigates an attack
Starting point is 00:11:01 from a state actor like China attacking the network. Also these repercussions subtle ones like you know like maybe you call it minor extracted value we've seen in 2017 there was actually these this this particular market environment where you're actually incentivized as a miner to attack the network. And they did, right? In 2017, there was a phase where the block was 93% filled. It was very congested. And at that point, if one miner controlled or a cartel of miners controlled the network,
Starting point is 00:11:41 what you could do is spam the network, actually pay and outbid the fees in the mempool and create this kind of Dutch auction where everyone would have to bid higher for their fees or their transactions wouldn't be processed. And so effectively, these miners were spamming the network so that they could extract more value in mining. And so that attack vector starts to reduce and actually that attack vector becomes very, very important later on in Bitcoin's kind of maturity as the kind of, you know, the inflation rate drops, the block subsidy, the new blocks that are being rewarded start to diminish to zero.
Starting point is 00:12:31 All we're left for the miners is that fees market. So what they earn from those fees becomes very important. And usually in that setup, the fees are quite quite high the blocks are very full and um that incentive for a miner to spam the network only works if you control enough of it so that you're guaranteed if you control 50 on the net well say 30 51 you'll get 30 of those fees back right so um those kind of um when you have when youralize that part of the network, it reduces a lot of the risk to the network. So yeah, it's hugely important.
Starting point is 00:13:12 I'm laughing sort of because it made me think of what's going on with Bitcoin SV or BSV, Satoshi Vision at the moment where they're finding, you know, trading being frozen on a number of exchanges because it lacks the things that you're talking about and they're experiencing 51% of tax. Exactly. I was like, they put out a statement saying
Starting point is 00:13:34 this is an illegal tech on a network, but actually, no, it's an incentivized attack on the network because you designed it wrong. Big blocks create that. Interesting karma for Craigig wright i guess uh at the moment yeah well you know he's supposed to be this rocket scientist according to his own words you know like he's a genius according to his words but um he's designed a network that incentivizes attack from its own miners um and he didn't know that but that was really clear i mean i, I saw these intentions work
Starting point is 00:14:06 out in 2017 as the whole thing became congested. Yeah. So listen, I got into Bitcoin late 2016, and I came in strictly as a trader. I think like a lot of people, I came for the dollars and stayed for, you know, took the orange pill and stayed. But one of the arguments when I first came in, because I'd been trading other markets was, Bitcoin's amazing. It has no fundamentals. You can just look at the chart and trade the chart. It doesn't matter. So obviously, you learn later that it has fundamentals, just not the same as a corporation. You don't have earnings like Apple or Amazon, but you have on-chain metrics. So that's clearly where you focus. I love to hear you talk about what those important fundamentals are of Bitcoin as far as on-chain metrics. And
Starting point is 00:14:50 for anyone who doesn't even understand it, to talk about why that's what you focus so heavily on. Yeah. So like, you know, most investors, probably the most common understanding around investment is in stocks and companies so we're very used to like a company and a balance sheet and profit and loss and the evaluation on you know the kind of money they're making and the growth of that that company and the money they'll make in the future whereas bitcoin can't be considered um this you know it's a it's a commodity it's a digital commodity um the only fundamentals you see in it are essentially people buying it to hold it. And so if we were to do this with gold, well you can't because it doesn't have
Starting point is 00:15:37 a blockchain so you can't trace it right. So you know gold's kind of private but on the other side there's no fundamentals you can track. So with Bitcoin, we have this blockchain and it's really interesting because we've got the first time a fully visible ledger and you can see investor movements. You can see flows of capital. at short-term and long-term demand and supply by these investors and speculators and all the different participants, including miners and exchanges and whatnot. So effectively we're doing that. I think my first indicator that was published was NVT
Starting point is 00:16:23 and it was kind of billed as the price earnings ratio of Bitcoin and I'll describe this as an example because we're used to a price earnings ratio a company has earnings and then we run a ratio to its share price and that's the PE ratio and whereas Bitcoin didn't have earnings right it's not's not a company, but it does have activity. And the activity is correlated to volume. Because when you see volume on its blockchain, not volume on the exchanges, because that can be wash traded. You can do all sorts of volume games in there.
Starting point is 00:17:02 But it's not indicative of long-term investors. So when you look at the long-term investors moving coins between participants, that's, if you see movement of coins, that's usually movements from a buyer to a seller. And so you can get a volume of investment activity there. And so it turns out, you know, the more investment activity you get in the network
Starting point is 00:17:26 the higher the valuation the correlation is very very high so what you do is you run the ratio to that and effectively the earnings is kind of like the investment activity the volume and that became NVT so that's a very simple example of trying to draw demand and supply when investment velocity is very high and the price isn't reflecting that. It means the market is not pricing that incorrectly. So often what you'll see is the price runs up afterwards once it figures it out. And were any of those signals present on the run up,up i guess from 3800 all the way to 65 but i think more people would ask where any of those signals present that the drop was coming when when we reached the top yeah so um interestingly with um you know the story goes back to covid um the covid crash in um you know the first and second quarter of
Starting point is 00:18:27 last year like we saw this the price pull back from 10 000 it flash crashed to 4 000 recovered to 10 000 and it went just sideways and it was very correlated to stocks and people were saying this is crap you know we're just it's not a safe haven. Gold's going up. It should be performing and it's not. Do something. It's just moving up and down with stocks. And if you look on chain, you'll see that something else happened.
Starting point is 00:18:58 The inventory on spot exchanges, the speculative inventory, I call it, that was starting to deplete as long-term investors were starting to scoop up all those coins. And you could see it also on the blockchain because you can look into all the, you can cluster all the wallets together and all the address spaces and you go,
Starting point is 00:19:18 oh, that's one person, that's another person, that's another person. And you can do a historical analysis of their wallets and you can then categorize the of their wallets and you can then categorize the guys that are long-term investors who don't sell they just keep accumulating and the speculative kind of holder that moves coins in and out of the exchanges you know so you could also see the the long-term investors who are just buying scooping up all the coins and the speculative guys giving up their supply and being
Starting point is 00:19:46 bought up by these long-term guys and it just carried on for like nine months and it went all the way to October so effectively there was this huge supply shock that was forming and the market was completely not pricing that in so when it did get priced in by late October we did this run up and it went from you know ten thousand to sixty thousand dollars and if you were a technical analyst you'd go oh oversold oversold by twenty thousand was oversold and just you all your technical indicators would be saying this is completely bonkers the market's gone bonkers but actually it hadn't gone bonkers the market was bonkers going sideways pricing not pricing in supply shock and it was just finding equilibrium finding its new balance and effectively pricing that supply shock in in the 50 000 range range um and so um you know with with that we um on chain things looked pretty you know it was
Starting point is 00:20:52 still looking kind of momentum was bullish um but there were a few key things that happened um whale started dumping um and like i certainly didn't think it would pull back to this level. Like we saw like a little bit of dumping, but I kind of thought we'd go even higher. But effectively, it wasn't till like mid, I think, 45,000, 50 to 45,000 things looked extremely bearish. I put out a very bearish call at around that zone and that was you could see a lot of coins moving from previously strong hands back to speculative hands
Starting point is 00:21:37 and so like a lot of the guys that had bought the coins um in the last quarter of last year and the first quarter of this year they bought you know kind of sub 20 000 was taking profit um and those guys started dumping and that's what you could see on chain you could see and and these guys weren't small fry they were whales they were effectively um like 10 000 bitcoins or more like yeah ridiculous amounts of like and these were noobs um effectively like in 2017 we had um you know as a bull run comes up it collects a lot of new investors and those noobs get frightened in the volatility kind of ups and downs and they sell out and they get snapped up by the smart you know hands that are well capitalized and in this year what we saw was
Starting point is 00:22:32 the noobs were like hedge funds swinging you know 50 million 100 million 200 million they're taking profit and so you know the the the people who like know bitcoin and it's like yeah this is going up over the long term they're snapping it up but they're getting crushed by the self-power of you know these these whales so that's effectively what's happened now um that you can see all this on chain um and now we're in this sort of sideways band where a lot of liquidity is being dumped back onto the market. So there's a lot of coins that are being reabsorbed by long-term holders. And, you know, that's been, that price has been going for two months now. Yeah.
Starting point is 00:23:20 Eight weeks of weekly candles. If you look at the chart, and I don't know when this will come out, but eight weeks have basically gone below 34 K and then closed above every time it drops below that level. It just gets absolutely eaten up and bought back up. So it really is interesting to watch. And I'd never heard the perspective that you just said that now we have whales that are noobs, which is not something that we ever had before, but it makes perfect sense because a hedge fund has people to answer to, right? If you're a hedge fund manager and you're up 4x on an investment that you made a couple of months ago, you literally have to sell. Yeah, you have to rebalance. You have to. By protocol, they have to do it.
Starting point is 00:24:00 Right. Yeah. I mean, it's absolutely a necessity. What I find funny, I actually did something I rarely do. And I told Twitter that I was going to be speaking with you today and ask for questions. And across the board, you get the same sort of thing that I get whenever I'm on Twitter, which is, why didn't you know this was going to happen? Why didn't you tell us? And I always laugh that people assume that we have crystal balls, right? And that we can literally tell the future, but people are like, you know, he was telling people to buy at 60K. Well, so was I. And frankly, I still think you should have bought at 60K because I'm thinking about a decade from now and not a month from now. Right? So do you think it's just that people are too impatient and too focused on now? I think it's very reflective of the cycle we're in that it's a bull cycle and we're collecting a lot of new investors and they're new to the market and they think um it's a crystal ball right and you know if you're a long-term trader you're generally like 55 correct if you're good on you know technical trader you might be right 55 you know you you make money because of your risk management
Starting point is 00:25:05 and your stops right if you've got extremely good analysis skills you you might be 60 like the best algorithm i've ever built was winning 60 of the trades right um so it's very seldom you get above 60 and um and so it's like that like with the the backtrace of on-chain that i've done is about um 80 right it's 80 and people are going expecting 100 well if you can get 100 well why would i ever just i just keep that like secret forever i'd be the emperor of the world the emperor of the world is 100 percent um reads the future you know it's iosauron yeah it's really true guys i really hope that all of you are not still trading on the old platforms like uniswap when there are much better options like matcha and now matcha has upgraded to 2.0 now i've told you about matcha
Starting point is 00:26:03 a number of times they have limit orders which these other platforms don't which is absolutely incredible so you don't have to sit there staring at your screen waiting for that perfect moment to enter or exit a trade and they also aggregate liquidity from all of the different platforms finding you the best price and reduced fees but now they have matcha 2.0 and have added so many awesome features matcha is now the only decks with an integrated fiat on-ramp you can put your dollars directly onto the platform. They also now have OTC trading for orders between 1k and 1 million, which is beyond huge. And maybe most importantly, match and now supports trading on polygon, meaning that those gas fees will almost evaporate completely. Now, if you guys want to check out matcha, which you absolutely should, you can do that at thewolfofallstreets.link slash matcha.
Starting point is 00:26:46 That's thewolfofallstreets.link slash matcha. Please check them out. I'm telling you, it will save you so much money and is such a superior experience. Do it now. Speaking of people being patient versus impatient, which is something we see constantly in the market, another recent argument that made me shake my head and laugh was that Bitcoin has failed as an inflation hedge because we've seen CPI numbers up in the United States. You know, May over May was roughly 5% and June over June was slightly higher than 5%. And alarmingly, Bitcoin didn't immediately go up.
Starting point is 00:27:18 So it's not a good inflation hedge. So I'm curious. This is also one of the things in the markets right the market's irrational in the short term um but it's usually very accurate pricing things in the long term that was exactly what i talked about earlier like nine months of supply shock the market did not have even an inkling of how to price that in until eventually um the supply ran out and they had to figure that out. So like right now, we're in this zone where the market is ridiculously irrational and caught up in fear. And the supply shock currently values Bitcoin at above 50,000 if you can shake off the fear.
Starting point is 00:28:00 The velocity valuation of Bitcoin is in the high 40 40s um supply shock is in the 50s stock to flow ratio is what is it close to 70 000 these are the fundamental valuations on bitcoin and um the market is stuck in fear mode in the 30s um i kind of suspect that it's more than fear i think that it's being manipulated down for more accumulation, massive amount of accumulation happening right now. So, you know, it's often the market is gang theoretic to make the smartest and richest trader more money. Yeah. I mean, the longer we go sideways, the more you trade like that. I mean, I don't trade much anymore because Bitcoin went so high that I had the luxury of becoming a really passionate investor and not having to bother trading, which is something that I've
Starting point is 00:28:55 always traded with a small part of my stack. But I personally, I believe that this is an exceptional time to buy. I mean, I like a 55% discount on an asset that I want to retire on. Yeah. And I don't care if it goes to 20 or 25, it's irrelevant, right? So, and that, sure, that could happen. But everything I'm seeing now, sort of like you're talking about,
Starting point is 00:29:17 once again, now we sort of have people getting impatient, price ranges endlessly. And eventually, they wouldn't have sold at 35 but now they think 35 all of a sudden is a great place and we're seeing those newer speculators getting impatient and selling back into the hands of whales who are accumulating and the real whales not the noob whales yeah the real ones the ones that are uh really stacking um we're actually we're in a zone where um like uh like the smart money has completely stopped selling. It's at a local minimum.
Starting point is 00:29:51 We call this destruction. This is another metric. You know, you can look at the age of the coins moving per volume, moving between investors. And whenever it reaches a low of destruction, meaning those coins that are moving between investors are young. That means the sellers are noobs. At maximum noobishness. And whenever that bottoms, yeah, that's a time to buy. And it's just bottomed in this last week.
Starting point is 00:30:19 We're at max noob selling. And the OGs are not selling. So they're buying, right? So that's another one right now. If you wind back the clock to 2018 to now, the network growth in terms of users, you can see on the blockchain, it's gone parabolic, right? It doesn't go parabolic.
Starting point is 00:30:44 Like, like the user growth on the net, I'm talking about parabolic on a log chart, you know, like we're used to. Normally it does that sort of, it grows and then it starts to taper. The growth rate starts to taper off. For the last three years, the growth rate has been going parabolic.
Starting point is 00:31:03 Never been seen before. So is it an inflation hedge well don't look at the price look at the fundamentals it is people are flying into bitcoin it's not being reflected in price because the price action is irrational and sometimes it's suppressed by very strong hands that are scooping more so there's all sorts of um weird effects like elon musk effects on the short-term price but when i look at on chain i filter all the noise out and i can see the long-term um movement in capital and and um you know fundamental valuations on this network and um you know price doesn't norm often it tracks but not always and when it doesn't those are great opportunities because never in the history
Starting point is 00:31:52 of bitcoin has the fundamentals been um not not played out you know they always play out it just always catches up yeah i've always made the argument that price and value are two very, very vastly different things, right? Because, you know, price is being set by speculators. And it really is incredible as I've been gone down this journey for five years to be able to actually quantify that value with on chain metrics and following people, you know, like yourself, because at the beginning, you just see price and you say, this is what it's worth. Right. And I think obviously we all know that it's worth more. And the notion that an inflation hedge would be defined in such a short period of time is such nonsense when you're buying it to edge against inflation 20 years from now. Yeah. It's, it's, I mean, often when inflation hits, it's use a delay mechanism before everything goes haywire.
Starting point is 00:32:46 But, you know, going back to the short-term pricing, we were in an era, 2018, 2019, even early 2020, you could describe the price of Bitcoin as it's not fundamentally driven. It was
Starting point is 00:33:02 effectively a random walk in the direction that would liquidate the most amount of traders on BitMEX. If you could figure out how much money could be made by liquidating the most traders, that would be the direction Bitcoin would move in. It's like this car swerving to take out as many traders. And effectively, that's a speculator game so it doesn't follow fundamentals it does track it once the price deviates so far like it goes so far below fundamentals that fundamental investors come in and scoop up they absolutely scoop up the those coins so it can't drop below and so yeah it's it's it's a waiting game it's you know it's patience and um certainly
Starting point is 00:33:47 this last two months has been very much a patience um game you know accumulation bands are patience yeah patience yeah well we were joking before we started recording that plan b who uh introduced us was smart enough to get on a boat for the summer and go away yeah mind you i think that um all fireworks is going to break loose in next week um i kind of think it's going to happen pretty it's going to be next week or the week after um and and he'll be probably kicking himself on a boat he's probably got internet access but you know i don't know he's not a trader so no not at all it's just funny so i'm curious if you have a oh shit price where if it drops below this price you're like oh shit i was wrong maybe uh you know maybe there's something false here or is it really price is completely irrelevant when you're
Starting point is 00:34:38 looking at your analysis um well there's definitely a oh shit price if i'm in a leverage trade um usually the oh shit happens um if the fundamentals start to swing right sometimes these these market events that happen where price action actually changes the fundamental you know um like we saw that in the the short squeeze um in was it 2019 when price broke out of the four thousand dollar range and it just went all the way to 14 and um you know it squeezed investors it squeezed investors and effectively it was well overvalued but as it was running up so fast investors started to get FOMO and then then we started to see the fundamentals started to conform to the price action and it pulled the fundamentals up and so I mean if you can create enough fear in the market the fundamentals can change and
Starting point is 00:35:41 then I would go oh shit yeah but we're luckily we're in the zone where as the price is going down everyone's going oh shit and buying and like it's just like really juicy right now um and it's it's really great because um you know crypto twitter is full of bearishness everyone's it's it's it's like floating in the dead sea there's so much salt it's unbelievable it's it's like um because you know i was tweeting bearish tweets after bearish tweets based on on-chain analysis in 2018 there'd be a market of that and they hated me absolutely hated me um and um now i'm doing bullish tweets and they're hating hating it saying it's going to 20 but it just says to me like actually the whole thing's flipped everyone wants to buy bitcoin but they want to buy it cheap
Starting point is 00:36:30 and they want the 20 000 bitcoin price so they can buy it um those are the people who buy those are the people who buy 50 those are the people who buy it at 50 on the way up when they're finally that's how markets work i don't know if it's going to go up or down, but I do know that when it's seemingly everyone wants to buy at a lower price, they all buy higher. That's just, I mean, you can see that in the history of markets everywhere, right? That's not unique to Bitcoin. And it's interesting now because on-chain analysis is very widespread and everyone's got access to the charts. And so people are posting very bearish on-chain analysis too. But I'd have you know that the on-chain analysis for the bearish stuff is fundamentally very bad analysis and it's flawed analysis with major gaps and misunderstanding of what the data they're looking at is actually saying.
Starting point is 00:37:28 To that end, I'm actually curious. So obviously traders spoof and manipulate the market all the time, manipulate because it's a free market and there's no rules against putting up a buy wall or sell wall. Can on-chain metrics be spoofed or manipulated by big players can they send a
Starting point is 00:37:46 whole lot of coins to one wallet or another to make you as an on-chain analyst believe that something's happening that's not or would they uh yeah it's um it's a lot harder to um it's not impervious but um these different tiers of data and like you like for example you can spoof addresses like active addresses is very easy to spoof and there's a high correlation to price historically to active addresses, but You know, some of the various, you know, much more sophisticated data we've got now like Glassnode do on chain forensics to cluster all the addresses together and go, that is one person you know and so you can't really um easily spoof that you know you can't fake being a million people literally you need to fake being a million people to make a difference on the network and that's very hard that's a large amount of capital to deal with um the cost is prohibitive you need probably a lot of development and wallets to be able to
Starting point is 00:38:45 to fake that kind of stuff um and even then we look at the amount of capital you're throwing so um if you're trying to spoof that stuff you you better be worth like you know 10 20 50 100 billion dollars um right for it to be worth you know particularly yeah and also we filter out a lot of the stuff that's new like um we you know we want to look at the coins that have aged so how can you like those coins that were five years aged moving between one participant to another you can't fake that like you can have to wait five years before you try that scam again on the network so um yeah it's very difficult to fake that the really good data um you know like there's very rudimentary data that's given for free
Starting point is 00:39:31 but the really good stuff costs money and that stuff is hard to um fake you know to get access to that data and that's the data um you know i'm working with and you know all the stuff on Twitter is the cheap free stuff. And none of the people that have access to this higher tier of data is posting anything bearish. Right. Which is very interesting. I saw you say that on Twitter, that basically, if you have access to the good data, it's very hard to build a bearish case. Yeah, it's very hard. And crypto Twitterish case yeah it's very hard and like you know it's crypto twitter's fortunate because there's a number of us you know william comente is uh is also tweeting at that tier of data um i do a bit of it um i try not to tweet too much
Starting point is 00:40:18 these days because i'm just sick of like the bs trolling. I forget it. We need to be service guys, but forget it. A voluntary beating is not really high on my list of fun things to do. I also tweet less for the very same reason. I mean, yeah, exactly. But I'm curious, you talk about obviously like five-year-old coins being moved in a large tranche,
Starting point is 00:40:44 something that you wouldn't be able to fake, but also to what end would you even try? I'm curious, when you see things like that, how easy is it to identify whether perhaps that's an OTC deal or is it perhaps just somebody changing their custody or security? How do you know why these coins are moving? Yeah, that's a hugely good question um it's like when you see that you know you'll see it in one dimension of the network so you will you will see it in um say like dormancy or the destruction of um coin we call it destruction pretty much the aging you know the age the fine wine aging of these coins and wallets um as they just get destroyed their age you go oh there's a blip here but then of course no one chart is the holy grail you need to look at you know we have like four or
Starting point is 00:41:34 five hundred charts of the network and you'll go oh well this could mean a b or c so it's a process elimination so if it's otc you will go to the OTC chart. And because we're tracing that, you can say there's some amount of data showing what's happening on OTC desks and so forth. For example, someone posted the wallets of a thousand bitcoins or higher is they're reducing meaning whales are selling. Well, it doesn't mean whales are selling. It could be wallet consolidation. It could be a number of things. So then you need to track how much is, you know, is it exchange balances? You know, because they're the biggest whales out there, which is Binance, you know, they'll look on, they hold the most wallets with over a thousand Bitcoins. Are they, is it supply shock? Is it actually everyone's buying coins and
Starting point is 00:42:40 taking it off Binance into cold storage because they're stacking hard that's bullish it's not bearish that whales are right and so you need to look at all these dimensions and once you have the good data and you look at all the different possibilities and eliminate them then you can ascertain what is happening in the network with much higher probability than just you know it's kind of a guess with past correlations. Like right now, active addresses dropping through the floor, which is correlated to price, right? When you see this thing dropping to the floor, it's been fuel for a lot of bearish people because it's like, you know, there's no activity. That means that the network's not growing. Actually, what's actually happened is we've had
Starting point is 00:43:25 two rounds of miners shut down and so the blocks have been processed at one third of the rate so obviously the activity in the addresses has to go to one third of the rate because they can't process at the same speed um so uh when you you have to take that into account um so there's all these sort of things you need to know about the network when you're you're going to do analysis so yeah yeah listening to you talk about is really enlightening because i'm on twitter i see hundreds of these charts that don't consider any of that right it's very binary this moved it went from here to there and then they ascertain what that means, but causation, correlation, right? So clearly, you have to be looking much, much deeper. And like technical analysis, people become basic beginner technical
Starting point is 00:44:20 analysis. They draw a couple lines and they think they're a master. It's probably very much similar with on-chain. You look at your three or four things that you track and you think that you then understand what's happening, but probably not the case. It's not usually the case. And I mean, I see people posting XYZ as a counterpoint, on-chain analysis as a counterpoint. And sometimes I even even like don't want to even get started because it's like a tweet thread of 10 chats and then none of them are analyzed properly and then when i say i don't want to get started with this because there's so much wrong in this and they'll just say oh that's because you then they'll say something really trollish like it's because you've got no
Starting point is 00:45:00 way to refute my strong argument yeah no it's just because i've got no way to refute my strong argument. Yeah. No, it's just because I've got only a certain amount of time in the day. I'm doing a lot of things right now. Yeah. So, yeah. So I'm curious. You put it in the time waster sometimes.
Starting point is 00:45:17 Oh, yeah. The ultimate. So I'm curious to pivot. Do you think that we get to a point in the future where Bitcoin is viewed by, you know, Wall Street or your average individual mainstream adoption level where it's just another asset in your portfolio, where it's so mainstream that people go, I have a portfolio of stocks and bonds and some crypto and something else? Or do you think that we remain sort of this fringe asset
Starting point is 00:45:46 and fringe community? I think we've probably got another two to four years to be considered fringe. From four years onwards, definitely it will be mainstream. Just in the adoption numbers, I think it's we're now in the transition from fringe be mainstream. Just in the adoption numbers, I think it's, we're now in the transition from fringe to mainstream.
Starting point is 00:46:07 We can see that from, obviously the whale's dumping, the hedge fund's dumping. It means that I've been in this game. Wall Street has been in this game for the last year at very large capital compared to what we're used to.
Starting point is 00:46:25 And, you know, like, you know, it probably doesn't take much conversation to realize that some of the smartest people on Wall Street are now bored with traditional finance and really excited about what they can build and what they can do in crypto. Certainly the yields inside crypto are huge. um you know like this market is so inefficient talking to some wall street guys they're like they look at the the markets here they run their models across it and their jaw drops they go what it's like 1980 for them yeah it's like 1980 wall street i like making like uh 20 per week by running arbitrage from
Starting point is 00:47:06 the standard wall street models onto here and they're like we've got to get into this you know because the volume is big enough now they can run the fun doing this stuff so that's the that's the thing right now this market is so inefficient that wall street's coming in and anyone with that kind of background is coming in and adding efficiency to the market and you can almost measure um the adoption as as the you know the crazy inefficiency start to like close um but you know like if you're if you're in um traditional finance you're you're lucky if you're getting you know uh you know maybe a few percentage points on your cash, but the yields in crypto are very easy to be double digit, triple digits, if you really know
Starting point is 00:47:51 what you're doing. That's interesting, because a lot of the excitement for mainstream is the yields that are being passed on by these companies, the Voyagers, BlockFi, Celsius, Nexo, Amber, of course. But as you said, you said, they're obviously having to take advantage of some arbitrage opportunity to pass those yields on to their customers. If the market becomes more efficient, won't those yields steadily disappear for the mainstream? We're seeing with BlockFi already. BlockFi went from six percent
Starting point is 00:48:26 to one percent i think largely because of the gptc premium just disappearing in a matter of months uh yeah true true like those yields are completely trashed and in a bearish phase um yeah and also the volume is very very low right now now. So, you know, I think some of the, the loaning out goes to market makers. They need the access to the liquidity to be able to market make. And because the volume is so low, you know, it's very low. Yeah. But they're still making a little. I mean, everybody's still making money, but it is just interesting because we know that this market will become
Starting point is 00:49:05 far more efficient with time and those opportunities will disappear. I mean, remember in 2017, even as just an average person, there was a time when you could arbitrage between exchanges on Bitcoin with a $3,500 gap. It would be trading at 19,000 one place and 15,500 somewhere else. There was a week where I was just cycling Litecoin between Coinbase, Binance, and Bittrex for five to 10% difference as fast as I could move it. Free money. Manually, right? Manually. I was literally like, oh, it's going to take me 30 minutes to send. Exactly. I remember when Bitcoin Cash Fork came know, remember like there was huge inefficiencies. I think I creamed five Bitcoins that day just moving coins around.
Starting point is 00:49:52 Right. That doesn't exist anymore. Right. And so I guess we can see that that's probably a statement of how much more mature the market is and how much further mature. Interesting, though, like we all talk about Wall Street and hedge funds and it's exciting that they're here and they're moving money around this market. But isn't like rationally that sort of contrary to the original purpose of Bitcoin? It's like, you know, you have the sort of short the banker, long Bitcoin mentality, but then they also make the number go up. So we cheer them. But for your average person, say in Venezuela or Lebanon or Iranbanon or iran who cares about bitcoin they don't want wall street and institutions here right they want uh they want
Starting point is 00:50:30 to use bitcoin as money or store value i think it's uh i think it's a little bit more um yeah nuanced and that and that like we're not saying like the bankers are here which you know i'm sure they are coming in well they definitely are they are it's actually really interesting i'll get to that later but like what i'm saying is the smart guys you know it's the rocket scientists they're trained to put you know rockets into space being hired up by some quant firm to build you know some front-running software to to beat the market and then they're coming over to crypto to go, wow, it's inefficient.
Starting point is 00:51:06 Let's build some stuff to make it efficient. It's not like the chairman of Goldman Sachs is coming in to do that. Because those guys come in and they want to dominate and control the currency. These guys are coming in to build cool stuff to add to the ecosystem. And ultimately, I don't think i've come across anyone who doesn't
Starting point is 00:51:26 really like after working with it really believe in the ethos of it um you know and usually a much more sophisticated way um so like you look at um sbf over at ftx right um he's had he's exactly that what i'm talking about like Like a little bit of Wall Street background and coming over like, whoa, look at all this stuff. Let's build some cool shit. So that's what I'm talking about. Meanwhile, you've got the bankers coming over
Starting point is 00:51:53 and they're coming over in a really interesting rock and a hard place because they make commercial and retail banks make money by essentially propagating debt and expanding the money supply, you know, through the process of loaning out and then getting deposits and loaning out and they expand the money supply. down through this food chain and now with central banks effectively saying we're cutting you guys out we're gonna issue our own currency central bank digital currencies you know the retail and commercial banks are now faced with two things that they can do option one is to roll over and die and option two is to be a Bitcoin bank right right? Essentially be on the other
Starting point is 00:52:45 side like of the divide because really it's coming down to central bank digital currencies and free and open peer-to-peer currency. And so you can see one by one you know like what is it DBS Singapore is banking Bitcoin, Standard Charter I think think, is initiating something in Europe. Morgan Stanley moving, JP Morgan. They're all coming over to Bitcoin and basically they don't have a choice. So that's the interesting thing is on that side of things,
Starting point is 00:53:17 those guys are coming into Bitcoin with it. Well, I think their tail's tucked because they're forced to. With the valu evaluations now no no better than coinbase right yeah um and and um spf now like i don't know if he's joking or being serious but it's like it's not out of the question to acquire goldman sachs like it gives you a little yeah well and the cme right gives you a little bit of a you know a completely flip side thing we're not that small anymore definitely not at the current growth rates
Starting point is 00:53:52 how big of a smile did it put on your face when you read that because I that to me that was like that was the funniest and most amazing news story in ages just the fact that i mean and he means the thing is he means it yeah yeah right it's well it's backed by data it's backed by the growth rate right um like this thing's going to it's it's going to 100 trillion um if not more um I imagine the economy is going to get a lot bigger just because productivity is improving. So yeah like this is probably a 10x above what banks, the size of the scale of banks you know. So yeah I mean we're so used to was it 12 years of being little guys but now we're in this zone of breaking out of being little to becoming mainstream. And, you know, you,
Starting point is 00:54:50 you can tell that because the chairman of, of central banks are now, you know, flooding Bitcoin to talk about it. I mean, regardless of what they're saying, the very fact that they're talking about it i mean regardless of what they're saying the very fact that they're talking about it is astounding it's it's it's like the very largest banking powers in the world and now um scared of this little thing that we thought was a toy a few years ago you know so it really is and it's like it's you know what is it's roughly 160 million people have exposure to bitcoin today um but that doubles every year you know so it's not actually about it's not actually
Starting point is 00:55:36 about the size we are in but it's the growth rate and the current network growth rate is the fastest growth rate of any technology we've ever seen in the history of mankind, which means that we'll be at saturation within a decade. I mean, I'm kind of wondering how long will it take for central bank digital currencies to actually roll out and be ready? Because they've got a race on their hands. If they can't get this done in five years um it's over yeah they'll have lost it but it's it's it's what the crypto is de facto bitcoin is de facto um it's too late um yeah i really ain't got a window of probably i don't
Starting point is 00:56:24 know two years five years yeah maybe two, I don't know, two years. Three to five years. Yeah, maybe two. Yeah, I don't know. Yeah, I think you're right. I think they, I mean, China's going to roll out, but the others are going to be very slow. Yeah, China's going to be very, wow, it's going to be quite a closed.
Starting point is 00:56:36 I imagine it'd be quite closed because how they do it. They'll be the fastest. They'll be the fastest. But, you know. Easy to be fast when you have complete control over what you're building. You don't have to ask anyone else's opinion. It's so funny though, talking about what you mentioned with SPF.
Starting point is 00:56:56 I had Steven Stonberg from Bittrex Global on the show. And he said, you know, it used to be like the bankers were the rich guys. And then in like the 70s, 80s, whatever, the hedge fund guys came in. They're like, ha ha, you're a billion used to be like the bankers were the rich guys. And then in like the 70s, 80s, whatever, the hedge fund guys came in, they're like, haha, you're a billion, I've got 2 billion, like, we're the rich guys. And now you have 28 year olds who are worth 10 or 20 billion, and just completely, right. So the future of wealth is going to move to the crypto billionaires. I mean, and they're going to be 20, 30 years younger than the guys who made their money on Wall Street.
Starting point is 00:57:32 And this is the interesting thing is like, you know, the founding fathers of America were essentially millennials when they wrote the founding documents, right? And I mean, there's been cases like this in europe i think is it estonia i think is one of these countries where the they it was like the average age of the politicians was in their 30s um like like a lot of progress happens when um the younger generation get to rewrite the rules according to the changing times
Starting point is 00:58:06 and like what's interesting now is the new power that's rising as um you know the millennial generation but the you know the cream of the crop are making billions in crypto right now yeah and they have very fine understanding of how monetary markets work um so i see a huge power change you know right now it's like uh if you ever read the book the fourth turning um you know it really describes every four generations they go through um archetypal kind of um changes and every fourth turning turning last one was the great depression going into world war ii we had a major shift of regime and an infrastructure change you know all the strong institutions we built in present day was built then with high integrity and now they've been dismantled
Starting point is 00:59:00 and we're actually in that fourth turning in the fourth generation of that happening now um and it's the millennial generation that are now very capitalized with the you know the ones that are capitalized like spf um they're very you know it's new values it's it's going to be a really interesting time in the next um 10 years i think it's ridiculous amounts of change we're going to have and i think it's going to be positive. I'm not doom or gloom. It might be a bit of pain in the short term, but I think it's positive. So you talk about this thing going to a hundred trillion, right? So what does that mean for Bitcoin price? Yeah, per Bitcoin, right?
Starting point is 00:59:37 Yeah. A hundred trillion dollars for Bitcoin, obviously. If anybody's listening, Willy Woo has just predicted 100 trillion dollar bitcoin just so yeah it's possible if if usd goes to zero but reasonably what i mean you know uh cycle tops is there a last cycle does it eventually just become a stable asset you know because it's a standard where's this thing going in your mind? I'm more and more siding on the last cycle. You can even see it on the chat.
Starting point is 01:00:16 It's a drunken walk right now of demand and supply. We've had parabolic rises and a blow off top in four-year cycles for three times now. And this time we're doing these kind of weird drunken walks of demand and supply as different participants come in and different effects happen and so um i'm kind of like with michael saylor which he said to laura shin there is no top i think we might just not have these four-year cycles because they're predicated on a supply shock from the halvening you know every four years the sell pressure from miners halves and the sell pressure from miners is getting pretty small now we're at what 1.7 percent inflation rate
Starting point is 01:01:00 per year from miners and the next halvening goes from 1.7 to like 0.8 percent or something like that it's that's infinitesimal in in a supply shock when exchanges are already almost double that like the sell pressure from exchanges if they were to sell all of their fees revenue onto them to interfere not saying they do, but they do sell some of it. The potential for their sell pressure is two times what miners do. The sell pressure from Grayscale's ETF, well, it's not an ETF, but their fee management fees of 2%, there's about 5% of all the miners combined right now.
Starting point is 01:01:47 So as ETF starts start to climb, their sell pressure comes in. So there's all these kind of mature market like demand, supply, impacts that are really starting to reduce what impacts miners have, which is what the four-year cycle is predicated on. So I think we're now in the last cycle and some people say, oh, we're getting lengthening cycles. No, it's just like we've just made a binary shift from four-year cycles into correlations and demand and supply to macro markets. That's funny. When you say the last cycle, I think your average person, the first thing is going to be like, oh my God, that's bearish. Like this is it. It just went up and we're done. But I think the point is that it will just continue to rise and even a 50% correction
Starting point is 01:02:40 will be more temporary and we don't have to wait four years to start going up again. Yeah. Thanks for the clarification. I mean, I like the last cycle. It's so dramatic, you know, but you might use Dan Howell's super cycle. I mean, that sounds like we might skip a cycle, but I think it's like the, the, the cycles are ended and now we're just, the only way is up through a drunken wonder. So just to conclude, Willie Wu says that one Bitcoin will be worth a few hundred trillion dollars and that we're in a super cycle that never ends. I got it.
Starting point is 01:03:14 Perfect. I love it. No, but I know that that doesn't mean that Bitcoin is going to a couple hundred trillion dollars, but it's always good to get a joking soundbite. So I know that we're up against it here with time. It's good to get a uh joking soundbite so i know that we're up against it here with time where can everybody it's good to get a headline right yeah exactly don't worry uh so where can everybody uh follow you after this and uh keep up with what you're doing uh mainly on twitter um if the trolling is under control uh it's woo nomic um i also write an investment newsletter essentially forecasting on chain demand supply so if you're you're a long-term or even a medium-term investor
Starting point is 01:03:52 and um you need that kind of intelligence whether it's just to um you know like give you a little bit more confidence of not to sell this asset or um you know even if you're a trader you want to do swing trades um it's good to get visibility it's not going to tell you buy here or sell there it's going to give you um the kind of regime environment we're in and um give you a bit more um you know full visibility of what's really happening. So you can make your own, you know, risk management decisions. And so if you want to look at that, it's linked to my Twitter account. That's the easiest way to find it.
Starting point is 01:04:32 So yeah, it's amazing. I highly recommend to everybody. It's on Substack, I know. It's an incredible, incredible newsletter. Well, thank you so much for taking the time to do this. Really an honor and very, very enlightening. And I think that when you do have someone who really understands the on-chain analysis
Starting point is 01:04:51 and the fundamentals, it gives you a lot more confidence in the asset long-term. And it's easy for your average person, I think, to get very caught up in the news cycles and what they see on Twitter and not really understand how important and powerful this asset is and how early we still are. Yeah, exactly. Well, it's been really fun, Scott. I've been looking forward to
Starting point is 01:05:12 talking to you all day. Awesome. Thank you, man. We'll do this again down the road and see if we actually hit a few hundred trillion, okay? Thank you. Okay. We'll get you later

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