Unchained - Willy Woo: How Bitcoin Reaches up to $300,000 by End of Year - Ep.207

Episode Date: January 12, 2021

Willy Woo, a prominent on-chain Bitcoin analyst and author of the “The Bitcoin Forecast,” a market intelligence newsletter, explains the parabolic activity of Bitcoin in the past month. We cover:�� why he thinks Bitcoin has more than doubled in the last month what the "double pump" market is and why Bitcoin may see two rallies this cycle what stage of the Bitcoin bull market we are currently in who is buying, and how they've differed from previous investors who still is yet to buy this cycle why Bitcoin hitting new all-time highs mean that we're in "uncharted price discovery" how his "top cap model" shows Bitcoin could be around $95k by end of year and how if certain trends accelerate, it could reach $200,000-$300,000 by year's end how the pandemic impacted Bitcoin’s price what on-chain movements he's seeing that make him call the current cycle of Bitcoin "whale spawning season”  how to gauge the increasingly rapid investor activity  what to expect from Bitcoin and Ethereum in 2021   Thank you to our sponsors! Crypto.com: http://crypto.com 1inch: http://1inch.exchange    Episode links:  Willy Woo: https://twitter.com/woonomic Woobull.com: http://charts.woobull.com   Willy on Unconfirmed: https://unchainedpodcast.com/willy-woo-on-why-its-an-extremely-great-time-to-buy-bitcoin/   Fibonacci traces tweet: https://twitter.com/woonomic/status/1347433551906500614?s=20   Bitcoin reflexivity: https://twitter.com/woonomic/status/1344189627997949952/photo/1   Who has been buying recently: https://twitter.com/woonomic/status/1347127159538688002?s=20   Double pump bull market: https://twitter.com/woonomic/status/1346889817792004096?s=20   Buying by long-term holders: https://twitter.com/woonomic/status/1346827893322616833/photo/1   What percentage of the Bitcoin supply is liquid: https://insights.glassnode.com/bitcoin-liquid-supply/   Premium above NVT Price: https://twitter.com/woonomic/status/1346797291668029440/photo/1   Accumulation of BTC before the OCC announcement: https://twitter.com/woonomic/status/1346296294797582336/photo/1   Will never see a $20k BTC again: https://twitter.com/woonomic/status/1345660018541019138?s=20   Bitcoin as investment vs. tech: https://twitter.com/woonomic/status/1345221723751206912?s=20 NVT Ratio: http://charts.woobull.com/bitcoin-nvt-ratio/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, your no-hype resource for all things Crypto. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto five years ago, and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. Subscribe to Unchained on YouTube, where you can watch the videos of me and my guests. Go to YouTube.com slash C-U-Schained podcast and subscribe today. One-inch exchange is Defi's leading Dex aggregator that discovers the best trade practices across all dexas. One Inch was launched in May 2019 by two White Hat Hackers at ETH Global's ETH New York Hackathon. One Inch has reached almost $7 billion in overall volume in just over a year. Crypto.com, the Crypto super app that lets you buy, earn and spend crypto, all in one place. Earn up to 8.5% per year on your BTC and more than 20 other coins. Download the Crypto.com app now to find out how much you could be earning.

Today's guest is Willie Woo, on-chain Bitcoin analyst and writer of the Bitcoin Forecast, a market intelligence newsletter. Welcome, Willie. Hi, Laura. Great to be back. Yeah, I am so excited to have you. I'm sure for the people watching on video, they're like, why is Laura like bursting with joy right now? And so, you guys, today's show is going to be all about the Bitcoin price, which has been on an absolute tear. And the reason why Billy, Sorry. Willie and I were laughing a little bit right when we first started is because we just checked the Bitcoin price and it's very near 42K. That's right. And you know, a month ago, it was at like $18,000. So anyway, I just want people to know we are recording Friday morning Eastern time. So if things change between now and when this comes out Tuesday, you will know why. All right, Willie, what's your sense of why Bitcoin has more than doubled in the last month? Well, it's been quite a ride.

Like, really, we had, I think it's really a validation of Bitcoin by the institutions. You know, we've had all manner of hedge fund managers say that Bitcoin is a valid investment at this time. We've had the likes of Michael Saylor with micro strategy acquiring, what was it, $425 million for his own company. and then buy another $650 million on a bond raise. So there's a lot of interest now from high net worth individuals, and I'm hearing through the Great Vine that there are so many of these people that have looked at it, there are 10 to hundreds of millions in net worth, and now they need allocations.

So since around the $22,000 mark of Bitcoin, which seems like a long time ago, but it was only, what was it, it was only like five or six weeks ago. It's just launched. This thing's launched. The interesting thing about it is, you know,

not only is the price going parabolic. And all of the more technical traders are saying it's overheated, it's overheated. We should sell here. You should short it here. Everything I'm seeing on chain is we sort of decompose who is by, what quantities, you know, what's the nature of these buyers?

We're seeing that these are high net worth. They're pulling large purchases and they're long-term buyers. I work a lot with Glass Node, which decomposes a lot of this on-chain data. And one of their latest metrics is this measurement of where are the coins moving to? Are they moving towards participants that are long-term holders or more liquid participants who tend to hold it, trade it, you know, buy and sell the swings? And what we're seeing now is this unprecedented swing to illiquid, these holders that are holding these bitcoins, and they don't tend to sell so readily.

And so as these coins are being bought and locked up by these holders, and also the fact that it's not just one big institution like micro strategy that is patiently waiting for the market to come to their limit orders, and they buy as the market sells in, you've got like all of these investors that are wanting to buy $1 million bullets of investment into Bitcoin. and they're competing. And as the price is rising, they're chasing it. And so it's not letting the price settle and sell into the orders.

So the price is running away. It sort of runs and it gets to a point where it's a little bit too frothy. It sort of settles for a few days in and then it launches again. So, yeah, this is the phase we're in. We're what? What is it? Well, 41 to 42 right now. That's kind of a resistance.

own right now. The next major one is 47. I was just saying to friends that with 95% certainty, $40,000 is going to break from everything being seen on chain. You can see this through, you know, the sheer number of coins that are being bought with inflows of stable coins and outflows of Bitcoin into their wallets. So yeah, it's a, it's a really fun time right now. And I think we've been waiting for this for a long, long time as Bitcoin is end crypto people, you know. Yeah, yeah. To me, I was just talking with some people on Twitter that what's remarkable to me and why this feels like such a story is that the price is just going insane. But the media tension and hype around Bitcoin is, I mean, not like, you know, an all-time low or anything.

but, you know, considerably minimal or relatively minimal. And so that to me signifies there's something really happening here. Okay, so you said so many things. We're going to have to unpack all of that. We'll spend probably the next half an hour unpacking a lot of that. But one thing that I wanted to ask you about was I did see that you tweeted that based on your models, you believe we'll see what you call a double pumpable market. And I don't even know what that means.

Okay. this is very crypto speak, you know, as a traditional world, they would say a rally. Bitcoiners call them pumps, you know, and a retracement would be called a dump. So we, we like I like to use the crypto lingo. So, you know, in 2013 you saw that Bitcoin rose very, very sharply to 200 and something. And then it retraced down to the... 266, I think. Yeah, yeah.

Well, it was 200 on the daily chat, which I do a lot of my studies on. It went to 230. It might have gone, I think it did go much higher, like 260 on hourly. And then it retraced down to $66 on the daily close. So there was a big rally in the first quarter of 2013. and then it retraced 70-something percent. It would have been 90% if you looked at it from hourly peak to trough. And then this thing consolidated.

I think everyone thought there was over. That was the bear market. But actually, that was just a big first rally, an overheated zone. It paused, it rested. And typically in these markets, when the price rises so quickly, And it hits a certain point where someone sells and it sets a cascade of people selling, thinking, oh, no, this was overheated. It was a bubble.

The thing comes back down. And what you're looking for is whether a lower value gets tested and rejected. And if it's rejected, you'll see that a lot of buyers come in and they buy their asset up very, very quickly. And it bounces back up. And then you get these sort of waves that happen up down, up down, until this whole thing sort of settles and all the frothlies. And then what you want to really see is, are we going to dip again? And if it dips again, then we've started a bear cycle. But if it starts to climb up again, that whole overheated zone and that consolidation of testing that lower range and

seeing if it was supported by new buyers, if that starts to come up again, then that whole thing was just, we're just settling. It just got a little bit overheated, but we're just settling, and now we've got new buyers coming in again. And so in 2013, we did have two rallies, a double pump bull season, to the 200s, and then on to the 1200s. And, you know, interestingly, in 2017,

Ethereum did the same thing. This is what happens, I think, is when, you see a lot of money coming into a smallish asset. Ethereum really was just launched in 2016 as a floated asset that could be tradable in. 2015. 2015? Okay. 2015.

You want to have better. The ICA was 2014. It was floated one year later in 2015. And then in 2017, we had the main bull run. And the whole world came into that. and Ethereum was a very small asset at its time. And of course, it rallied from what was it, was in the 20s to the 1500s or something.

I think it started 2016 at like around $10 or $7, something like that. And then, yeah, a year later, it was at like $1,400 on one particular day. Yeah, that's right. I've got the chat now. We kind of settled, you know, we settled down. sort of had to shake off the Dow hack. And then 2017 started at around $10. And then, you know, we had a major ball run of all of crypto.

Bitcoin started to run. And all of this capital came in in 2017. And you saw that Ethereum also did the double pump bull market, right? It went straight up. And I'm looking on the chart now. And it went to 350. It didn't pull back much. It dropped to one, you know, relatively speaking.

150. It pulled back to 150 and then it ran on to, you know, 1,400. And so you get these, you actually see it. Just so people know, then after that, it dipped below 100. I forget when that happened. Yeah. You got to shake it all out again. Yeah. 2018 to 20 to this. I think it was the tail end of 2018. That was the end of the beer. But there are the main thing is you see like. you've got all of this capital windflow into a smallish asset. And this thing goes wee and it squeezes it up to the point it can be, it can't take the capital. It runs up so high. And then suddenly it has to sort of find itself again and shake out the heatedness. And then it goes again.

And, you know, and Bitcoin did that five times in its first, the first bull run way back in the, what was it, like the 2000. 2011 sort of 2010-2011 run-ups. So these assets sort of squeeze up, go wee, and then they consolidate, and then they go up again. And so it's interesting to see how much the coin's going to go wee and writing it up right now. And, you know, I'm looking at the on-chain capital flows and they're just, you know, ridiculously high, ridiculously high right now. this amount of capital flow compared to what Bitcoin is as an asset class, as an asset in itself,

is again similar to like maybe Ethereum being introduced to the world as an investment. And now we're seeing Bitcoin introduced to the world, the institutional world, which is then given the blessing to, you know, there must be. someone will have the figures of how many family offices there are worldwide, but it's not insubstantial. And if you can think of them all buying one to two million dollars allocation, that's a lot of money coming in. And so why do you say that, you know, that's who it is and that's the amount? Is it just from conversations with different, you know, desks or how are you figuring that out?

It's both. It's conversation to people in the family office in high net worth strata. And they're saying all their friends are all finally coming in and saying, I need to get an allocation for my portfolio. But the main part of this, where I get the certainty, is I'm seeing that capital flow coming in on chain. I can see the value of withdrawals on exchanges increasing. And that both could signify institution. But then we can look at the clusters of wallets that, The wallet addresses, you can do some forensics on it, and you can noticeably see wallets or addresses that are controlled by a single participant.

And what we're seeing is there's a large growth in Wales. You know, I kind of joke that it's Wales spawning season. There's a lot of high net worth kind of owner. It's not corporation scale, where you're talking tens of thousands of bitcoins that are being held. It's one, the number of whales that hold a thousand bitcoins or more is skyrocketing and so are the smaller, you know, allocations around the 100, 250. That, that's a very, very, you know, telltale sign that we've got a lot of participants that are individual coming in that are just buying, you know, and we haven't seen them appear before. And so when you talk about like

what you're looking at on-chain, um, you know, you. you're saying it's like purchases or even when you look at, you know, what's happening on exchanges and you're saying lots of withdrawals. You mean that you're seeing activity where money's coming in, but then the bitcoins are just being held and they're not changing hands. They're not being traded. And there's just basically no movement after their purchases at. Yeah, that's yeah, that's another lens of it. So, you know, right now what we can see is there's definite clustering of Bitcoin addresses that are being owned by single people or, you know, participants.

They could be a, you know, holding company. But there's lots of them, and they're popping up and buying Bitcoin and holding large amounts. And then we're also seeing the nature of these participants. We can look into them and classify them as being buy-in-holders that they usually coins come in and they don't usually sell versus the more trader type profile of participant where you see coins come in and they leave. And so you can classify the liquid guys, the trader types, is participants that are liquid and the participants that tend to be holders, you classify them as illiquid.

And then you look for the coin movements between the. two types of participants. The net flows of it is more of the coins now being dominated or moving towards the trader guys that are going to sell the tops, or are you going to, you seeing these coins start to move towards the participants that are holding, you know, the ones that are like getting an allocation, they're probably balancing their portfolio for different risks across many asset classes. So we're seeing coins move to these holders. And then to go back to what we were talking about with the, you know, double pumps and whatever, Adam Draper at BoostVC, he describes this

as like Bitcoin moving in these like breathing cycles where it sort of like inhales, I guess, new investors and then it kind of settles and then it like takes another breath. But each time in between kind of the new happy medium is like at a higher level than than previously. And, I saw you have like a way of kind of breaking down these Bitcoin cycles into stages. So what are the stages and what stage do you think we're at right now? Okay. So I we obviously there's the beer cycle, which is where the, you know, there's a long sell-off that typically lasts for Bitcoin and crypto as a whole one year. And then normally the thing to to end the beer cycle is capitulation. You'll see the sudden sharp drop. And that's the absolute bottom.

peak fair. Everyone says it's over. This is gone. So then what you see is a sort of flat band where the smart investors come in and they put a floor on the price because they're quietly accumulating. So whenever someone sells down,

the investors come in and buy. The accumulators buy, buy, buy, and that stops the price dropping. And you'll see a solid horizontal band in price after the, this sharp spike downwards. You'll see the price, you know, grab along the bottom with a few waves,

and then it sort of breaks out of that, and it breaks out into a early bull phase. And we kind of had that. The capitulation happened in December 2018, and then we had a rather short accumulation compared to the previous cycle. And then by April full, Day in 2019.

That was when we had this crazy break out of it and it ran up. And so that was the early bull phase. So I call it the early bull phase. I consider the bull phase into three parts. So the first phase is that break out and there's this sort of excitement again. And then that dies down and we kind of have this phase where it sort of quietens. it goes downwards sideways, downward sideways.

And this is what we call a reaccumulation phase of the market. And in that phase, a different type of investor, not the one that accumulates the bottom. It's the one that sees that we are now in an uptrend and they come in and buy.

And it's in that phase that you, at least in the Bitcoin world where we have very, very good metrics unlike, you know, stock markets or gold. we've got on-chain analytics to show, oh, the inventory that is sitting on the spot exchanges, the inventory on them, it starts to deplete. And when you see that depletion, that's, it's a good sign that we're in the,

the tail end of the first phase of the bull market. You'll see these buyers start to buy those coins and move them off of the exchanges into the wallets. And we had that reaccumulation, which signalled the end of the, the early stage of ball market. Around, well, actually, around the time micro strategy bought, around the 22,000, which was only, um, like an early December? It was actually December, around the 20,000 mark, actually. I'm looking at the charts right now. That was, that was where we were starting to end the the early bull phase. And what I like to see to define the next phase, which is the main bull run, is

after that depletion finishes, and then there's this run where we see a relatively smooth, upward climb without any choppiness of going downwards. And you also see the capital flows that are going into Bitcoin, start to go vertical. And there's a very strong amount of investor capital coming into Bitcoin. And this we can measure as well through the blockchain. Have we entered that phase yet? Because, I mean, it looks pretty vertical to me. And you did tweet this morning.

So actually, I also didn't understand the tweet. So maybe you can explain this. You tweeted about something that you were calling Fibonati traces. By the way, I'm like super into fractals and that kind of thing. So I was like excited about this. I was like, oh, I have to learn about this. And you wrote, when there's no historic resistance levels, magic numbers in nature is all we have for support.

and resistance fans. So also, I'm not a trader. I don't follow the TA technical analysis stuff, but I have gleaned support means like it's not going to fall below a certain level. And resistance is like it's going to be hard for it to get past that level. But anyway, then you wrote, Bitcoin is in unrestrained price discovery in uncharted territory literally, which that sounds kind of interesting. So what do you mean by that? Okay. So, you know, you think of the markets is essentially a whole bunch of traders that are coming in and they're buying or selling. And essentially, through that action, there's a price discovery process. So if you look on a price chart of any asset, you'll often see these patterns. And a trained trader with a lot

of experience will just, it'll just pop. You go, this price is reaching a level where in the past, traders have rejected that price. They've sold it, you know, and it had trouble hitting. It hit that level and it always got sold down. Or the price conversely, if it's going downwards, downwards, downwards, and then it hits a level where in the history of this price, you see that it was always bought up. So now you've got a resistance line and now a support line.

And the price chart is full of these because we're always range-bound exploring the price and we'll always look back to the prior resistance or support levels to give us a kind of a probability of are we going to slide through the resistance or we're going to reject off it and then have to find some sort of support level and so the price chart ends up being quite a semi-patterned semi-random walk around these price levels that historically people have supported or rejected. And so there's this one thing that happens in the, it's a very, very exciting event when an asset breaks its prior all-time high.

And so now you're in literal uncharted territory because you can go back on the charts and there's no resistances. There's no history in, no history in this asset that will reject the price. You'll go, well, Bitcoin is now 42,000. Let's go back the last 12 years of Bitcoin. When was the last time it hit $42,000? Did we find a resistance that was rejected? Well, no, there's no resistance.

So we're in outer space. This price just rallies upwards. And not many people want to sell into that because we don't have any history to see, oh, it was rejected off $50,000 back in this year. There's no one has seen that before. So no one really wants to sell into this. And so there's very little resistance.

And so the only things that we can really do to find targets is magic numbers. So we can do the Fibonacci series. And that's the golden ratio and the ancient sort of like, was it, spiral life sort of patterns you see? It turns out people have used these numbers to create less. levels and you can throw these traces. And it just looks like a whole bunch of different spaced horizontal lines from one level to the next. And you can put them over the chart and they tend to work even when we're range bound

within, you know, prior explored price. They do work. So a lot of traders use this. But now we're in uncharted territories. is the only thing we can put on a chart is Fibonacci traces. And these are just what these patterns of nature give us. And traders will trade to it. And they are certainly working.

They always work in these kind of areas. And somewhat maybe a self-fulfilling prophecy. But yeah, the next, I think 40,000 was it? 40,000 was the last resistance, which we just sliced through just a few hours ago. And so now it's, I have to look at the chat. What was it? The way I've laid it, yeah, 40,400 was the last resistance. We've started to move off that.

So 46, 800. So say 47,000 is the next level. And certainly there's a lot. a lot of bullish on-chain pressure, buying pressure to push it there. And there's not a lot to push against. There's not a lot of sellers. We're an out of space. So it's obviously a very, very exciting time. Well, so one other thing that I want to ask about while we're talking about kind of like, well, I don't know if price target is really the word. But so in the middle of December, you tweeted that Bitcoin was at the point where the BTC top cap model starts curving upward.

And you said that at that trajectory, the ridiculously low target was $100,000. So why don't you first explain what the BTC top cap model is, but then also, you know, explain how you get to that $100,000 or if it's changed since you tweeted it? Oh, yeah, it's constantly changing. So essentially the top cap model is a model that uses the theory of mean reversion. And in simple language, what that means is that it's a theory that a price of an asset always reverts to the long-term average of the entire history of the data seat. So essentially, if you're a trader, mean reversion as simple as trading on a moving average. You know, 128 moving average tends to be a support level of Bitcoin.

And whenever it hits that, it bounces. 200-day moving average is sort of the, when we cross that, that tells us we're in a bull phase. And when it gets too high above the 200-day moving average, people might say it's overheated. And I think Trace Mayer is well known to create the Maya multiple, which measures how far we're above that 200-day moving average, as a sign is overvalued, undervalued. So that's day-to-day mean reversion playing out. And so I built a model a while back, which uses the same basics of averaging. And so if you do an average of the price, and it's a cumulative average of Bitcoin's entire price history.

So it's not like a 200-day moving average. It's a forever moving average from the day Bitcoin floated on the first day of trade to today. and that window averaging continues to average out. And you use that metric, you can use that to find all the tops. You can multiply that by 35. It's just a magic number. And it's hit every single historic top in the history of Bitcoin. Don't ask me why.

I do think maybe it's because Bitcoin is a machine. It's very mechanical. It's set harvening. They're set supply. The demand is relatively, constant through the 12 years. And so that creates a top and the current top price

today is $94,000. And when you plot this sort of arc as it starts to curve and wiggle through time, you'll always see in the bull market starts arcing upwards. And you can take an estimate of the trajectory it's arcing. We don't

know how it'll trade through the next 12 months, but you can gauge it from historical sort of movements of Bitcoin price and make a guess of where the arc's going. If we don't arc, if we don't arc upwards and we assume the top of the bull market is around December this year, which, you know, it's a fair estimate because all the bull market tops of the last two cycles has been around the December just before tax season. We're going to go above 100,000 even if it doesn't arc upwards. If we arc upwards, and we're up to 200,000 conservatively. I mean, given the size of this rally, it's going to push it higher.

Wait, 200 to 300K, over what time period? Over the next, by December this year. Wow. Yeah. Wow. So like Plan B's very well known for his stock to flow ratio. Yeah, he said Twitter anonymous Bitcoin researcher or analyst. Yes, yes, that's right.

So he's very famous for this stock to flow model of predicting price. And he's got many models. I think the highest one of that is, is it $250,000? And right now the trajectory is on track with the top cap model. it'll be an interesting one because the top cap was hit in 2013 in that double pump ball run. The first rally hit the top cap and it retraced and then it consolidated and it went up again against that ceiling, which obviously was a lot higher by the second pump. Right now, if we're going to do a double pump, it's $94,000, $95,000 right now if we hit that ceiling.

Maybe we're halfway there with, in terms of price, $42,000, we're getting pretty close to a halfway point. Yeah. And it's moving very, very fast. Oh, yeah. I mean, end of January. We're going to be a, Bitcoin's going to be a $1 trillion. It's on track to be exceeding $1 trillion by, I think that's a $55,000 mark. We're on track to breaking that.

very quickly. And that's a very interesting mark in the sand. Oh, yeah. You know, all of our major asset buckets, whether it's gold, whether it's stock, whether it's real estate, they're all measured in trillion dollar buckets. And Bitcoin's always been like a little toy being sub one trillion dollars. So it's a significant event, I think, yeah. All right.

So in a moment, we're going to talk about other significant events in Bitcoin. but first a quick word from the sponsors who make this show possible. The ScoreBet app here with Trusted Stats and Real Time Sports News. Yeah, hey, who should I take in the Boston game? Well, statistically speaking. Nah, no more statistically speaking. I want hot takes. I want knee-jerk reactions.

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market depths. Recently, the one inch team unveiled one inch version two. The main highlights of V2 are Pathfinder, an API that contains a new discovery and routing algorithm and a new intuitive, user-friendly UI. The V2 improvements ensure the best rates on swaps while dramatically cutting response time. Back to my conversation with Willie Wu. So speaking of significant events, one thing that was so curious to me is throughout this whole discussion, we have not mentioned once the pandemic. And I just wondered if for you, you know, you see any effect from that in the Bitcoin price or if it's actually really not that relevant.

Yeah, the pandemic was very relevant to Bitcoin's price. You know, on the outset is everyone who follows the price closely. will note a week prior to the, well, as this pandemic was starting to roll out across the world, we had price of Bitcoin, you know, it reached just over $10,000 and it started to pull back over the successive couple of weeks. And then this whole, you know, we call it a white swan, you know, unpredictable, we say this is an unpredictable event that wasn't in any of the risk models. That's a black swan, but because a pandemic is actually, you know,

there's a history of roughly every hundred years there's a pandemic. There is some data. So we call it a white swan, but it caught most of the world by surprise. And the price actually caved down to the 4,000 range instantly. And that's what we call a flight to safety. Everyone reassesses their risk models. they get out of every single position. There's absolutely panic selling.

They sell gold. They sell stocks. They sell all of their leverage trades and everything. And they go to the safe haven, which is US dollars. And they park in US dollars. And then they redeploy back into assets that make sense for the new world that's ahead. You know, they change the risk models have changed and you recalculate those and you deploy accordingly. And so you'll see this in the 2008 world financial crisis. You know, gold, for example, is the perfect safe haven for that time.

And it did rally for the next three or so years. But it also sold off because everyone sells in that flight to safety. And Bitcoin did in the COVID crash also. So I like to say Bitcoin went from 10,000 to 4,000 to 10,000 over that bump. as people reassessed their risks and then redeployed. But the unheard of story, and the more interesting one to me, is that this was also the point where we saw vast amounts of Bitcoin being accumulated and pulled off the inventory sitting on exchanges.

And, you know, that was the sign of the reacumulation that I talked about earlier. But this amount of inventory being accumulated off the... This amount of inventory being pulled off the exchanges was two times deeper and two times longer. It took 10 months to complete than any other, you know, the prior cycle. And what that did was it moved the floor price of Bitcoin higher and higher and higher until it squeezed. The Bitcoin price was trading sideways at that point. And people said this thing was a failed safe haven. and it's a risk on asset.

You invest in it as a risky asset. It's not a safe haven. And actually, if you look at the on-chain data, it was saying and screaming, this is a safe haven. And lots of long-term buyers are coming in to scoop it up and hold it as that safe haven. But you couldn't see that in price because the price was highly speculative. and we had a lot of buffer between that floor price that these investors were supporting and the random wonder of price resistance and supports that traders speculating on.

And so there's a lot of movement in that until the price floor comes up and squeezes you out. And you see that in the accumulation phase of the bottom of the bear. And we saw that happen after COVID. And that was the start of this bull run, this phase of the bull run we saw. And so just to make sure that I'm understanding correctly, basically what you're saying is there's a lot of people who have Bitcoin who don't necessarily have conviction in it. And they were selling on these exchanges,

just trying to make money on the price swings. But meanwhile, for 10 and a half months, you had these people with conviction about Bitcoin who were buying on the exchanges and moving that money, over to their cold wallets or their cold storage. And so you could see that there was this kind of like period where people were turning to it as a safe haven. But because there was like enough of the people who were just kind of

trying to trade on the swings and who didn't have conviction about it, like it took a while to deplete that amount of inventory. But when it did, that's why the price rose so quickly. Is that what you're saying? Yeah, more or less. We have, you know, Bitcoin is a very, very, very liquid asset. It's traded on futures exchanges to

the billions per day. And so it's a great game for speculators to play and very profitable for some. And it moves in a random walk. When COVID happened, you know, as Michael Saylor said, he took a look at

the world and so much money is being printed that essentially everything's being inflated away at 14%. per annum, anything you want to hold, whether it's a car, whether it's a Harvard education, the price is going up by 14% per annum. And he was looking for a way to hedge against, you know, all of his cash being inflated away. And this is the dilemma that many investors have, is where do you move your assets to in a way that you can.

can outperform that inflation, and that's 14% is calculated by Microstrategy. And so, interestingly, the timing of it was about right. If you wind back the clock from when MicroStrategy accumulated their first deployment into Bitcoin, and you go back six months, which is what Michael Saylor was known to have said, is the timeframe in which a publicly traded company needs to go through its entire board approval, regulatory approval, SEC approval, and actually implement that purchase. It is six months, and that six months is right at the point of around that COVID

crash and also where we saw that inventory depletion. And so I think there might not be just a number of very high net worth individuals thinking about the markets in that way. and I'm sure that CEOs of publicly traded companies and their board of directors who are researching this are some of the most well-networked people in society. So I don't think that it was just like those guys that bought it. I think that it was that entire network of people

that was spreading the word as here's this, you know, a new kind of inflation protection candy that you can come and get. Well, one other thing, speaking of people who are well networks, I was kind of disturbed because you have this chart that shows what you believe to be an accumulation of Bitcoin by Wales in the days leading up to the news that the OCC, the Office of the Control of the Currency, will now permit banks to use public blockchains and dollar stable coins for settlement.

Can you explain why you think that that was the catalyst for that? Well, for starters, it's a huge win for this entire industry because now the US government has, the US Treasury is okay that banks can now use these public ledges as infrastructure for banking. With the likes of regulated stable coins like USDC by circle, that's regulated. There's nothing to stop a bank from using that. that stable coin from transmitting US dollars around the world cross-border to each other within the country in 16 seconds is the block time for Ethereum that it runs on. If you've got that kind of infrastructure that banks can use, I think that if you consider that Bitcoin is, or crypto in itself, if you've got USDC, it's a hop in a step to get to

to buy Ethereum, to buy Bitcoin, to buy any of the leading coins. And you've got defy networks that take it on Ethereum. And you can swap it into anything. It's literally seconds away from being Bitcoin compared to, you know, you can imagine all of the stories of, you know, friends or friends of friends who are trying to figure out how to buy this thing. I'm trying to send money to a bank and that's trying to send it to Coinbase. And working all that out.

Like now it's a lot more fluid when there's a prominence of stable coins that are being run by banks and supported by banks. So that's a huge win and we saw a huge price breakout when that was released. And there was a front running with the price. Oh, right. Yeah. Yeah, exactly. It was it was, I think it was 23,000 and then this thing launched. And it launched ridiculously.

And I was like, wow, okay. There's no insider trading rules for Bitcoin. Someone's in the know. So anyway, that was quite fun to see. Yeah, well, a little bit disturbing. I mean, technically it's not insider trading, but it's the same behavior just with a different asset that that rule doesn't apply to. Yes, yes, that's true.

That's true. Yeah. Well, so speaking of stable coins, though, you do have some analysis about looking at stable. I can't speak stable coin inflows to exchanges. So what can you extrapolate about the Bitcoin price from what you're seeing there? They're very good indicators for local movements. Generally, you know, a lot of stuff we look on chain. They differ from the timeframes that they can operate from.

And the lower time frame stuff, we just look at capital flows going into and out of exchanges. you want to see Fiat going in and you want to see Bitcoin and Ethereum and all the other coins move out. If Bitcoin's are moving out and money is moving in, well, that's a clear buy signal. And obviously we can't see the banking wires into exchanges, but we can see stable coins being minted

and being sent to exchanges to buy. And so that turns out to be a very good indicator, particularly USDC currently. So it's also Than something like tether, you mean? That's right. Tether used to be quite good with it. But now in this current phase Circle,

USDCs are a much better signal. And that tells me the buying is by regulated entities and most likely US base. And actually the buying is coming. But you'll see the book, the price rallies more during US trading hours than Asian trading hours. So there's a fair signature to say that we're getting a lot of buying from that USD signal.

And we're also seeing that that's most likely US entities. So my guess is it's those US family offices that are buying it right now. And so we've been talking about different kinds of on-shel. analysis throughout the show. But are there any factors that we haven't looked at that you would want to mention? Well, there's one actually that I know you've talked about coin movements, which I actually didn't even know what that was. Is that, are you talking about coin movements that are like number of transactions or is that dollar amount or like, how are you to find you that? It's a, it's a kind of an amorphous mix of, I'm looking at the same. I'm looking at the same. I'm looking at the

supply of Bitcoin and looking at how active that is in moving compared from day to day. So there's no actual unit of account, no unit there of to speak of. And it is kind of a proprietary signal

that I use. I published it a lot publicly. But yeah, it's sensing how much of the network of Bitcoin's network that supply is actually moving from day to day compared to, you know, a month ago. And it turns out that these, the supply moves in impulses, you know, you'll see these impulses.

And the trick is to go, when you see these impulses, you know there's an activity on chain. And usually it's going to shove the price in one price vector, whether it's from up to horizontal or horizontal to down or up to down or up to even more up. And so I use that as a key indicator to structurally whether the asset is going to change direction and price vector. And there's a lot of extra investigation I have to do whenever I see one of those impulses to go which direction and who's pushing it and whatnot. But those coins changing hands is kind of the tempo and the beat of the price action that I see on chain. and they happen between three to six weeks. And right now, the latest tweet I think you saw was a very large impulse.

And, you know, really it's the mother of all impulses for this cycle. And normally they're sharp impulses, but this one was like very steep, very high. And then it didn't drop. And it just got bigger and fatter and wider. and it's still big and it hasn't let up yet. So it's a big shove. And, you know, we're seeing that play out right now is this tiny little assets being propelled upwards

in a sheer vertical wall as that coin impulses is pushing it like it's never had a push before. All right. Well, let's also talk about like maybe the most well-known way to value Bitcoin, I think, the NVT ratio, which is network value to transaction ratio. Can you define that for people who don't know what that is and then say what you're seeing when you look at that metric now? Okay.

So I think most investors are very familiar with the price earnings ratio for stocks, where you take a look at the price of the stock and you look at its earnings per share and you run a ratio. So you kind of get an idea of its valuation next to the underlying. earnings activity from this business. And of course, these decentralized networks don't actually, they are not businesses, they don't generate income, but they're purely investor assets like gold, for example. So what we can measure on the blockchain is the amount of investment activity

that is happening and the price in accordance to it. And so we do get the equivalent of a price earnings ratio, for Bitcoin and Ethereum and these networks. And like this one, this one I came up with in 2016, I think I published around that or 2017 the start of it. And it was one of our very first on-chain signals for buy or sell. When the MVP is low, that would tell you that there's a lot of, so NVT stands for network values.

value, which is the market cap, the valuation, compared to the transaction volume, the investment volume going through the blockchain. And so when you see NVT being low, that's signaling a very high amount of investment volume moving through the blockchain and when it's as compared to the price. And so right now, yeah, it's currently there's immense amounts of on-chain. invest activity, crazy amounts of it. And the price is not that high compared to that activity. So the ratio of price is not that high compared to the investors moving coins around. And wait, and just for the value of the transactions on the network, is that denominated in

dollars? You can. You can do the ratio of volume. You can do the volume going through the blockchain per day compared to its MacaCat. That's how, that's a simple way of calculating it or simple way of thinking about it and that calculation works. If you were to, you know, streamline the calculation, it just turns out to be how much the coins are churning compared to its supply. But then is that the number of transactions? No, it's the volume.

You can say the US dollar, you could say the US dollar value moving through the blockchain. versus the market cap. But if you were a technical analyst like me, you'd say you can solve that equation to saying that is actually inverse monetary velocity. So how much of the money supply is churning? So you can even do it like in the number of BTC? Yeah. So I can say there's 18.5 million BTC and this is how many BTCs that was transacted.

And that's also the same thing. Oh, wow. Okay. So it turns out the higher the... Sorry, I just feel like the ratio would be quite different when the price is changing, right? Or am I... No, right, because the market is... Yeah, because... Exactly.

You divide by the price and you get the coins, and you divide by the volume, by price, and you get how many coins as well. So both solved the same thing. And so if you think of it in more abstracted way as monetary velocity, how much of the money supply of Bitcoin is churning. That's how much how much is moving between investors. That's actually all it is. NVT is inverse monetary velocity. And the more velocity you get in this thing,

the higher the valuation. The higher the velocity, the better, which is very healthy for the network. And it always turns out whenever you see, this high velocity, which is a low NVT, it drives the bull market. And we're being in that low zone for a while now since the COVID crash. So it seems the COVID crash, the bottom of COVID crash made us hit the buy signal on NVT.

And it's on the, and this latest drive upwards with that immense amount of investment coming from, you know, the family offices and that I mentioned earlier. we're once again kissing the buy zone. So I guess I'm confused because I would think if it were low velocity, then that would make the number go up, right? Because then it would, right? Because low velocity is like people buying, but then moving it to cold storage and not,

not trading it anymore, whereas high velocity would be like people constantly selling and buying, right? Yeah. I think it's kind of counterintuitive. We are talking about the, total supply and what actually what you do see. For example, if you were to get all of these holders at a long term and they come in and buy and then they move it off the market and they become a liquid.

What you see is low velocity. This is true. And what happens is there's less volume that needs to be traded between and investors to move the price because so much of it's locked up. That is true. And so what you what you'll see is these oscillations from low and high NVT, low and high being the buy and sell, those oscillations still happen,

but they start drifting. As more get scooped up than locked away, you'll start to see NVT start to drift higher and higher and higher, but they oscillate. And you'll see that in the main chart of NVT that is on my site. You'll see that it is oscillating, but it is drifting higher. And that's actually a consequence of people buying and locking up, but it's also a consequence of a lot of coins now moving to exchanges

and being held by retail who never actually move it off into their personal or on-chain wallets. And so that looks like all of this volume is being locked up. But it's just that it's not visible in the blockchain, and you'll see that drifting higher. Okay. Well, one thing that was really, really interesting to me, and I think this is why kind of like the whole story of cryptocurrency

is so exciting and interesting to me, because I just feel like these assets are like a completely new thing. that hasn't been seen before in history. And this one tweet of yours, I feel like captured that in a certain way. You said, well, you talked about how investors and tech vCs have different mindsets. So what would you say is the mindset, well, first of all, describe the two mindsets, but then say which of those mindsets people should have when it comes to Bitcoin and why? Okay.

So, you know, if you're coming from a traditional world and you're investing in these assets, is, you know, like you want to buy an asset where you think it's undervalued and you want to sell it when it reaches, you know, at the high point of its, you know, bull or beer cycle, whether it's real estate, you know, we always want to buy the bottom of the market for the houses when no one wants to actually buy, you buy it. And then when the market's really, really frothy, maybe you sell that. And that's the mindset of a lot of traditional assets. And these are assets at saturation. They've had centuries of developing, and they oscillate.

And then you have this other type of asset, which is what Bitcoin Ethereum and these digital networks represent. And they are these assets that are new to the world. And these are new technologies that are gaining adoption. And new technology always goes through this adoption curve. We call it the adoption S curve where it goes and it goes. And it creates this kind of S as it sort of goes exponentially upwards. And as you get closer to the 50% it slows down until you eventually get to saturation at near 100% usage. And so we'll see that in the tech world with the internet.

You'll see it with mobile phones. You'll see it with any new technology. And so the realm of investment for people who invest in new technology, technology and these are our venture capitalists. They know how to invest in new tech and they never sell the tops. They buy the tops. And this is the view that one should have with Bitcoin. It's a newer technology and currently there's only somewhere around the 1.9% of the

world population that has exposure to this asset. And if you believe that the internet is going to go to 100%, which it's pretty close to now, and you believe that we're going to have internet native commerce, and there will be an internet native currency that is borderless and an internet native store of value, or in the case of Ethereum, actually, applications that can route money and risk across the world. These tokens are only at the 2% penetration, of the world population. And so when you see an asset break an all-time high,

you've got the choice to sell it because this asset is really made you a profit. Or you can say that asset is just had another validation that it is coming in to dominate the world. If you were given a choice, would you buy the asset that is broken a, an all-time low and it's a new technology and it's continually making new lows and it's meant to dominate the world. It's obviously gone off the adoption S curve. So whenever you see this

thing breaking you high, it is gaining more traction and it's being validated and you should buy it and you should sell it when it reaches saturation. When Bitcoin is used by the majority of the world, then that's probably a good time to sell it. But just keep buying those tops. And this strategy actually works in a backtrace. If you measure that and run that strategy for Bitcoin, it is way more profitable than trying to get these oscillations. All right. Well, so speaking of tech, you said before you don't really cover Ethereum. And last I spoke with you on Unconfirmed, you did, however, at say at that time that you thought EF could change in terms of whether or not it's kind of like an interesting asset to invest in,

if Ethereum Improvement Proposal 1559 goes through, which is the one where transaction fees will be burned and that could potentially make eth deflationary. And since then, we've seen Ethereum 2.0 launch, it does look like EIP 1559 should happen. What is your take on Ethereum for the foreseeable future? In the short term, I'm quite excited with it because just on these just like all-time highs, it's about to break one. And we've talked about the sort of outer space price discovery. So Bitcoin's doing that right now.

Ethereum is about to unleash its price discovery into outer space. So it's a really exciting time for Ethereum as a tradable asset. And I think it's, you know, we'll have to see. I haven't been so excited with Ethereum as the platform. I know a lot of, I know a lot of developers are. And that's not to be discounted because there's a lot of frothiness and excitement. And that will drive and has driven application development. And we've seen the really great stuff that's being developed on Defi.

I think they're great experiments right now. So, yeah, let's see what happens. We need to see how well this thing scales, how well these apps can operate with each other on the more scalable platform. but that's an exciting space. These competitors, of course, and the question is whether or not... The big question I have for Ethereum is

Ethereum going to be the global development stack in which you will build the risk infrastructure for the planet to route. Essentially, I look at the world financial market is just essentially computer programs or contracts, that route money and risk between participants. And Ethereum is the asset to route primarily risk for the defy. And the question is, will app developers only develop on Ethereum?

Or will it develop on Solana? Will it develop on Cosmo? There's an all number of Ethereum killers out there that are competing for the app space. And if you look at the history of computers and how things are developed, you'll notice that we haven't actually, you know, focused on one development platform.

Like you look at any app, there's all number of development platforms and application environments that we run on. And so each one is fit for a purpose. So I do wonder whether or not it'll be like a menagerie of different, networks that will eventually fill the space as we get towards that, you know, carrying the world's real financial infrastructure.

And so that's the question to ask. So we've definitely, it's the leader right now and it's an exciting time for the asset. But if we're to look at it over the next 10 years as world infrastructure gets digitized onto the internet, we'll have to see how that plays out. Yeah, well, actually, you know, when you were saying that you wondered if Ethereum would be the global development stack, I thought you were going to say settlement layer because of this thing with the OCC allowing banks to use blockchain networks and stablecoins. And, you know, we're already seeing a lot of Bitcoin coming to Ethereum. Yeah, yeah, exactly. It's that it's what essentially doing is wrapping, right?

We're wrapping US dollars onto Ethereum. We're wrapping Bitcoin's on Ethereum. So it's utilized as the asset that's getting routed by these defy networks, which are routing risk and settlement, obviously, with the stable coins. But you'll also notice that, you know, our first really widespread stable coin, which is tether, which is routed on Ethereum, was also routed on Bitcoin as the Omnilayer, and it was also routed on Lightcoin on their Omni layer. And now it's also routable on Salinas network.

and so, and I think Tron as well. So you can see how these, the underlying stable coin can use any number of networks to route on. And, you know, I could decide if I was the head of the stable coin to say, why don't we use this network here because it's faster. So it's just whether or not these networks gain adoption. Ethereum's great because it's got that network effect of wallet infrastructure. and, well, development infrastructure. So it is very much a no-brainer to use that because that ecosystem's very well-developed and well-documented.

So it's a platform war, I guess, and I don't think it's necessarily going to be winner-takes-all. It doesn't have that kind of network effect that you get with protocols. Protocols like TCPIP are unifications of different menageries of communication lines. And Ethereum's not a compatibility layer. You know, it's actually very much an environment that you program in, and that's that, and it's good for some things. And there are environments that are better in other applications.

So I think it's really early for this. I think we've still got 10 years ahead, at least, for that side of things. So who knows? I agree. All right. So let's shrink this down to a time frame that's a little bit more manageable. What do you think, I mean, I know you gave a price target for Bitcoin for this year, but what else do you think people can expect from Bitcoin in 2021? Every cycle in Bitcoin is really different. These different narratives, different underlying drivers.

I'm just really excited to see how this one actually plays out. We've been thinking this is institutionally driven, will be institutionally driven. Is being. I said that, like, we thought it would be. And right now the thing is, I don't actually think it is. I think it's driven by institutional narrative. And the institutions themselves saying, yes, we were, we think this is good and we're going to deploy. but right now I did not think that we would see so many family offices come in

and just these high net worth guys coming in and buy so much that. Well, they can probably move faster. They can move faster, yeah. And so I didn't see that would be happening. And then I think we've still got many institutions that have not deployed yet. I think sovereign wealth will start to come in this year. and then we're still got the retail guys to come in too. So right now I'm looking at it and I'm going,

Bitcoin is surrounded by all sides and they all think it's sexy and they all want in. Retail doesn't realize yet that it's sexy and they want in. Institutions are getting ready and right now high net worth individuals are coming in by the droves. And I'm not sure how, all plays out. I think this double rally thing is probably the most likely because that's an immense amount of capital would come into this tiny little asset that's not broken $1 trillion yet.

So I don't know how it will interplay. I only get really a read of it up to maybe a month or six weeks ahead. And I have models that sort of say this thing's going to break the model if it goes passed here, but I'm like you, Laura, I'm just watching this as we go. I might have a little bit more foresight with the unchain data, but I don't know how this is going to play out this year because there's so many things that are arriving at the same time. Yeah, all I know is I think it will be a very exciting year for all of us. This was a life-changing for many Bitcoin is here. So, yeah. Yeah, and fun for me. Okay. Well, where can people learn more about you and your work?

So primarily most of my stuff goes out on Twitter at Woonomic. I like to post most of my analysis there as much as possible. If you would like access to the newsletter, go to willywoo. com. I put out a newsletter whenever the on-chain structure changes, that will give you a bull or be a call. And also, it helps investors. navigate the this ball cycle.

So that's available there. You can just go to my Twitter profile, and it's got a link there. And finally, I put up a lot of free charts onchart.wbill.com, and you can, you know, explore that if you're a chart person and like visuals. Great.

Well, it's been so fun having you. Thanks for coming on Unchained. Thank you, Laura. It's been really awesome and fun, as usual. Thanks so much for joining us today. To learn more about Willie and Bitcoin, check out the show notes for this episode. Don't forget, you can now watch video recordings of the shows on the Unchained YouTube channel. Go to YouTube.com slash C slash Unchained podcast and subscribe today.

Unchained is produced by me, Laura Shin, with help from Anthony Yoon, Daniel Ness, Bossie Vager, Shishonk, Josh Durham, and the team at CLK transcription. Thanks for listening.