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People are reimagining the world around you on tase. Owes. Today's topic is Bitcoin. And what the on chain metrics? Tell us about the price here to discuss our Willie, woo, and on chain Bitcoin analyst and writer of the Bitcoin forecast. A market intelligence newsletter and Raphael Schultz craft co-founder and CTO of glass node, welcome Willie and Raphael
Taylor. Great to be back. Hey Laura, thanks for having me. Five years of the podcast, I didn't know. Conquering,
thank you. The market has been an adult arms recently with Bitcoin as of the time of this recording which is Thursday morning Eastern. The day before the official start of the BTC Miami Conference treating in the high 30,000, as opposed to 30,000 range as opposed to The $64,000 said, that it was at an April and the coin recently saw
Big sell-off on May 19th, which featured the largest daily candle in between history which showed an intraday price range of $11,500. It was also the day in which an all-time high of four point five three billion dollars in losses was hit and that's the all-time high bite quite a hefty Marcin. So for Rafael and Willie. What do you two think is the reason for this drop? You wanna go first? Yeah, Willie, how about you go first?
Well, you know, obviously, you know, a lot of people have seen from the news that Elon Musk tweeted out that they were no longer taking payments to pay for to, you know, for the Tesla sales and they cited reasons that Bitcoin was very, very fossil fuel here, the in its Network. And so in that view there's there's this
There was someone who was relatively respected amongst technology actually validating a lot of one of these fud points that the mainstream media have been throwing at Bitcoin, which I don't think is actually valid. But nevertheless, it sent a shock wave of fear through the market. The, the price started plummeting within seconds to minutes of that tweet. And the market set up at that point was already quite soft.
There was, it was making a light recovery, it was tentative and it was staying to move upwards. And that that's also from a fundamental lens. When you look at what's happening on the investment activity on the blockchain. And then when that tweet, came out instigated, severe amounts of selling, not only on derivative markets and spot markets. We actually saw like significant sell off as
Point started to flow into exchanges. So real coins got moved and they were moving from wallets that we're quite young, that the coins, the coins held between one to six months of age. So Ralphie New Comers to bitcoin as what I can tell and I think a lot of them swore a lot of you know really nice Rises and Bitcoin from the
80,000 up to the 60 and 50 to 60 range and they probably took the opportunity to take profit. And so you know we saw this this huge huge. I just call it tidal waves of coins moving into the exchanges and ultimately the whole derivatives Market started to unwind anyone who has long got liquidated. So they added further selling pressure and so just we had this Cascade of
Pleat unwinding and sell-off. And what I think it went out to 30 or 29,000 I'm in the final when the final dust had cleared and it bounced up and then it was recovering in the in China announced that they were Banning Bitcoin, Miners and reiterated their their stance on no trading for the their, their National. So that's a big thing because, you know, miners are
He really located in China. So that said another wave of fear and price, hold down. So we're now in this situation where Bitcoins heavily discounted below fundamentals and the markets you know, attempting a recovery it's going sideways up Ash now
Raphael what do you think?
Yeah I second most of what Willie said I think there is
My perspective, two major driving forces here. I think I've it, I do remember when's the last time when I saw the market react, so much to news to actual fought or, you know, to tweet. I think this was I saw this much more happening in 2017. So you know, with Elon Musk with with the news. From from China mind, shutting down and China. Do you know, Banning Banning Mining and so on and so forth on the
One hand that and what we saw on chain is that, you know, most of those reactions were, you know, to like more New Market entrants, right? Very short term holders that that's sold, you know, at losses or actually. Yeah, panic panic. Sold in eventually. And the second thing I think is that the market was just highly over-leveraged, right?
And I think that what will we mentioned this Cascade of you know, margin calls, liquidations investors, you know, aiming to buy the dip when in fact, you know the the cell of wasn't wasn't over yet and so sort of like ask a skated down and and we saw that huge shrub if you know over 50 percent down to 29k. So so that combination I think is what really
You know, made all these all this price action happened.
I totally get that the market is not rational, and yet, for the Tesla news, I mean, it's not like a huge percentage of the coin transactions were being used to buy Tesla's and Tesla kept all the Bitcoin on its balance sheet. Other than, you know what, it had sold previously to test the liquidity in the market, which I think was just them trying to like, do fancy accounting tricks. But anyway, so in that sense, it's sort of the real
The reaction to sell based on the news doesn't make sense? And is it just that? That's what it is. These are newbies. And what they're doing, doesn't make sense, is that why that tweet had such an effect?
Yeah, I think it's very much. The case is like we've got some new entrants. The veiny been holding for this in six months and then you've enjoyed a lot of price gains and then something comes along and invalidates, you know, so called
You know, the the Iron Man guy that that has space rockets and Tesla cars says no, no, this is this is solid. It's like this is like you know, it's a big can going to be a big contributor to the world carbon emission. So, you know, it's just the guy saying it is very well respected and for sure like that, that will I think, well, I obviously did change the
Views of people that came in recently saying, oh, maybe this is something that's not going to work in the long run and they emptied their bags and sold off. Yeah, I think the simple reach of you know, of a personality, like Elon Musk. Mm. Just, you know, it's something that we hadn't we hadn't seen before, right? And I can very well imagine that it wasn't, you know, just
The inability of many investors to, you know, see the nuances of, you know, those those messages such as a we're not accepting these anymore because of, you know, X and Y reasons. But actually we haven't sold and we don't plan to sell any of those. And in other investors that I bet, you know, we're batting, probably on, we're batting, probably on, on your knowing any rational Market reacting to this and install the opportunity.
And then started selling that
well. So here's one area where I actually disagree with you Willy, you know, where you said, you don't think the environmental issue is such a problem for Bitcoin or, or not, even just Bitcoin, but proof-of-work chains in general, like, I mean, granted. I used to cover the environment, it's a reporter. So maybe I'm kind of tuned into that segment of the world a little bit more than the average person. And and perhaps in that regard, give them more weight than they have. But
I feel like they're concerned is only just growing because, you know, obviously the more time we let laps without doing anything about it, the worse, the problem will be in the heart. It will be to fix, though. And that regard, I actually feel like that could be quite a concern for Bitcoin going forward, but you seem to really not think it is merited.
Yeah, I look, I'm on my, my training is a mechanical engineer. We studied Renewables and
Another thing is the cost economics of Renewables is still in its rollout stage and it's very marginal. And so what Bitcoin does is it makes something that's marginal cost competitive. And so, in some regards you might see an old coal powered station. That's that's going to be shut down. But Along Comes a Bitcoin, - has, we can mop up their energy and make it hang on for longer but there's you know, there's so many places.
Is in the world where renewable energies is deploying and Mining setup can make that marginal deployment. Come about much sooner as the cost of renewable start to drop and we're on of this Arc where Renewables are becoming cheaper and cheaper. So eventually this whole infrastructure of energy that the the planets on will eventually move to Renewables like
The, the age of fossil fuels is coming to an end. And so what I see is that like you've got this tool here, that's making things that are marginal, mainly Renewables and it's going to accelerate that. So that's the argument and people see these smokestacks and go. Oh that's that's bad but they don't see this. This increase in a celebration of Renewables that's facilitated by these new economics.
And not to mention that the efficiency of the Bitcoin Network gets better as it gets bigger per
capita.
Yeah. And now that China is cracking down on mining. We could see the switch to Renewables for mining Bitcoin accelerate and So that obviously would also be good and I think what you're referencing to when you talk about renewable energy generation and combining it with Bitcoin mining that is are you referring to the ark Square paper that they put out, was talking about how the economics of that could?
You know, Renewables stronger.
I think I haven't actually read their work. I think they talk about it as maybe like in the home or something, but I'm not sure. This is just from first principles thinking as an engineer and seeing the light. Yeah. Half I've done, I used to be a Renewables geek too. So I did a lot of the calculations
me and Chris furnace key.
Yeah, yeah.
Yeah. Kristen. Yeah. But I have done the calculations, you know.
Okay. One other thing that I wanted to ask you to about who was selling at the time, was really, I think you had. Also it was tweeted or you wrote about the singer newsletter that you also saw some institutional selling. Can you talk about that a little bit more?
Yeah. There was like we saw I wouldn't say institutional I'd say you know
They do whale selling holders over a thousand Bitcoins. So that's either very, very large holders that are personal and private or institutional but like their their Holdings dropped and that would they were dropping before slightly before the crash. And so yeah that dropped. And unlike your normally what we see is when what we have seen and then past months, as whenever the institutions
Or Wales dropped their Holdings. The next tier below which is like one hundred to a thousand Bitcoins and holdings. They would gain almost a mirror image and they were were soaking up those coins. And in this case the the next tier below the the what we call the dolphins and sharks they they were pretty steady. And so all of those coins they were being unloaded by the whales just were
Head to be absorbed by the smaller buyers, which they couldn't maintain the price at that point. And so, yeah. Despite the interesting thing was that as this whole thing started to, to cave in the price dropped and, you know, crypto Twitter, the world was going are bitcoins going into a bear Market. Your, you know, we don't see 50% drops like this without like a beer market.
That was completely different. Their views was complete different on chain. We saw a whole lot of new entrants come in for the very first time to buy their Bitcoins in the holders of one Bitcoin or less. So, you know, fifty thousand, thirty thousand dollars investment that those numbers started skyrocketing and so smaller players came in to buy that derp. And so, the actual user account
On the network increased as a single selling down and it's just that, the, the buying power by a sea of smaller retail, it was not sufficient to counter act. The the sell-off coming from Wales
and Rafael glass node. Recently, wrote a blog post, also talking about a potential slowing and institutional demand. How are you all determining that?
Yeah. So what we see is, you know, one is Maybe
The the institutional products, right? The gbtc, the ETFs that, you know, have been have been trading at a discount for, for, for quite a bit. Now, which, you know, they seem seem to to request could recover slowly. We'll see, we'll see how that plays out within the next couple of of, of weeks and months. But what we saw is that going into the end of 2020 and
It's early 21. We saw this huge unprecedented Spike of of number of whales in the network on Shane. Right. And and that started cooling off, you know, in my in February van in March so so that kind of shows that you know distribution of potential, you know, institutional or whale buying into into smaller hands.
And I think ultimately you know, this this led to what Willie says, although we see this as huge entrance of new network participants right over of new users coming into into the network. They were simply not able to sustain the price because because you know just just just because of the buying power as compared to to this institutional serve this institution of rice or whale.
I said that we saw. What's the end of the year and beginning of this year?
And I also, you know, you guys parse Out The Chain metrics and so many different ways. And I know both of you has also seen some trends when it comes to the movement to. And from exchanges, what are you seeing there? And what does it say about where the market is headed?
Yeah, I think so. What we saw, you know, the Trent that we started seeing since essentially a bit over a year since, you know, black Thursday was
As, you know, General depletion of supply and exchanges. And, and so that, of course, leads to, you know, some sort of liquidity, squeeze there is, there's not enough essentially to to be board up. And so this this reduces substantially at the selling pressure, you know, with the with the rise to two new all-time highs and, you know before. And now you know, after enduring the strop,
With, we've seen some, we saw some, some, in some increased Supply on exchanges, right? That is now cooling off again. And so these coin movements, really tell you story about you know, investor behavior on chain and and the liquidity and potential cell pressure that that you see there. It's a bit more Nuance than people usually put it because it really depends.
On on the exchange. And we've seen recently, you know, this is sort of like the geographical difference between, you know, increasing Supply in on Asian exchanges, decreasing Supply and you as exchanges, right? So there are there might be some geographical, you know, things in play as well. But generally, you know, you can you can see this this recent cool off that you know, that that it seems like
You know, investors are essentially done with the with the cell
of well, actually in order to kind of paint him a broader picture at the three exchanges that you were talking about that are picking up coins are financed, but Phoenix and bitrex is bit trucks. I thought that was an American exchange or
I'm I don't want to get ahead of myself here, but I thought or at least.
They were, they were operating there may be okay but I don't want to get out ahead of my story, shiny turchin. And please American is it it's not a very large by volume exchange. It's not tomato. The main, you know, the big 800-pound gorilla is buying it. And you know, that's interesting because I'm like, I'm seeing like, you know, even in the chat analysis and looking at the way in which the price action is analyzed.
The selling comes from buying ants, in the buying comes from going base and there's a niche shift and coins, and I don't know if it's some intricate Arbitrage thing that's happening or whether or not it is actually Chinese the Chinese selling their coins and like now that we've seen the bending, bending mining, I don't know what the what's causing their butts definitely. Looks like the waist is buying in the East is divesting.
It said, Remember the, you know what the exact wording was in the blog post, where it talked about that, but I feel like it hinted at people, essentially trying to move their coins offshore maybe to avoid certain regulation or something, so, little flight you. But Willie, you feel like it's simply that Asians are so or the Asian market is selling in that America, the Western Market is buying
Yeah, I'm just guessing it theories. I have no, I have no real information. I'd probably have to, you know, figure out what really happening in this tree by talking to people, rather than just looking at the this year, numbers on charts. But yeah, and you know, like, you know, back to this point of the, the supply on these exchanges. But the interesting thing for me is that we've been an ERA with such strong,
Choose Channel and high. Net worth buying that on chain has come very become, very dominant in the first half of this year because those guys move their coins off the exchanges and put it into Cold Storage. But now we're in this phase where retails really ramping up and they're coming in to buy this dip and typically the second half of these you know one in year bull markets there you know go crazy vertical, the tail end of it is very very dominated by
Retail. And I think the picture might be a little bit harder to read mainly, because there might be a lot of buying from retail but they don't withdraw from exchanges as much as an institution. Would they are quite happy to leave their coins on the coin based wallet. And so, you'll see potentially the supply on these exchanges increase and increase, because there are in long-term Holdings by retail. And that looks like coins are being sold.
And but in actual fact, though and long-term hold by by retail, who just using the exchange wallet. So, I think the second part of this year will be quite interesting. And I think we need to know that in that effect is happening.
And maybe to add on this, to add to this. I think you know, one of the the major depletions that we've seen is is actually coinbase, right? Which we all know. You know they have custody service again also for institutional's. And actually we're currently doing some research on, you know identifying some of these you know, larger clusters of unchain that seemed to be very very closely related to
You know, the the coin chain, the coinbase wallets that we see whether it's, you know, coinbase custody or something, something else, you know, hard to say. But, but at least it's something that interacts very, very closely with them. And so, you know, as really says, much of that, could be related to institutional buying versus, you know, retail on the other hand potentially more on violence. And so on that I'm, you know, just leave a comment and let
leave their coins and on exchanges in order to keep trading.
So I do want to ask another question about institutional, but before we get to that and just to continue on this Finance thread, one of the glass nose in class node posts talked about how it could also be that people are moving coins to exchanges, not simply to sell but also because they either want to rotate into 'if or they want to trade on chains like Finance smart chain. So do you think that that's all
You know, influence the sell-off in the Bitcoin price and with that also account for this movement, we're seeing of coins going on to
finance.
I think so. I mean, I don't know what the extent of of really of that. How much influence it really has, but we've seen those those rotations, right. And we often see this, I mean, this, this is something typical for for bull markets as well where people start, you know, moving into into different altcoins into other assets. You know, most recently than potentially also into into buying and smart chain, which, you know, didn't exist in
And Tina. And so I think that those, those are things that come into play as well, and in something that we're observing closely, in terms of, you know, how it is. This look like now that we've seen this, this immense dip, you know, as a coming back into Bitcoin right in order to to rebalance potential portfolios again and and and see how that, you know what kind of effect and that this
Hasn't on the Bitcoin price itself as well.
And so so just wrap up this institutional conversation. I did also want to ask about gbtc because the story around that has shifted quite a bit in the last several months from what it really had been for years. Can you tell us what changes we've seen there and what that says about this current market.
Sure. So I'm you know, I think I saw this too and I was actually a bit surprised to be honest it to see this this
this huge flip in the last couple of months because that narrative was a big one, right? And this was, this was, you know, the, the essentially, the, the front page of a institutions are here, the Holdings of, you know, gbtc we're going up preferred from for, you know, for months people were comparing it that, you know, there were scooping up more coins than actually coins were being mined. And so you know there's this was naturally seen as something.
I mean, very, very bullish and then that changed and that change happen actually coincided with the introduction of the Canadian purpose ETF. Right? And so people were speculating right? Whether investors might be, you know, relocating and going into the ETF rather than gbtc just because of, you know, that the structure of how these funds are the trust as being a setup in. So and so
So the gbtc premium dropped, you know? And and and flipped actually into a discount. And, and for me, this was actually going to be something that, you know, people must be arbitraging this, right? So it's just going to be, you know, very short period of time and it will, you know, flip positive again, very very quickly. But, you know, this has now sustained for what? Two months or so. I don't even know for for very long. I think much of that has to do with you.
The structure of the of trust itself and but I'm not too much too deep into that. So I cannot cannot say whether this is this is true. And whether, you know, you know, because it seems like it's a one-way Road, right? You, can you consider if like, you know, put things into there, but it takes a lot of time to, to recover them and so, yeah. It seems, it seems like that this count has cooled a bit. I mean, it's still negative, right? But, but it's going sideways.
And, and so I'm super curious to see how that plays out specifically, because DTF itself is also trading at a discount currently, but maybe Willie has more insights on that as well.
If I found it interesting that you know the Arbitrage was not close, we didn't hissy buyers buying Bitcoin it was it over a ten percent discount at one point you don't want it by exposure to Wendy at some point 20. Okay. 20% discount on, you can either buy Bitcoins on coinbase or you can buy the ETF at 20% discount I thought I found it phenomenal that sure if the no one could Arbitrage it because of the structure of
That fund surely investors would see that opportunity and and bring it back up and, and maybe reduce their buying on standard exchanges but it never did and I was I don't know it was always a mystery to me but I have seen in this start to the day Flip or change directory and now the premium is starting to become less negative. So that's you know, that that's a positive sign that saying.
You know, people are starting to buy buy this, this ETF, so these these more demand coming from that side. But I think overall, there was a warning sign in hindsight kind of this hidden warning sign their viewers Mac at selling and the ETF the ETF holds. I think was as it like 3% of all Bitcoin supplier at something like that, not sure.
So like that was being sold down and there wasn't reflected into the main Market because the way that ETF is structured, is that it's kind of like Hotel California. Those Bitcoins go in and they cannot leave. So, like the coins weren't being emptied out of that trust to be sold on to the market to track the coin. It just meant the, the premium job. The the
Was heavily discounted. So yeah, it's an interesting one, that one like Willie, you seem to have you seem to you seem to have a very, very, very nice analogies to the music. And I
was going to say the same
thing, Rick Astley, they're always at the classics, right?
Yeah, I have to agree. I was just going to comment on
on the same thing. Alright, so in a moment we're going to talk about other areas of the market and what they say about the Bitcoin price and where it's going. But first a quick word from the sponsors who make this show possible today's episode is sponsored by ey, blockchain Ernst & Young is committed to supporting integration of the world's business, ecosystems on the public, ethereum blockchain, join, our fifth, annual, blockchain Summit and education series on May 18th to 21st for a deep dive into zero-knowledge.
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Ray the link is in the description back to my conversation with Lily Wu and Raphael, Schultz craft. So, we touched on this briefly, but we could probably talk about a little bit more. What have you seen in derivatives trading and how has that played a role in the Bitcoin price as of late?
Oh it's well in derivatives is like you know it's it's really was an invention by bit mix in 2017 and that got two phenomenal volumes by 2018 and so when I look at the Bitcoin price, I go oh look at those Shear walls of fear his derivatives, get Unwound. And I look at the chart going back to Italian or 2018 ic3 50% drops of
of sheer walls of Terror in everyone, you know screaming with blood on the streets and that is the impact of derivatives as people get completely liquidated on these derivative markets with their, you know, 100x, leverage. I think Finance published that, you know, they do the largest volume and they published 60% do 20 x or more leverage on these things. So
The price volatility of Bitcoin has made Market jumps upwards since Drifter markets have been out in force. And, yeah, I think their time A lot of people are trading these things and I don't know. It's a little bit like crack cocaine when you're on a hundred X leverage, and it's fun, if you can make something, and then we've got now, a generation of the coin traders that like,
Rinsing this, on the one hand, they're learning. You know, how markets, work, how you can, you know, push price around. You can buy things, you can liquidate other people. It's like this full-on game and then the other side, you get this, you know, crazy kind of whips or in the Bitcoin price, which deters long-term investors because the volatility is its it does some pretty crazy things, you know? And no
From what we just saw her now with this, you know, almost 50% drop and in covid or so. And to put this in perspective, I think I'm the last metric I had. I didn't read how many people got liquidated in this last crash, but one of the unwinds from the the, the low 60s, there was a derivatives unwind. And it what happened when I think the miners tripped, over the power cord and
China. And the hash rate dropped on the network people sold off the shelves of derivatives when until Cascade of liquidations and it was 1 million traders that got liquidated. So it's it's not it's you know there's only about a hundred and fifty million holders of Bitcoin in the world and 1 million of them a trading. Derivatives and well that's like a generation that is learning how to trade.
Market it? No, I think this is a new thing. This is a new phenomena. When we look back on the history books as like a generation learning how to trade,
all right, let's it. Raphael. Do you want to add anything we can we can talk about stable coins. There's quite a lot to cover when it comes to stable coins.
Sure. Let's let's move let's move. They were constant. So
I did see that one of the glass node posts. Also talked about how in the months leading up to the coinbase direct listing demand for stable coins with
So high that tether u.s. DC and die, all traded above the peg for a month. So why is that? Can you
explain? Yeah, I think, you know, people might have just been looking for, you know, liquidity to, to exit, right. I mean in the end for for I feel like as we see this, right? The the price of stable coin even if it's packed to the dollar, you know, is susceptible to, you know, just Market forces. And if there's huge demand
For, for those, you know, potentially, for people to, you know, because they're wanting to, to exit, right? And to move into those coins, we saw that, you know, the peg for, for, you know, for USD TSTC. And I just was, you know, for over a month, just slightly above above the dollar pack, right? Wait,
so this town for me because I don't know if I fully understand because obviously, the coinbase direct listing that's, you know, in the traditional stock market, that's like a totally separate point.
Angel system and then you're saying like people might want to exit their cryptos so I just I don't feel like I really understand the connection.
Yeah, yeah I mean that's I mean that that's that's one of the interpretation of what we saw. All right? Because it was it was it was rather constant over over you know a period of a month just before before before the dip. Right. And and so and so this is, this is, this is, you know, looking at those at those at those
Jackson and how they deviate from, you know, from from, from the, from the actual underlying value is is something that essentially by chance we saw and we're currently looking a bit more into, you know, some more. So, you know, systematic analysis on how that really changes over time. And you know, if that actually no means anything at all or what it does and because it's it we saw it, you know, across multiple stable coins them over there period.
But be, it's that they may be themselves, don't own own coinbase stock or is it for the people that do like I didn't get who it was. Was it the people who have coinbase talk or the people who
don't? I mean, I think that's, that's speculative, like, I couldn't say right? I mean, it's a, it's more, it's something that is, you know, I wouldn't go as far as to bring in that interpretation. I'm
Leaning more towards, you know, the soul sort of like you know data-driven you know observation of what that what the pack and what the price say. So so I wouldn't I wouldn't want to go ahead ahead of myself. There are too much, right? So that's that's one part of. That's one part of you know what we've seen with with respect to two stable coins. The other thing is that it has you know the supply has increased quite a bit right? And and
We've seen this actually accelerating during this, this during drop as well, right? So what this means is, it's essentially that, you know, we believe that there is there's a lot of gunpowder out there, right? That the can be used essentially in these markets to to you know buy up Bitcoin and an essentially increase the the price. So one of the metrics that we look at is the the stable coin Supply ratio, right? That
Essentially Compares it compares. The supply of the stable coins to to bitcoin and actually really had a very nice modification of that adjusting for the downtrend over over the over the last, you know, over the last couple of months. And that actually shows that we are, you know, historically at the low end of it, which you know, could indicate that that, you know,
There is that there is essentially his start comparing it historically as as you know as looking at this oscillator, a lot of dry powder to to to to, you know, start moving into into Bitcoin again.
So people are essentially buying a lot of stable coins kind of waiting for a kind of a type of bottom in the market to deploy as I do with that in a okay.
Yeah cuz like if you're selling out of your Bitcoin and a theorem and whatever cryptos you have, you're going to sell serious dollars and you've got a choice, right? You're going to either sell to US Dollars and withdraw it to your bank or the other choice is to sell it. Sell it to a stable coin and keep it in digital form, and that is the advantage of
You can just move it straight back into into crypto move very quickly and effectively. So what we've seen is a lot of the value, go out of crypto and into stable coins, sitting there on the sidelines, just read it to flow back in once the picture of price action starts to move bullish. So it's a good picture, you know, it's like if it was bearish, I would say people would want to exit this table coins and move it to stock.
Do something cool gold or something traditional where you wire the money out. So and we're in these historic kind of all time highs of stable coins when once you take out the SKU and the picture. So it's I think it's it's very positive for the the longer term price that we're kind of in regions where were overextended and overselling. That's my interpretation of the data.
And like we've got a lot of upside, and the downside is quite Limited at this
stage.
Okay. Yeah let's talk about some of the metrics that show that Willy obviously you're well known for that and VT ratio. Why don't you remind the listeners? How you define that and tell us what it's currently indicating?
Okay. So you know most people are familiar with price to earnings ratio and stocks and Bitcoin doesn't really have. It's not a company it doesn't have earnings. What it does have is it's a pure store of value.
Network. So what it does have is volumes of Bitcoin moving between investors, so you can measure the value moving between investors as as how active they are networkers, as a as an investment Network and you can run a ratio to its Network value, the market cap, and that's essentially nvt ratio the price to earnings for Bitcoin. You can you know it's a fundamental equation, you can put it down on first principles and you
Show that price to earnings of the coin which is em V T multiplied by the volume. That oscillates, it gives you a valuation for Bitcoin. Just like you, you might say this company has a 4X multiplier from its price to earnings this category, our company and so you can go okay? And let's see what meanings of does and okay, the valuation is four times. So that's that is essentially what you can do with nvt and in
VT is that batch pure ratio like a process earnings you can multiply it by the volume and the long-standing value, but the median and you can map it back to the price domain. And so, it gives you also very nice kind of trace of where the value should be based on the investment volume going through the network between individual investors. And currently, that's its that $55,000 even though
We're not long ago in their low thirties. It's it's an historic band of undervaluation and I notice, you know, plan B's pretty well-known stock to flow ratio and other fundamental based on the scarcity dynamics of the network, that's, that's currently at $65,000. So those two are pretty much in the high agreement of between 5560 $5,000.
We're and also, if you look at how far the price is currently deviated from that, that metric. It's it's also in a band where it's all time undervaluation, when you look back on the history, so
yeah, I mean something that confuses me a little is if we're at this moment where the coin is you know, quite well, undervalued historically. And yet at the same time, we're at this moment.
Are, you know, there's this huge amount and sitting in stable coins. Then why aren't we starting to see kind of the beginnings of a more bullish Market or maybe we are? And, and, you know, I'm just not aware that, that's what you're thinking.
Yeah, I actually think that were in a, you know, a post, a capitulation re accumulation of coins. So, so many whales dumped out, and it will take a bit of time for those coins to be re accumulated and I think once the price action starts to tip, properly bullish. So maybe a little bit of sideways and price action starts to look good. I think a lot of those stable coins will come back in
And like, all these Matrix is telling me is like, we're very overextended and in the cell down and historically, when we are below these fundamentals, the recovery is quite quick. The only times where the recovery is, slow tends to be when the price was way above fundamentals and it's taken a long time for the price to come back down and recover. So,
I think the time to a lot of this is telling me the time to recovery is going to be faster than, maybe what we saw in 2019 took months after that, six thousand to three thousand drop and I think it'll be a lot like the covid. White swan crashing in 2020. We drop below fundamentals there, and we recovered in a matter of about eight weeks, I think.
Yeah, there's actually reminds me something.
I wanted to touch on at the very beginning because one thing that surprised me was that neither of you mentioned, that the May 19th sell sell off, was kind of like right around the time. That taxes were due here in the US. And I did wonder, you know, because I did see other people saying that that could be a contributing factor. Do you guys both think that that could have been as well?
I'm actually, I actually don't know too much about, you know, text behavior in the u.s. them. I'm not a, I'm not a, I'm not a resident there. I mean if it is and people often point to that, right? And when when when spring is here that that it does have an effect and and always when we see those dips and around that period, right on a yearly basis, essentially it's been pointed out as one potential factor for the, for the, for the
For the corrections for the dips and for those price drops from my perspective though, you know this year you know the black Thursday last last year and so on they definitely go beyond that, right? And I think there's, you know, these these more more obvious factors that led to, you know, those more extreme Corrections than they usually happen.
But but but but overall it seems like, you know, there is, you know, there is some, some effect due to, you know, tax season and in the US on the price, I pay for my perspective I wouldn't, you know, over overestimated too much. But but but it's probably probably placed some role.
Yeah, I'm just realizing is to not Americans. This
question. Yeah but I know you. That is the thing. Walk away in May, I think now I know it's maybe because the
text reason, but it's normally in April, it was only pushed because of the pandemic 1 modulo, okay? Because it's normally April 15th and this year it was May 17th.
Well I can't remember
why but I'm looking at the chart with covet
and it doesn't seem to back-trace for that great, you know, like
Lot of times in April, it's climbing quite rapidly in the Bitcoin price history so no I do not sure even like now I think we're in the era where a lot of people were choosing to not sell their their Bitcoins to to pay down taxes because that incurs even more taxes, they might just collateralize it and get a block file own. So you know, you no more leverage in the system, but I've noticed that people are doing that.
Um, rather than to incur a tax of being on capital gains with their
Bitcoins. Yeah, yeah. And I was going to say, it could be a bunch of the defy yield Farmers, but since there isn't a huge overlap with the Bitcoin community, may not be the case. All right, one other of your favorite metrics. Willie is sopr. I actually don't know what that exactly stands for. I know how you define it, but can you give
Of us, the definition, and explain what it is. That that says about the market. Now,
sure, this is Renato, is meet Rick who called it spent output price ratio. So profit ratio profit ratio. Sorry, profit ratio. Yeah, so essentially they say we'll pick a day and we'll get someone to count every coin that passes between let's say investors.
Actually just look at between wallets. But let's say the ideal cases investors last night, actually does it for investors and you go, all right, those coins are moved and you can because the blockchain tells you when those coins arrived in that wallet, you know the price that the seller sold those coins for. And now, you know today this is the price they sold it for so you can get a profit on that, that guy sold for, you know, you know, maybe fifty thousand dollars of
Out of all those coins and that person sold at a loss because they bought it a higher pricing. And so you kind of do a ratio of the profit that is transacted during that day and you can say, you get this reader, you get this chart. And typically, what you see is this chart, you know, in a bull market, the price runs up higher and higher and higher. So anyone who's transacting coins is obviously moving coins, that are now fast.
Of it. And so, once the price starts to tip, you know, like people, listen, now, like, selling the coins and some of them are selling at a loss because it's now possible to sell the last because it's coming down in price, they bought earlier when was higher and and generally what you see is, you know, the as it goes down more and more people sell because they are taking the profit that they've got on the table while it's still in hand. So
This is this profit-taking coming is so per goes down and down and down and down until it hits the 1.0 line which is like there's on average. The coins that are moving between investors in the market are no longer carrying any profit. And so typically in a bull market, no one wants to sell at a loss so the selling stops and the price bounces up. So soap is this really nice kind of chart that tells us, you know, when does The Profit taking end when it's 1.0 there?
Hi chance the market will no longer sell at a loss for an Abu market. And so, yeah, sober in a
nutshell.
All right, so we're running out of time. So I want to touch on a few things before we wrap up, but one is obviously a huge Trend in Bitcoin, the last like, 9 months. 10 months has been corporate treasuries, buying a Bitcoin. And after this Winter's Bitcoin for corporations event, that microstrategy held I kind of expected we would start to see you know after some time period and
Our steady drumbeat of corporate news about Bitcoin, being added to treasuries, but it's actually kind of died down a bit. And I wondered if you're seeing any evidence on chain or even just hearing from the industry, you know where that's going is that a trend that has kind of died out or is it just something that takes? Well, because we're talking about corporate treasuries here. Or where do you think that is headed?
So for my perspective, it's
Thing, that, that, that will continue right in the continues. The thing is that, you know, what you hear is obviously, you know, publicly traded companies and and only those that started those processes very early on and to get those, you know, Bitcoin on their balance sheets. We have to remember that. Those are, you know, those are processes that, you know, take. Take quite some time, right? It's not, it's not like, hey, you know, let's, let's, let's let's by and then that's it.
And so, you know, now that the infrastructure is is essentially there that that, you know, wasn't simply there a couple of years ago and for sure not during the last bull run. This, this is now possible for those, right. And I think what we heard so far are those that that really started. You know, you setting up their Bitcoin strategies very early on and from from what we saw on,
Chain, this might have, you know, cooled off a bit. When you look at at least when you look at, you know, large whale entities on chain. I mean, of course, they're not always, you know, one mapped, want to one many of those, you know, are not been holding their coins and in self custody, but you services for that. But I think that that will hear much, much more of those in the upcoming months. And, and I think so,
Because I believe that you're probably risking a lot. If you don't have a proper Bitcoin strategy, nowadays. And also because you know what, we what we hear out there are the the publicly traded companies. But I mean, also glass know, like, you wouldn't believe like what conversations were having at times. Right there is, there is a hedge funds, there's
Family offices, there is Big, high-net-worth individuals. There's really, you know, a lot of like, big private folks that are looking into this. And if those are, you can imagine how many, how many others are. So, I think there is, there's a lot of things going on behind closed doors, and it's, for my perspective, it's just a matter of time until these, the start popping up more and more and announcing, you know, their Holdings.
Willie. Do you want to add anything?
Yeah, I also think that there's the, the again, I agree. It's a timing thing. I know. Like, they, I believe Michael Seiler said that it took microstrategy six months to get prepared to actually deploy into Bitcoin and they were very fast about most. Most companies would take nine months or
Or even longer. And so I kind of started the The Clock ticking from win their conference kicked off and see. Well it's let's go six to nine months, probably nine months and I was like that's going to be very very interesting if if those guys really do deploy and it is going to be in that time frame, we're looking at a fourth quarter of this year of buying from large and large ticket sizes, which is
A what we kind of expect that to the time, where the bull market starts to wane, the momentum starts to die out around there. But if those guys come in, I'm thinking that's going to be a make a very interesting fourth quarter because, you know, most of the models predict or add just guessing that like pass Cycles, we might top out near the fourth quarter. So it's an interesting timing. If this
this money starts coming in all around then.
Yeah, we'll have to see. So one other kind of wild card is that I did notice in some of the recent analyses last node has referenced holders, rotating ether as I mentioned before and I'm sure you're well aware etherium is going to be instituting probably the biggest change to its monetary policy ever. And it's one that many people believe will make eith deflationary which in my
From this is my personal perspective, but I feel like then this is the first time where Bitcoin in ether kind of will compete in that regard. Because even though there has been a narrative that there are competitive or whatever it, you know, to my mind, there kind of just different things. And if you're, if you really understand what you're doing with your money, then when you put your money in one versus the other, it's for different reasons. That's my perspective. I'm sure many people don't actually really do the research to understand on that level. But anyway, still
Given this change to eats monetary policy. How do you expect that that will impact the price of Bitcoin going forward? Now that they will compete, you know, in this kind of deflationary sense,
I think in terms of you know a store of value is it? I think the theorem has been competing for a long time and now even as early as 2017 as a young back then, but now we've had maybe getting on six years of price action as
Tree. We've had a lot of a lot of other kind of properties. You want to see in a store, a very asset develop and side the theory mm Network. Even though we're, you know, it's like a smacks contracts Network and we have defy running on it. I think a lot of the the value that has accrued to ethereum is really people wanting to hold it locking that up and I think yeah, it certainly does impact the
The valuation metrics if you're going to reduce the inflation significantly. Yeah I think that's that's what I'll say is that it is developing those Lindy effects and I have seen that you know it is becoming a choice for corporate treasuries, it's starting to yeah. We're previously. The conversation was just becoming
and is that because of this change?
Hi, I would not know. I would not know. I think that I think for me looking at this as an analyst, I go. Well actually if you look at, if you look at the Sharpe ratio, the risk of read the adjusted return on this network, it's very similar to The Coin and I think that the traditional world is very, very comfortable with diversifying and having baskets rather than all in one asset.
Rafael's you have an opinion. Yeah, I
think. Yeah, I am more in the sight of you know those are not competing networks. I'm not I'm a quite sure if you know this, this this will really grab so much of Bitcoin. I think Bitcoin is still you know, regarding its history regarding its Simplicity or regarding, you know, this is very you know static
A monetary policy that is, you know, has been established now 4 for 12 years. It's still something that that, that from my perspective and where I believe, you know, serious money at this stage is probably, you know, more more inclined to, to deploy because, you know, the theorem has just made other choices, right? And you know, this changes is
Mental right? You know, I mean it will have to see what, what like, how much and how, what it actually does to it and it goes into that direction, right? It points towards, you know, doing something similar and and you know, making the assets, you know, deflationary but but still still, still still at the fried stuff. View it as you know something something you know,
Yeah, on the sides and not not competing and and you know grabbing grabbing Capital off of the coin at this stage at least and we have to observe, you know, how this actually plays out and what it does with the ecosystem. I think a lot of interest though comes from the fact that there's so much development happening happening in the in this in this ecosystem, right? So many things,
It's being built on top of it and in so much more things that you can actually do. Now holding etherium in those decentralized protocols, then you can you know in Bitcoin and that makes it very interesting for many investors I believe.
Yeah yeah. When Mark Cuban came on my show, he felt like because of the number of things that one can do with the theory of that that might be the coin that more people end up holding, which is kind of interesting and
You know that for me, was a fresh idea. All right, so for you, what are you looking for to determine whether, you know, when we'll flip back to a bull market or or do you think we already are and going forward, why don't we say August? And then end of year, what would be your price predictions for those two moments in time?
Well, I'm actually very careful with press prediction.
As is everyone is probably. So my answers to this are usually the more fuzzy, I think we haven't exited a bull market at the stage from a non Shane perspective. From a structural perspective. There is, there's little that the points to that. So, as of now, I still believe that, you know, this is a correction, A big one with in the bull market, but we're still on track seems to be no looking a bit.
Like like that? Like mm 213. Double top. If you will, if you take, you know, the 65k is as the first stop and and now this you know, this this correction bit longer. I feel like I'm, I don't know if I'm as optimistic as Willie is with, you know, how how fast will will go back up. And I at this stage, I feel that, you know, that
Downside risk right now is very, very small but I still wouldn't be very surprised if we get another burst of pain and another kind of, you know, shake out before. You know, we start, we start, you know, properly, you know, regaining the trends that the bull market Trend essentially over the next couple weeks and months, but uh, yeah, structurally, I think we are
Track. And it's it's it's as long as the data doesn't tell me anything else, I remain bullish and and we'll see where we end up towards the end of the Welly. What about you? Yeah, there's some other structures not bearish. If this is a bear markets, the weirdest weirdest, Donna be a market of ever seen and if it keeps dropping from here like it's like what's wrong with this network? Because it bro
Token. It's were very revered oversold. The these people joining we you know, we haven't even dropped from a high Mania phase which is can very consistent for being market. So they ended up, they end with a bull market pop and then we have to revisit fundamentals. Here we were already at fundamentals win this thing sold off. So I think that will rebound relatively well soon nourish and
Don't think it's going to be multi multi months longer than two months that, you know, anything can happen in these markets. Yeah, I think that will will, will will climb back up with. I'm pretty confident that. No, he's nothing in the data. That shows me, this is, this is serious. Only, you know, the most purest thing I can find on the network as that Capital was moved out of the network. In terms of relays cap which is you know, good metric on.
How much the stood there. And so that's dipped quite a bit and I haven't seen that before in the middle of the bull market. So there was some significant sell-offs
button to remind listeners, what realized cap means
it's a sum of all all the coins sitting in wallets at the price that investors paid for those coins. So that's dropped that means that people sold higher up and now realize kept is no longer capturing the
Value of these those extra high coins. And there's one of the things that typically Rises very easily and very seldom does it drop and it has dropped, it will add a level which is consistent of a start of a bear Market. But once again, there's does not agree with some much more telling metrics like the number of new entities that were seeing on the network and the number of users coming on board, some of the companies that I have the data.
Iran. So the yeah, their customers are coming in new users coming in. That's a bull market, it's just a matter of when those coins will be a very absorbed and bought and held.
Which and so, if you were going to give your August in end of your price predictions, what would those be
August is tough? But like, looking at, you know, I have a model, which is just a moving average of the market cap and
Tweak a little, it captures all the tops and history. It probably won't catch this one because if one's looking at it now, but that's that was prior to this crash, that was dying to look. Like it was winding up two, three, four, even five hundred thousand Dollars near the end of this year. Now it's starting to reduce its trajectory looks like it will comfortably reach 200 to 280 reach.
And you, but we have to see how that develops. So, you know, once again, it's like I'm just naming this model. I'm just reading on what, what? It's pointing it, but it keeps changing. So I'm safe there.
Okay, alright, well, we'll have to see what happens at that time and circle back. So, thank you both so much for coming on Unchained working people, learn more about each of you and your work.
Okay, I'm on Twitter.
As we namik, you can read my tweets. The, I usually put my analysis on there. If you want a bit of a deeper view into the market, I do have a newsletter that you can subscribe to and that's linked into from my Twitter account, we namik. Yeah, I'm neocortex on Twitter. The first key is a three. Otherwise, my company is glass now, a class not on Twitter, and last the.com for
Or data charts and a newsletter as well.
Perfect. Well, thank you both so much for coming on Unchained.
Thanks. Very much, Laura, really enjoyed it. It was a pleasure. Thank you.
Thanks so much for joining us today to learn more about Willie, and it. Raphael, check out the show notes for this episode, Unchained is produced by me. Laura Shin with help from Anthony Yoon, danyoung us and Mark Murdoch. Thanks for
listening.
