The Pomp Letter

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To investors,

Something very unique is happening in the public markets. The S&P 500 has hit a new all-time high every day for the last 7 days. The Nasdaq also sits at an all-time high as well. Look at this chart — everything is up and to the right. The bull market rages on.

This is all happening while millions of Americans are still experiencing pandemic-related issues. It seems like the complex beast known as the economy has broken all preconceived notions of how it is supposed to work. Gasoline prices have increased $1 from a year ago, which brings the national average to $3.13 currently. The prices of commodities have increased so rapidly that home builders are throwing their hands up and refusing to participate in the market until they can better forecast their cost structures (read this epic thread for context).

This is not a problem specific to the United States though. The Washington Post had a great article highlighting the exploding food prices around the world. In the piece, Adam Taylor writes:

“The U.N. Food and Agriculture Organization said its food price index, which measures the global price of select foods, had in May hit highs not seen since 2011, up 40 percent year-on-year.

A variety of factors are to blame, including a surge in orders from China, fluctuating oil prices, a sliding U.S. dollar, and looming above all: the pandemic, and in some places, reopening.

But experts say that in the face of growing populations, globalization and climate change, higher prices may not be a blip.”

So what about the United States? Surely we couldn’t be experiencing the same thing in the most developed nation in the world, right? Wrong. Take this opening from Jaewon Kang’s article in the Wall Street Journal this morning:

“Supermarkets are stocking up on everything from sugar to frozen meat before they get more pricey, girding for what some executives anticipate will be some of the highest price increases in recent memory.

Some supermarkets said they are buying and storing supplies to keep their shelves full amid stronger demand. Grocery sales in the U.S. for the week ended June 19 rose about 15% from two years earlier and increased 0.5% from a year earlier, according to Jefferies and NielsenIQ data.

Stockpiling by food retailers is driving shortages of some staples, grocery industry executives said, and is challenging a U.S. food supply chain already squeezed by transportation costs, labor pressure and ingredient constraints.

The move is a reversal from last year when consumers hoarded groceries because of concerns about food availability, disrupting the food industry. Now, retailers themselves are stockpiling to keep costs down and protect margins.”

There is a level of insanity at the moment that is hard to comprehend. Grocery stores are acting like hedge funds through their speculation on future food prices. Think about that for a second. The current economy is so out of whack that the grocery stores are speculating.

Speaking of speculation, Robinhood revealed quite a bit of information in their S-1 filing. Here are a few statistics that stood out to me:

* Robinhood has 18 million funded accounts

* Almost 100% of the funded accounts are active monthly (17.7 million)

* Robinhood has $81 billion of assets under custody

This is an incredibly large business, but there are some nasty sides to it too. For example, Tanay Jaipuria correctly identified one issue:

“The DAU/MAU ratio is ~47%. For context, the very best social networks tend to be in the 50-65% range, so it’s quite crazy that the daily usage rate for Robinhood is that high.”

Given the research around less trading historically equating to higher long-term returns, this level of activity is a big negative for the user base’s economic outlook. But that isn’t even the worst part. Check out this insanity:

* Approximately 6% of Robinhood’s total revenue comes from users trading Dogecoin.

* Approximately 37% of Robinhood’s total revenue comes from users trading options.

* Over 6.5% of Robinhood’s total revenue comes from providing margin loans to users.

These statistics scream SPECULATION! to me. Speculation isn’t necessarily a bad thing on its own, but when you add in the context of the broader financial markets and economic calamities, the current situation is alarming to say the least.

But as I mentioned at the top of this letter, the S&P 500 and Nasdaq continue to hit all-time highs. That means the wealthiest people in our society continue to get richer and richer, while things like rising food costs continue to eat away at the financial well-being of the economy’s most vulnerable.

Rather than spend time complaining about the situation, my suggestion to every person is to get educated about how the economy works and position yourself to benefit from the macro economic forces. You, nor I, will be able to change the current situation. There is literally rumors of $6 trillion infrastructure bills being floated inside the current administration, so we actually may see things get even more crazy over time.

Education is the great equalizer in uncertain times. While it can be fun to speculate, remember the most common investment strategy of the world’s greatest investors: Buy good assets at discounted prices. That is it. Easy to understand, hard to execute.

Hope each of you has a great start to your day. I’ll talk to everyone tomorrow.

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-Pomp

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THE RUNDOWN:

Coinbase to Woo India Recruits With $1,000 in Crypto: Coinbase is looking to hire “hundreds” of recruits for its new hub in India, and is offering an incentive of $1,000 in crypto. The aim is for recruits to "leverage this offering to learn about crypto," Pankaj Gupta, VP of engineering and site lead in India, said a blog post Friday. The exchange is looking to tap the country's "world class community" of engineers, tech builders and entrepreneurs, Gupta wrote. Read more.

Fed’s Powell May Have Met With Coinbase CEO in May: U.S. Federal Reserve Chairman Jerome Powell was scheduled to meet with Coinbase CEO Brian Armstrong on May 11, according to an entry on the central bank’s calendar. It was unknown what the subject of the planned half hour meeting was or that it even took place. Former Speaker of the House Paul Ryan was also to have been in attendance. Read more.

UK Bank Barclays Blocks Payments to Binance: U.K. bank Barclays said Monday it is blocking customers from using their debit and credit cards to make payments to crypto exchange Binance. "With effect from today, Barclays intends to stop credit and debit card payments to Binance," Barclays said in an email to CoinDesk. "This action does not impact on the ability for customers to withdraw funds from Binance." Read more.

Revolut in Talks With SoftBank for Investment at $30B+ Valuation: U.K.-based digital bank Revolut is in “detailed talks” with SoftBank about a fundraising round that could value the firm between $30 billion and $40 billion, according to a Sky News report. Revolut and its advisers have asked investors at SoftBank's Vision Fund 2 to submit proposals for an investment of between $750 million to $1 billion with a deal expected to be “some weeks” away. Read more.

Digital-Asset Investment Funds See Net Inflows of $63M: Digital-asset investment funds attracted net capital inflows in the week to Friday after four consecutive weeks of redemptions, as bitcoin, the crypto-market leader, consolidated its quick recovery from sub-$30,000 levels. Data tracked by the U.S.-based CoinShares show crypto funds registered a net inflow of $63 million last week, of which nearly 62%, or $39 million, went into bitcoin-dedicated funds. Read more.

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Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Will Clemente breaks down this week’s bitcoin situation using on-chain metrics to separate the signal from the noise. You can follow Will on Twitter or sign up for his email by clicking here. Here is Will’s analysis:

Hope all is well and you had a great week. It’s been yet another week of ranging for Bitcoin, with price trading in this current $30K-$40K range for over 6 weeks now. Let’s dive into this week’s on-chain overview for 6/25 to 7/1, hope you enjoy. 

Here are some key takeaways from this week:

* Bitcoin continues to build up a big base of capital between $32K-$40K, over 15% of BTC’s money supply has moved in this current range

* Mean daily Hash Rate continues to trend down, reaching the lowest it has been since late 2019 at one point; >23 minute Block intervals at one point, Issuance slowed, Difficulty adjustment coming in the next few days

* Miners slightly selling over the last month (assumed to be part of the China miner migration) 

* Younger coins continue to sell, including the largest day of net losses in Bitcoin’s history (in USD terms)

* Still no major uptick in new whales, Retail adding aggressively (broken down in detail)

* Re-accumulation continues (looked at in detail)

* Exchange flows sideways bullish

* Stablecoins continue to slowly flow back in

* New users “W” shaped recovery continues, back over 36,000 new users coming on-chain a day

Given the amount of time we have spent in this range, there is now a clear third zone of on-chain volume for this bull market. 15.91% of Bitcoin’s money supply has now moved in this current range.

One of the most talked about phenomenon regarding Bitcoin lately has been the dramatic drop in hash rate. Hash rate continues to trend down, with a very small bounce on Wednesday the 28th. On the 27th it dropped to the lowest levels it has been since late 2019. Despite some minor impacts, the network continues to function as it always has and always will. Let us look at some of these minor impacts that the drop in hash rate has had on the Bitcoin protocol.

One last note on miners. It has been widely spread that miners have played a big role in the price decline over the last few weeks, as supposedly miners have needed to sell BTC in order to cover the costs of migrating out of China. However, according to Glassnode, miners have reduced their holdings by 5,269 BTC since May. Most of this selling came at the beginning of June and is nothing that the Bitcoin market cannot easily absorb.

In raw dollar terms, this was the largest day of realized losses in Bitcoin’s history, outpacing the previous record set in May. In total, $4,456,786,884 of losses were realized.

Here’s the breakdown of buy/sell behavior of different cohorts since early June 5th to now (7/1 at time of writing):

* Retail or Shrimp (0.001-1 BTC): + 4,396 BTC 

* Crab (1-10 BTC): +14,942

* Octopus/Fish (10-100) BTC: +15,705

* Dolphins/Sharks 100-1,000 BTC: -17,374 

* Whales/Humpbacks 1,000-10,000 BTC: -27,037

So in a general sense it appears smaller entities have been buying heavily while larger entities have been trimming their holdings. Looking at the age of coins being sold according to metrics such as coin days destroyed, dormancy, ASOL, liveliness it appears, in combination with the cohort data, young whales have done most selling over the last month. Let’s hone in on whales; which of course are the cohort that moves the market the most. The number of new whales has continued to trend down, something we’ve been tracking for weeks now.

With this being said, we can conclude that the vast majority of this big w shaped recovery in new users coming on-chain is retail; given that the number of whales is trending down, retail is buying, and whales are selling. Would be fascinating to know how much of this move up is coming from Latin American countries. The network is back above 34,000 new users coming on a day. Remember, this is not addresses, but rather uses heuristics to identify entities on the blockchain. 

In regard to re-accumulation, illiquid supply change is still in the green and the liquid supply ratio; created with help charting from Willy Woo; continues to trend up. These indicators both suggest the same concept, supply continues to flow into illiquid entities. I think a good way to analogize what is going on to the following: a lot of liquid (no pun intended) has spilled out on the counter, the market is now slowly adding paper towels. The speed of the paper towels being added is represented by the slope in the liquid supply ratio, but as long as there is no more spill (capitulation where a lot of new supply becomes liquid), eventually the liquid (loose coins) will be absorbed by strong hands. With this being said, as we have talked about since we initially began ranging over a month ago, we will range until this re-accumulation is complete. 

Exchange flows are also now looking sideways bullish; a change in trend from what we saw leading up to May’s big price drawdown. This also shows accumulation.

Looking forward to touching base next week guys, hope you have a great weekend as always. Key takeaways are at the top of the newsletter as usual. Enjoy the podcast this week with Checkmate, someone who has taught me a lot of what I know and provides a tremendous amount of value to the on-chain community. Willy Woo will be on the pod with me and Pomp next week, followed by David Puell the week after that. Want to provide all listeners some alternative perspectives and the chance to hear from the brightest minds I look up to in this still very small space. Cheers everyone!

That is it for today’s analysis. Hopefully you found this helpful. I highly suggest you subscribe to Will Clemente’s email where he breaks down on-chain metrics multiple times per week: Click here

SPONSORED: Amber Group is a leading global crypto finance service provider operating around the world and around the clock with a presence in Hong Kong, Taipei, Seoul, and Vancouver. Founded in 2017, Amber Group is committed to combining best-in-class technology with sophisticated quantitative research to offer clients a streamlined crypto finance experience.

The platform now services over 500 institutions and 100,000+ individual investors across the Amber Pro web platform, the Amber App, as well as their 24/7 trading desk. To date, Amber Group has cumulatively traded more than $330 billion across 100+ electronic exchanges, exceeding $1 billion in assets under management. In 2019, Amber Group raised $28 million in Series A funding led by global crypto heavyweights Paradigm and Pantera Capital, with participation from Polychain Capital, Dragonfly Capital, Blockchain.com. 

Click here to sign up now.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Will Clemente breaks down this week’s bitcoin situation using on-chain metrics to separate the signal from the noise. You can follow Will on Twitter or sign up for his email by clicking here. Here is Will’s analysis:

Hope all is well, and you had a great week. This was an interesting week in terms of price, with BTC dipping below 30K, retracing all the gains from 2021. Since then, we’ve rallied back above the short term hourly downtrend and retested that trend as support at the time of writing ($35,118). Despite price fluctuations, not much has changed in terms of on-chain structure from last week. Mostly seeing continuation of trends in investor behavior we have already been following. Let’s dive in.

From a high level, here are some of the key takeaways this week:

* Long-Term Holder buying offset selling from Short-Term by 21,136 BTC this week

* Miners selling, Hash rate down

* “W” shaped recovery in new users coming on the network

* Still a lack of new whales coming on the network 

* Stablecoins rotating back in from the sidelines

* Supply continues to rotate into entities with little history of selling (illiquid entities)

* OTC Desk Flows are bullish, while exchange flows slightly bearish (up ~10K BTC this week) 

Accumulation from strong-hands and experienced market participants has continued. The illiquid supply change metric, also dubbed the “Rick Astley Indicator” by Willy Woo, is still continuing its trend of strong accumulation from entities that statistically have a very low likelihood of selling. For weeks now, we’ve been watching the reversal of the drawdown this metric has had during the original price drawdown that dropped us into this current 30K-40K range. When we looked at this metric last week, we only had 3 days in the green and they weren’t large bars, however this week we’ve gotten strong confirmation of the positive trend with 7 straight fairly large green days; with the 30 day change of liquid to illiquid supply reaching as high as 95,800 BTC on Monday.

As a variant of this, I introduced an idea to Willy Woo of comparing liquid to liquid supply in a simple ratio. This ratio is very similar to the metric above, essentially describing the same thing, but is just a trendline of this simple ratio.  Willy charted out the ratio for me and noticed something very interesting. What he noticed was a clear bullish divergence (when an oscillator makes a higher low, but price makes lower low) in the ratio. The last time we had a divergence this clear in the ratio was during the recovery from the correction in late January earlier this year. This supports the idea of re-accumulation we’ve been talking about heavily. Simplified, the trend of strong hands buying is increasing as price is decreasing. 

By the way, yes, selling is still coming from young entities. I think this point has been made in this newsletter for well over a month now, but all indication of the age of coins being sold on-chain are still trending down. This week, long-term holders buying is now offsetting selling from short-term holders in a big way, with LTHs adding 21,136 more BTC to their holdings than STHs have reduced their holdings by.

In the last week LTHs have added 120,739 BTC while STHs have reduced their holdings by 97,333 BTC. To be noted: some of this is STH entities aging into the LTH cohort that bought Bitcoin around late January (155 day cutoff). This divergence between the two in the chart below can be interpreted differently depending on your view of market structure based on other things; it resembles what occurs both at the tail end of a bull market, but also what occurred in the middle of both previous bull markets. What you see is this large divergence between the 2013 “double pumps”, as well as a more moderate, but still noticeable divergence in late 2016. This essentially means that experienced were setting the floor for bull run continuation. I highly suspect this is what is going on now, when combined with other broader metrics that are not signaling Bitcoin being in a bear market. 

Although the number of new whales (entities holding over 1,000 BTC) is still flat, which is something I think is crucial to see for big a continuation of the bull market, the number of new entities coming on the network overall is showing a very nice W shaped recovery. I would be very curious to see how many of these new users are coming from Latin America. Nonetheless, this uptick is not resemblance of what occurred at the tail end of any previous bull market. 

Next up we have SOPR, something I believe we’ve touched on every week; a metric that looks at the profit taking of coins trading on any given day. Similar to the liquid supply ratio, this is showing a clear bullish divergence. To me this indicates that any strong capitulation that was going to be done has already taken place and that the panic behavior and willingness to sell at a loss is dissipating. This is the clearest bull div that I’ve seen in this indicator since late January. Coincidentally (or not) this was the same case with the bull div in the liquid supply ratio, hmm…

Next up we have a new metric Glassnode released, the stablecoin supply ratio oscillator. This shows that capital in the form of stablecoins is slowly rotating back into the market from the sidelines. This chart (labelled in a tweet from Glassnode) shows that the current recovery in terms of stable coin flows resembles that of previous major corrections such as late 2018, March 2020, and the relatively big drawdown during September of last year.

The crackdown on miners in China is real and visible on chain. Firstly, obviously hash rate has dropped tremendously. But from a selling pressure perspective, miners are slightly reducing their holdings. This is shown by miner net position change. However, this selling pressure does not appear to be anything very significant. All in all, miners have reduced their holdings by 5,125 BTC since the end of May according to Glassnode’s “miner balance” metric.

Lastly, I wanted to shill another new metric that I created, titled: OTC Desk Outflow Stoch RSI Signal. (I need to come up with a shorter name) This looks at the strength of which the trend of OTC outflows are occurring. This of course is tracking behavior of big money; high net worth individuals and institutional players that navigate through OTC desks. This capital is what of course drives the market; therefore, following the movement of this capital offers insightful signal to market structure.

When the RSI breaks out of the purple highlighted range, it offers buy/sell signals. When below, sell signals (lack of OTC outflows) and conversely when above, buy signals (large amount of OTC outflows). Over the last year, these signals have been correct at a rate over 90%. We just flashed a buy signal, meaning OTC outflows have ramped up. (Big money buying the dip) Note before we had mentioned a lack of new whales, so this shows the “big money” behind these outflows is not new entities, but rather market participants that have already been in this market. 

Hope you guys enjoyed this week’s letter, looking forward to touching base next week. Have a good weekend, cheers!

That is it for today’s analysis. Hopefully you found this helpful. I highly suggest you subscribe to Will Clemente’s email where he breaks down on-chain metrics multiple times per week: Click here

SPONSORED: Amber Group is a leading global crypto finance service provider operating around the world and around the clock with a presence in Hong Kong, Taipei, Seoul, and Vancouver. Founded in 2017, Amber Group is committed to combining best-in-class technology with sophisticated quantitative research to offer clients a streamlined crypto finance experience.

The platform now services over 500 institutions and 100,000+ individual investors across the Amber Pro web platform, the Amber App, as well as their 24/7 trading desk. To date, Amber Group has cumulatively traded more than $330 billion across 100+ electronic exchanges, exceeding $1 billion in assets under management. In 2019, Amber Group raised $28 million in Series A funding led by global crypto heavyweights Paradigm and Pantera Capital, with participation from Polychain Capital, Dragonfly Capital, Blockchain.com. 

Click here to sign up now.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 185,000 other investors today.

To investors,

Majority of geopolitical mistakes in history have been related to violent combat. They either occur in the high tension period leading up to the conflict or they occur during the actual conflict with another nation state. This is a story as old as time.

Every once in awhile a mistake is made on the global stage that doesn’t involve violent combat though. These situations almost always rely on a nation state impairing themselves in some way, instead of there being some sort of harm done to another nation. You can think of this as a self-inflicted wound.

One historical example of these self-inflicted wounds is internet access in North Korea. According to Wikipedia, “Internet access is available in North Korea, but is only permitted with special authorization. It is primarily used for government purposes, and also by foreigners. The country has some broadband infrastructure, including fiber optic links between major institutions. Online services for most individuals and institutions are provided through a free domestic-only network known as Kwangmyong, with access to the global Internet limited to a much smaller group.”

The country’s leadership essentially made the decision that the internet would only be used by the government and ruling family. The every day citizens and business owners are not allowed to access the open internet without special permission. However, they are allowed to use an intranet that mimics the value proposition of the internet, yet has none of the freedoms or true value that an open system provides.

It doesn’t take a rocket scientist to see that the decision from North Korea has been a big mistake. They chose to pursue authoritarian control of the country and population over economic prosperity. While this likely has been a key decision to consolidating power, it has spelled disaster for the citizens of the country.

China is in the process of repeating this mistake.

The superpower of the East has had an interesting relationship with bitcoin over time. The government has essentially banned the digital currency and any related activities for years. That ban only applies to the average citizen or entrepreneur though. If you are a government official, or if you’re able to secure special permission, the bitcoin network was available for your legal use. This is almost an exact replica of the North Korea internet strategy — keep the empowering technology for the elites or their friends.

But China has recently doubled down on their anti-bitcoin stance. They are enforcing the ban in a much more aggressive manner in the last few weeks. This has led to upwards of 90% of all bitcoin miners in the country being shut down. These miners have two choices — patiently wait to see if the regulators will allow them to resume operations later or pick up and leave the region to begin re-building their business elsewhere.

As you would expect, many of the Chinese miners have decided to leave China. This decision means that they operationally have to shut down their mining equipment, pack it up, ship it to a new location, set it up again, and then commence mining activities. We can see this happening in real time as the total mining hash rate appears to have fallen off a cliff recently.

The beauty of bitcoin is that a drop in hash rate like this will be quickly corrected by the mining difficulty adjustment that occurs approximately every two weeks. For those who are unaware of how this works, the simplest explanation is that mining bitcoin will become easier for those still on the network (this makes the remaining miners more profitable until the miners who left are able to return to their mining activities).

There are a few ramifications that I think are worth calling out here.

First, this move by China is a significant blow to the bitcoin critics. The anti-bitcoin argument historically revolved around China’s market share of mining or the ability for the country to control/manipulate the network. As we are watching miners move out of the country, this argument is losing most of its teeth. China doesn’t control bitcoin and never has. Also, the free market of economic incentives will always lead bitcoin miners to seek the lowest cost power, specifically in regions where there is the greatest political and regulatory stability.

Next, the United States is a massive winner in this situation. Take for example the exclusive gain in hash rate for the largest American bitcoin mining pool, Foundry USA.

While China is losing market share in bitcoin mining, the United States is gaining market share. It won’t necessarily be one-for-one because some Chinese miners will not come to the US, but it is hard to argue any country is going to benefit more from this than the United States.

This is why I started the letter with references to geopolitical mistakes. China has chosen a path that will become a more obvious self-inflicted wound, while simultaneously handing a large, non-violent victory to a Western superpower. It is hard to see in the moment. It may not be obvious for years. But this is what we are watching occur in real-time.

Historians will write that China had a majority of hash rate within their geographic borders, yet they made decisions that pushed that hash rate into more democratic and capitalistic societies. Just as North Korea chose to embrace the internet only for the elites, China is making a similar mistake here. As if that wasn’t bad enough, China’s plan for a nation state digital currency is similar to North Korea’s internal “internet.”

As we have discussed over and over again, open systems beat closed systems. The Chinese approach of banning an open monetary network in pursuit of a tightly controlled monetary system is unlikely to be seen as an advantageous strategic move for their citizens. But just like North Korea, this decision will be helpful in continuing to consolidate power and ensure the longevity of the dictatorship.

The United States is choosing to embrace the open monetary system though. We must continue to encourage our political and regulatory leadership teams to become the global leader in this open monetary network. Whether we embrace it or not, the bitcoin network will be adopted by countries around the world. Just as it didn’t matter if North Korea or others leveraged the internet, because other countries decided to plug into the open information system, it won’t matter what one individual country does with bitcoin. There will still be more countries waiting to plug into the open monetary system.

This is the beauty of bitcoin. It doesn’t care about geopolitics. It doesn’t care about monetary policy. It doesn’t care about sentiment. The bitcoin network simply continues to produce block after block after block of transactions. The network just doing what it was designed to do — providing a decentralized payment system that can be used by anyone in the world with an internet connection.

China just made one of the greatest geopolitical mistakes in recent memory. The United States is the greatest beneficiary of the situation. Americans should be celebrating, and capitalizing on, this gift that we were just given. In a game of chess, you don’t always need to win. Sometimes, you just need to wait for your opponent to make a mistake.

Hope each of you has a great start to your week. Talk to you tomorrow.

-Pomp

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THE RUNDOWN:

Venture Capital Makes a Record $17 Billion Bet on Crypto World: For a sense of just how big everything crypto has become, you can, of course, just take a look at coin and token prices. And then you can check again five minutes later to see if the space’s notorious volatility has markedly changed the first observation. But for a more stable measure of the industry’s growth, consider this: venture capital funds have already poured $17 billion this year into companies that operate in the space, according to data provider PitchBook. That’s by far the most in any single year and nearly equal to the total amount raised in all previous years combined. Read more.

BlackRock Wants a Blockchain Strategy for Aladdin, Its Investments Engine: BlackRock, the world’s largest asset manager with almost $9 trillion in assets under management, is seeking to develop a blockchain strategy for its flagship portfolio management system, Aladdin, according to a job posting. The director-level hire will “evaluate different blockchain protocols/platforms to explore solution alternatives.” Public and private chains are on the table, a source familiar with the posting said. Read more.

US Government to Auction Off Seized Litecoin Alongside Bitcoin: The U.S. General Services Administration, an agency that sells surplus assets held by the federal government from office furniture to houses and tractors, said it will auction off bitcoin and litecoin with a combined market value of $377,000. The bidding in the latest auction starts Friday at 5 p.m. ET and runs through Monday at 5 p.m., according to a press release. Eleven lots of cryptocurrency are on the block, including 8.93 bitcoins and 150.2 litecoins. According to a document on the GSA’s auction website, the litecoins were seized from a taxpayer for nonpayment of internal revenue taxes. Read more.

Galaxy Digital Will Provide Liquidity for Goldman Sachs’ Bitcoin Futures Trades: Billionaire crypto financier Mike Novogratz’s Galaxy Digital has agreed to provide liquidity to Goldman Sachs for the bank’s bitcoin futures trades. Under growing demand from institutional clients, in March Goldman Sachs reopened its crypto trading desk after a three-year hiatus. The desk is part of the bank’s U.S. Global Markets division. Read more.

Security Audit Firm Raises $5.3M From Funds Investing in Polkadot, Cardano Blockchains: Blockchain security auditor Runtime Verification has raised $5.3 million from a handful of prominent backers. Led by IOSG Ventures, the funding round included investment from Polkadot-focused Hypersphere Ventures, Cardano's cFund, the Tezos Foundation, Elrond Research and Algorand accelerator Borderless Capital. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Dave Rubin is a political commentator, YouTube personality, and talk show host. He is the creator and host of The Rubin Report, a political talk show on YouTube and the network BlazeTV. Dave is also the founder of Locals, a new subscription service built for creators.

In this conversation, Dave and I discuss:

* critical thinking skills

* bravery deficit

* eroding trust in institutions

* censorship & decentralization

* going direct

* first principles

* personal responsibility

* democracy

* capitalism

I really enjoyed this conversation with Dave. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Exodus is an absolute game changer in the crypto wallet space. With over 100 assets supported, one-click built-in exchange, Trezor hardware wallet integration and 24/7 customer support, this is a no brainer for both newcomers and crypto heavyweights. Download Exodus on desktop, iOS, and Android using my code http://get.exodus.com/pomp

* Cosmos is building the Internet of Blockchains, marking a new era of interoperability, scalability, and usability. The free flow of assets and data between blockchains with bridges to Ethereum and Bitcoin will unleash the potential of DeFi, NFTs, and much more. Dive into Cosmos at cosmos.network/pomp

* OKEx is a leading crypto exchange known for providing the most options for crypto traders and investors. Whether you want to trade spot, futures, options or swaps, OKEx gives you institutional-grade tools and a best-in-class trading engine. The platform offers credit and debit card funding options and supports 40 different fiat currencies, including EUR, CAD, GBP, TRY, INR and RUB, to name just a few. You can invest, trade, and earn yield, all within one place at okex.com. OKEx is not available to customers in the United States. 

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains makes crypto easier by replacing your address with [AnyName].crypto. They allow you to send and receive over 70 cryptocurrencies, including BTC, ETH, and LINK with a single blockchain domain. Go to unstoppabledomains.com and get [YourName].crypto to make your crypto life easier.

* BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Public Rec is on a mission to make comfort look good. Their fan-favorite Flex Short is the ultimate crossover short you’ll need all summer long. From the beach to the gym, this quick-drying short has you covered. Comfort starts with a better fit. Free shipping. Free returns. Visit www.publicrec.com/pomp and use POMP at checkout for 10% off!

* Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com.

* Gemini is a leading regulated cryptocurrency exchange, wallet, and custodian that makes it simple and secure to buy bitcoin, ether, and over 30 other cryptocurrencies. Offering industry-leading security, insurance and uptime, Gemini is the go-to trusted platform for beginner and sophisticated investors alike. Open a free account in under 3 minutes at gemini.com/pomp and get $20 of bitcoin after you trade $100 or more within 30 days.

* Revolut is a finance app in the US and UK, that say they're the simplest way to access crypto. Sign up today at Revolut.com/pomp and make 3 card transactions to get $15, which you can exchange for any tokens Revolut supports. As usual, when you move your money from fiat to crypto your capital is at risk. See T&C's for details. Revolut is a financial technology company. Banking services provided by Metropolitan Commercial Bank, Member FDIC. Cryptocurrency services provided directly by Paxos Trust Company, LLC.

* Did you know nearly 338 million dollars worth of NFTs were sent last year? And in 2021 that number is growing faster than ever. Looking to make your first NFT? Check out NEAR’s fast, scalable, low-cost, open-source platform. Learn why NEAR is the infrastructure for innovation at near.org

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Will Clemente breaks down this week’s bitcoin situation using on-chain metrics to separate the signal from the noise. You can follow Will on Twitter or sign up for his email by clicking here. Here is Will’s analysis:

Hope all is well and you had a great week. Last week we discussed how Bitcoin was moving into the later stages of the re-accumulation phase that we have been tracking throughout the last month. Since then, we retested range highs just above $41K before dipping back down to the middle trend line of the current range, trading between $37K-$38K at the time of writing. Firstly, let’s zoom out to some metrics that can help us establish positional awareness of where we stand in a broader sense Then, we’ll zoom into some of the trends that are key to watch over the next week(s) in my humble opinion.

These are the key takeaways from this week’s letter:

* Bitcoin is very oversold in accordance with on-chain

* BTC now sits on historically important inflection points for several major on-chain indicators

* Long-term holders continue to scoop up discounted BTC

* Selling from STHs continues to lose steam

* Accumulation continues to grow stronger

* Still a lack of what resembles new institutional/high net-worth buyers. (whales)

NUPL is one of my favorite metrics to look at for determining broader market structure. This looks at the difference between realized cap (the capitalization of Bitcoin based on the price of which each coin was last moved) and market cap, and then dividing this difference by market cap. This can give a representation of market sentiment, as during the euphoric later stages of the bull market investors realize profits at a lower rate, and during bearish stages investors begin to realize profits at a higher rate. Glassnode separates these “stages” into different zones: Greed, Optimism/Denial, Hope/Fear, and Capitulation. 

Glassnode is then able to apply this metric to long-term holders and short-term holders specifically. Looking at LTH-NUPL on a 14-day moving average, we are right on what has been the threshold for bull/bear markets historically. Between the 2013 double pumps we bounced off the lower band of the euphoria zone, whereas in the end of 2017 we dropped through the zone like a rock after a very small relief bounce. We will have to keep an eye on this over the next few weeks to get a better gauge of bull/bear in terms of this metric.

The next metric that suggests this same concept of being at an inflection point is long-term holder SOPR. We’ve discussed SOPR many times but have never looked at this metric in terms of long-term holders. The current level this metric is approaching served as support in 2013 and in late 2017, but also as resistance after the 2013 bull run, after the 2017 bull run, and in 2019.  

And third we have MVRV ratio, which is a simple ratio of market cap to realized cap. This also is at a historically important level that has either served as support or resistance for Bitcoin. 

Notice a commonality between the three: we are at a decision/inflection point for continuation over the coming weeks. One other thing to note: BTC did not reach any historically overheated or greed zones on these broader metrics. With this being said, Bitcoin needs to make a move up to gain momentum over these next weeks to clear this zone of uncertainty. However, zooming into some intermediate-term trends, in my opinion fundamental investor activity looks slightly bullish; hence why I have stated we have been in what looks like a re-accumulation phase. This week on-chain has confirmed my thoughts from last week that we are in the latter half of the phase. Let’s take a look at some of the metrics that make me think this.

One important thing to preface, I know I sound like a broken record here: selling continues to come from short term holders. Dormancy is still trending down. (younger coins being sold) This is also shown by looking at the raw number of supply held by short term holders, although some of this is STHs aging into the LTH cohort.

Next up we exchange net position change. This is showing that exchange flows are no longer bearish and have moved into net accumulation. 

Next, we have illiquid supply change, something we had looked at last week as we took note of the decreasing amount of liquid supply. This looks at the 30-day change of supply to determine if supply is becoming liquid or illiquid in aggregate. Just as we had been expecting last week, the metric has now flipped green for the first time since before the sell-off.

Next up we have Long-Term Holder net position change. This continues to climb up. Long Term Holders have added 127,760 BTC in the last 7 days. This is offsetting the selling from short-term holders, which have reduced their positions by 122,423 BTC. This shows a net difference between the two of 5,337 BTC in favor of LTHs. 

*Note: Some of this is STHs aging past the 155-day threshold to move into the LTH cohort.

Should also be noted: zooming out this metric looked similar during the 2013 bull run, but also following the 2013 and 2017 bull run peaks as well. Key takeaway: when Bitcoin is very undervalued experienced market participants begin to add heavily to their positions.

But not everything is bullish, one thing to take note of is the number of new whales coming onto the network. This continues to trend down. Would like to see an uptick in this, but not the end of the world as whales started to sell off in the middle of the 2017 bull run. 

Finally, I wanted to show this chart recently put out by Willy Woo, showing a variant of his NVT Signal. This shows BTC is extremely oversold.

In conclusion, Bitcoin is very oversold in accordance with on-chain, long-term holders continue to scoop up discounted BTC, accumulation continues to grow stronger, still a lack of new institutional/high net-worth buyers. (whales) The next few weeks are crucial for Bitcoin in terms of directionality for broader metrics, but the re-accumulation process still looks bullish for the intermediate term. This was partially reflected by price this week in the recovery to the upper $30Ks.

Based off this analysis would expect possibly more sideways in the mid to upper $30Ks over the coming week, but the set up for the intermediate to long term (next few weeks) has looked increasingly bullish. In the very short term, the $41K-$42K is a crucial level to break, which serves as technical resistance and where the 200DMA stands. Looking forward to speaking with you guys tomorrow on Pomp’s pod. Have a great weekend. 

That is it for today’s analysis. Hopefully you found this helpful. I highly suggest you subscribe to Will Clemente’s email where he breaks down on-chain metrics multiple times per week: Click here

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 185,000 other investors today.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 185,000 other investors today.

To investors,

The global pandemic caused incredible uncertainty and chaos in financial markets last March. Every day felt like a month. Each asset class seemed to bleed more and more every time the market opened. At one point, circuit breakers were tripping almost daily, the Federal Reserve was announcing multiple emergency interest rate cuts, and most “capitalists” on Wall Street proved to be socialists as they begged the government for bailouts.

Simply, it was an utter disaster and no one knew how much worse it would get. This is when the Federal Reserve and the US government decided to intervene. As you would expect from the Keynesian economic viewpoint, the market intervention was seen as a badge of honor. In fact, a noble act. The cavalry was here to save the day. And save investors’ wallets.

There were the two emergency interest rate cuts to a 0% environment. There was incredible support and attention measured in hundreds of billions of dollars directed at the repo markets. The politicians couldn’t stop passing monetary stimulus bills that led to trillions of dollars being injected into the economy as if it was a drug addict reliant on another hit before a painful withdrawal.

The crazy part was that the intervention from central banks and politicians was met with applause and admiration by the leaders of the legacy financial system. They claimed that the little people….the every day citizens….needed help immediately. If not, people would die, people would be put out in the street, and the entire system could potentially collapse. Seriously. You saw them tweeting this nonsense. You saw them talking about it on television. And you saw them applauding every intervention, along with asking the government for their own bailouts and stimulus money.

There were airlines that received billions of dollars in free loans that never had to be paid back. There were Wall Street asset management firms who took PPP loans. The encouragement for market intervention from the wealthiest in society was rather odd, right?

Not at all. They knew exactly what was going to happen. These individuals are intelligent. They have been in markets for a long time. The secret escaped into the public during the global financial crisis. If you can convince the government and central bank to intervene in the market, they will not only remove all risk from that market, but they will also drastically enrich anyone holding assets.

Guess what? That is exactly what happened.

This past week we saw the S&P 500 hit an all-time high on the very same day that the Federal Reserve’s balance sheet hit an all-time high of over $8 trillion. THE EXACT SAME DAY! Coincidence? I think not.

The US government, Federal Reserve, and US Treasury department have been manipulating the market for more than a decade now, but they really turned up the intensity in the last 12-15 months. With COVID-19 as an excuse, the market interventionists did what they did best — they brought the cost of capital down to 0% and they pumped trillions of dollars into the economy.

We are now living in an economy that has the worst wealth inequality gap in history. Small business owners can’t find enough labor to run their businesses because most people are making more money from government support than they would in the labor market. There are more open jobs in the US economy than ever before, including pre-pandemic. People literally refuse to go back to work.

On top of this, inflation hit 5% in the month of May. For most of last year, economists and the mainstream media told us that inflation wouldn’t be a problem. They said we lived in a deflationary period and the market could soak up all the extra monetary stimulus. But now that inflation is here, we are told that the inflation is only transitory. It will go away in the short to medium term. Nothing to worry about!

Wrong. There is not a single business that is raising the prices of their goods or services that has intentions to lower the prices in the future. There is no such thing as transitory inflation. Prices move up over time as a currency is devalued. You can’t increase the value of a currency that can, and will be, printed infinitely at will. You may be able to slow the pace of inflation, but you can’t reverse it. The prices of goods and services don’t come back down because of any monetary policy decisions.

But the lack of labor force participation and accelerating cost of goods is not the only story here. The Federal Reserve and various political administrations have made a complete mockery of markets. They have manipulated them so badly at this point that a generation of kids is growing up with the belief that all risk has been removed from the market. The leaders of our monetary system have outlawed bear markets. They have banned market corrections.

The first sight of any regression to the mean is met with an incredible amount of market intervention and manipulation. The bigger the force of correction, the more intense the market manipulation effort. The Federal Reserve and government officials have become so arrogant that they were literally on 60 Minutes bragging about their access to unlimited money. You can’t make this stuff up.

So where do we go from here?

The short answer is that there is no turning back. The market has been manipulated to the point of no return. It would be nearly impossible for the government or central bank to allow free market forces to rectify the mess that has been made. The pain would be too great. Every politician would be replaced. There would be social unrest. It would get very ugly, very fast.

The only option that the market manipulators have left is to continue manipulating. The charade has become a necessity. Every time the market wants to correct, the interventionists must be at the ready with more interest rate cuts and more monetary stimulus bombs. Why stop at $5 trillion? Why can’t we go to $10 trillion? $20 trillion?

The crazy part is that we are going to see it all. Regardless of whether people recognize we are sprinting off a cliff or not, the manipulation that we have seen over the last 18 months will pale in comparison to what we are going to see in the future. The Fed’s balance sheet will keep growing over the long-term. Asset prices will continue to be pumped to the moon. You literally can be an idiot and get rich in dollar terms.

Just get out of cash. Buy any asset that is denominated in dollars, sit back, and relax. The market manipulators will continue to devalue the dollar and push your asset values to the moon. They will make you richer than your wildest dreams.

Sounds amazing, right? Unfortunately, the bottom 45% of Americans hold no investable assets. They live paycheck-to-paycheck. 100% of their wealth is stored in dollars. So at the same time that the market manipulators are making asset holders wealthy, they are also punishing the individuals who are most vulnerable in our society. The rich get richer and the poor get poorer.

Very few wealthy people want to talk about this dirty secret. They don’t want to advocate for the closing of the wealth inequality gap by shutting off the money printer. They will talk about the virtue signaling efforts of paying slightly higher wages, etc. But they know those things won’t actually have the systemic impact that is needed to actually close the gap and empower the bottom 45% of citizens.

This is why I am such a big proponent of bitcoin. It is the only currency that can’t be devalued. It is outside the control of any government or central bank. The monetary policy not only has certainty, but it has finality as well. There will be no devaluation on a macro basis. You don’t need to be a professional investor or a wealthy, sophisticated person to keep the wealth you have earned. You can simply save in the digital currency and continue to have your purchasing power increase over time.

This is the beauty of a programmatic, transparent, fixed monetary policy. Bitcoin is literally the wealth protection that billions of people around the world need. While the market manipulators are pretending to save the world, they are actually running trillion dollar marketing campaigns for the true wealth inequality solution.

I wish the market interventionists would knock it off. I wish they would let the free markets do what they do best. I wish they would stop inflating asset prices artificially and punishing the bottom 45% of Americans who hold cash. But they won’t. So this is why we bitcoin. This is why I spend all day trying to educate billions of people around the world on how they can protect themselves from this madness.

Slowly, but surely, the world is waking up. People are beginning to see the problems. They don’t understand why markets are up when the economy is down. They know it doesn’t make sense that the wealthy got much, much wealthier when tens of millions of Americans were out of work and the US economy was essentially shut down. They realize something is wrong and they have been looking for a solution.

That is why bitcoin is gaining adoption so quickly. People around the world now understand its importance. Let the market manipulators continue to play their game. They are only accelerating the inevitable end state. I wish them the best of luck. In the meantime, get yourself educated and share your knowledge with those around you.

Don’t get caught flat-footed. Don’t sit around holding an asset that is being devalued at a historic pace. Make sure you have the protection you need to ensure that your purchasing power isn’t eroded away. You worked for your money. Don’t let it wither away at the hands of the rich and powerful.

Hope you have a great start to your week. I’ll talk to everyone tomorrow.

BONUS: We are running our 4th cohort for the Bitcoin and Crypto Training Course starting tomorrow, Tuesday June 15th. Graduates have already been hired at Coinbase, BlockFi, Gemini, Kraken, and many other great companies. Want to increase chances of being hired? Apply here: https://pompscryptocourse.com

-Pomp

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THE RUNDOWN:

Federal Reserve Balance Sheet Tops $8T for First Time: The Federal Reserve’s balance sheet has exceeded $8 trillion for the first time, following extensive measures the U.S. central bank took last year to contain the economic damage from the coronavirus. The Fed’s balance sheet has nearly doubled since March 2020, when the pandemic erupted in the U.S, based on weekly statistics released Thursday by the U.S. central bank. Read more.

Wall Street Asks If Bitcoin Can Ever Replace Fiat Currencies: El Salvador’s bold move to accept Bitcoin as legal tender has Wall Street once again wondering whether a cryptocurrency could really ever replace the old-school dollar. It’s a question that appeared, at least to some, to already be nearly answered after a handful of trailblazing companies -- including Tesla Inc., MicroStrategy Inc. and Square Inc. -- incorporated Bitcoin into their balance sheets without igniting a broader corporate revolution. Now, the focus is turning to governments.Read more.

Bitcoin Jumps After Musk Says Tesla Will Use When Mining Cleaner: Bitcoin jumped above $39,000 after Elon Musk said Tesla Inc. would resume transactions with the cryptocurrency when mining is done with more clean energy. The electric-car maker will allow Bitcoin transactions again “when there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend,” Musk, Tesla’s chief executive officer, said in a tweet. Read more.

South Koreans Can Pay With Bitcoin in Stacks, Paycoin Integration: Stacks is partnering with South Korean e-commerce protocol Paycoin to support transactions with its currency STX. This integration means that merchants who accommodate Paycoin will soon accept STX and Bitcoin as methods of payment, the Stacks Foundation, which builds apps on top of the Bitcoin blockchain, announced. Businesses that accept Paycoin, such as Domino’s Pizza, KFC and 7-Eleven, will allow for customers to transact in these cryptocurrencies. There are 1 million users of the Paycoin application and 70,000 businesses that accept this cryptocurrency. Read more.

Next-Gen Game Developer Mythical Raises $75M for Playable NFTs: Mythical Games is opening its non-fungible token platform to external game developers following a $75 million funding round. The primary game in development, Blankos Block Party, includes animated NFT game characters as well as customizable aesthetics players earn through gameplay. Players in the beta version already hold more than 100,000 NFTs, and as the audience continues to grow, Mythical expects these rare assets will accrue value in the secondary markets. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Shaan Puri is the Senior Director of Product, Mobile Gaming & Emerging Markets at Twitch. He previously built Bebo, before ultimately selling the business to Twitch. Shaan is also the host of My First Million, one of the fastest growing business podcasts.

In this conversation, Shaan and I discuss:

* Solo-capitalists

* Copypreneurs

* Pros/cons of social reach

* Podcasts

* Newsletters

* Rolling funds

* Howard Stern

* Kanye West

* Joe Rogan

* Kardashians

* Mr Beast

I really enjoyed this conversation with Shaan. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Exodus is an absolute game changer in the crypto wallet space. With over 100 assets supported, one-click built-in exchange, Trezor hardware wallet integration and 24/7 customer support, this is a no brainer for both newcomers and crypto heavyweights. Download Exodus on desktop, iOS, and Android using my code http://get.exodus.com/pomp

* Cosmos is building the Internet of Blockchains, marking a new era of interoperability, scalability, and usability. The free flow of assets and data between blockchains with bridges to Ethereum and Bitcoin will unleash the potential of DeFi, NFTs, and much more. Dive into Cosmos at cosmos.network/pomp

* OKEx is a leading crypto exchange known for providing the most options for crypto traders and investors. Whether you want to trade spot, futures, options or swaps, OKEx gives you institutional-grade tools and a best-in-class trading engine. The platform offers credit and debit card funding options and supports 40 different fiat currencies, including EUR, CAD, GBP, TRY, INR and RUB, to name just a few. You can invest, trade, and earn yield, all within one place at okex.com. OKEx is not available to customers in the United States. 

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains makes crypto easier by replacing your address with [AnyName].crypto. They allow you to send and receive over 70 cryptocurrencies, including BTC, ETH, and LINK with a single blockchain domain. Go to unstoppabledomains.com and get [YourName].crypto to make your crypto life easier.

* BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

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* Circle is a global financial technology firm that enables businesses of all sizes to harness the power of stablecoins and public blockchains for payments, commerce and financial applications worldwide. Circle is also a principal developer of USD Coin (USDC), the fastest growing, fully reserved and regulated dollar stablecoin in the world. The free Circle Account and suite of platform API services bridge the gap between traditional payments and crypto for trading, DeFi, and NFT marketplaces. Create seamless, user-friendly, mainstream customer experiences with crypto-native infrastructure under the hood with Circle. Learn more at circle.com.

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To investors,

Will Clemente breaks down this week’s bitcoin situation using on-chain metrics to separate the signal from the noise. You can follow Will on Twitter or sign up for his email by clicking here. Here is Will’s analysis:

Hope all is well and you had a great week. It’s been another week of ranging for Bitcoin with some interesting price action in the later portion of the week, retesting range lows at 31K followed by a sharp rebound. Let’s take a look at what clues we can gather from on-chain. 

Key takeaways:

* Accumulation process is nearly complete

* Profit-taking nearly reset on all time frames

* The rate of which short-term holders have been selling has decreased, while the rate that long-term holders are buying has increased 

* Futures Open Interest creeping back up

* Miners selling, hash rate trending down

* Sitting on lower band of Stock-to-Flow

* Large cluster of on chain volume forming at these levels  

Firstly, I wanted to look at SOPR. This is something we look at often, a ratio of the profit-taking between coins trading on any given day. SOPR looks bullish for several reasons:

* Back above the 1.0 threshold (coins are no longer being sold at a loss)

* Double Bottom/Higher low

* Deepest reset since March 2020

* Bullish Divergence 

Would like to see SOPR stabilize above 1. One trend that we have been following for 2-3 weeks now is the rate of which Long and Short-Term Holders have been adding to their positions. In the last week, STHs moved 106,319 BTC out of their holdings. Over the last month STHs moved 422,188 BTC out of their holdings. Now let’s look at long term holders and compare. 

In the last week long term hodlers have added 137,434 bitcoin to their holdings. In the last month they have added 389,968 BTC to their holdings. 

With that noted you get the following when looking at the difference between STHs and LTHs:

* 7 day change: LTHs +31,115 (or) STHs -31,115

* 1 month change: STHs +32,220 (or) LTHs -32,220

Short-term holders had been selling at a greater pace than long-term holders were selling throughout the recent drawdown. However in the last week especially, long-term holders are now buying at a greater rate than short-term holders are selling. Along with what we looked at with SOPR, this shows that the re-accumulation process is almost complete. 

*note some of this is short term holders aging into the long term cohort (155 day threshold)

Another metric to look to asses accumulation is illiquid supply change. This is one of the main metrics that had been talked about throughout the early bull market, showing strong accumulation. It was even dubbed the “Rick Astley Indicator” by Willy Woo, given that these holders appeared that they were never gonna let us down. However, this metric flipped from strong accumulation to distribution quite rapidly at the end of May/early June as a lot of coins that appeared to be in strong hands were sold off amidst the price drop. However, since the price drop, this metric has started slipping back into what can be thought of as accumulation/strong hands. 

Futures Open Interest has started to creep back up, briefly reaching over $12.2B on Wednesday during the rally off 31K. As OI comes back, futures data will become more influential in trying to asses the market, with metrics such as funding rates. 

One interesting thing that I saw was a huge increase of shorts piling on from Bitfinex throughout the week. The only other time I’ve seen something similar was the day before the liquidation crash to 30K a few weeks ago. Potentially this is just a big player hedging, but something to take note of. 

Miners have been selling off throughout the week, this comes after strong accumulation over the last month. From what I can tell it appears to be a lot of selling coming from Chinese miners mostly. This is not a large portion of supply, they’ve only sold about 4K BTC in the last week, just a change in trend to keep in mind.

Plan B’s stock to flow is currently having the largest deflection from the model price in its history. We’re sitting on the lower bound of the model’s outer band. If the model is going to stay valid price needs to start moving up soon. 

In conclusion, the accumulation and profit-taking process we've been tracking is nearly complete. The rate of which short-term holders have been selling has decreased, while the rate that long-term holders are buying has increased. Futures Open Interest creeping back up; would expect that to come back in a big way if we get a strong move to either the up or downside. Miners selling, especially from China, hash rate trending down. Lastly, we continue to carve out a large cluster of on-chain volume at these levels. Looking forward to touching base on my channel Monday. Hope you all have a great weekend. Cheers!

That is it for today’s analysis. Hopefully you found this helpful. I highly suggest you subscribe to Will Clemente’s email where he breaks down on-chain metrics multiple times per week: Click here

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 180,000 other investors today.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

Will Clemente breaks down the volatility from this week using on-chain metrics to separate the signal from the noise. You can follow Will on Twitter or sign up for his email by clicking here. Here is Will’s analysis:

Key takeaways for this week:

* BTC is still rangebound between 32K-40K

* Exchange flows have plateaued, no real directional trend

* Stablecoins are waiting on the sideline 

* The perp traders that didn’t get wrecked over the last few weeks are waiting on the sideline (futures open interest and number of futures contracts is flat)

* Selling is still mostly being done by younger coins

* Long term holders still adding, offsetting selling from short-term holders over the last week

* Retail buying heavily (possibly attracted by lower prices)

* Bitcoin remains undervalued compared to the capital flows on-chain 

Hope all is well. At the time of writing, Bitcoin is still consolidating in the upper bound of a range between $32,000 and $40,000. Until price makes a decisive move in either direction, there is a lot of capital on the sidelines waiting to be deployed once the market decides. There are a lot of bids beneath us, set at $33,000 and below. In addition, there are a lot of sell orders around $40,000 and above. To break out of the range, high volume will be needed to fill those order walls. After consolidating this long, I would expect a strong move in either direction once price has that break out of this range. Until then, we are in no man’s land.

In the bottom half of the chart above, you can see the number of futures contracts has been flat. Also, in the chart below you can see that futures open interest is flat. To me, this suggests the futures traders that didn’t get rekt in the drop to $30K got spooked and now are waiting for confirmation out of this range before taking a directional position. 

The annualized spreads between spot and 1-month futures contracts are flat as well. This comes after these spreads reached above 50% annualized in early April. I think this also visualizes how the amount of leverage on these different exchanges correlates to the spot/futures spreads. Notice that CME (the bottom line) is significantly lower than others up until mid to late May when we saw leverage get wiped out from the other platforms listed. 

There is also a lot of dry powder in the form of stable coins on the sideline waiting to be deployed. This can be shown by the stablecoin supply ratio. When the stablecoin market cap grows in relation to Bitcoin market cap, the ratio goes down. Some of this decline has to do with Bitcoin’s market cap going down as well.

With that being said, whenever the move comes, it will likely be large. Until then, we keep trading between $32K-$40K. All that trading volume is adding up. We have now formed the third largest cluster of on-chain volume this bull run, only behind the one we’ve talked about often between $53,000 and $59,000, and between $7K-$11K. This is one of the reasons I had been bullish prior to the crash, as strong volume zones have historically formed a base of capital for the remainder of the bull market. Of course, that 10.5% in supply of volume is going to serve as a resistance on the way back up. Over 10 percent of Bitcoin’s money supply has now moved between $33,000 and $40,000. However, if we lose the low 30Ks, we do not have much distribution below aside from some at 27K, 23K, and of course 20K.

One interesting trend to note: another spike in selling from coins aged 3-6 months old. These entities would have bought back between December and March. There is another spike in selling from 1–3-month-old coins as well.

Coins are still being sold at a loss, although realized losses are trending down following the big price dump. Even yesterday (Thursday) over $540M of losses were realized by the market. Bitcoin has an uphill battle because there is fair portion of supply bought overhead in the consolidation between $50K-60K. Some of these buyers will be looking to minimize their losses realized by selling on what they believe is a complacency bounce on the way up. It will probably take some more time for these coins to be accumulated, but we’re on the right track. 

Similarly, SOPR on a weekly timeframe, (which we’ve described in multiple newsletters now), is on the threshold of the market selling at a profit or loss. 

Long-term holders continue to add to their holdings, +158,641 over the last week. They’ve added +305,305 BTC to their holdings over the last month now.

Zooming out you get this divergence between the two (short and long term holders). Based on historical behavior of these cohorts, we are either headed into a full-fledged bear market or are in a “mini bear market” similar to the consolidation between the two double pumps (but still in a broader bull market). At that time there was a similar phenomenon of long-term holders stepping in and doing the heavy lifting while short-term holders panic sold. Based on metrics looking at the broader cycle, I tend to side more with the latter, but I could be wrong. 

In conclusion, we remain in limbo for the time being. Waiting for a decisive move with volume to break us out of this 32K-40K range. For the bulls: looking for a jolt in new whales to help do some of the heavy lifting. Want to keep seeing long-term holders offset selling from those short-term holders, many of whom are selling at a loss. For the bears: Still no real price momentum, market is still selling at a loss and is fragile (Elon moved the market again with a tweet last night), downtrend in whales still continues while retail buying heavily. 

Looking forward to talking with you guys tomorrow on Pomp’s pod. Have a great weekend and for anyone in Miami, have fun. Cheers!

That is it for today’s analysis. Hopefully you found this helpful. I highly suggest you subscribe to Will Clemente’s email where he breaks down on-chain metrics multiple times per week: Click here

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 180,000 other investors today.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 180,000 other investors today.

To investors,

Will Clemente breaks down the volatility from this week using on-chain metrics to separate the signal from the noise. You can follow Will on Twitter or sign up for his email by clicking here. Here is Will’s analysis:

Hope all is well and you had a great week. Last time we spoke we discussed the price drop of Wednesday 5/19 and how outlook was moving forward. At the time I didn’t have a strong opinion on the speed of the recovery. I still hold don’t have a strong opinion, but this week has shown some positive signs and I would now expect that full recovery will take place sooner rather than later. 

Some key takeaways from this week’s recap:

* There is a clear rotation of supply from short-term holders to long-term holders

* Exchange flows have reversed from being bearish recently, now showing net outflows

* Accumulation is in process 

* After a big drop off earlier this month, new entities are coming on the network, possibly attracted by lower prices; mostly retail

* Miners not accumulating as heavily as they had been recently 

In the shorter term, some key price resistances to the upside are the 200DMA (~$47,750), $50K, $53K, and $59K. In terms of support, the strongest zones are $30K of course, but then $20K after. If $30K is broken I would see $20K as the next likely support level based on price structure and on-chain volume.

One interesting theme that has taken developed is seeing long-term holders and accumulation addresses stacking through this dip. Let’s break this down; first with a quick overview of who is selling on the other side and then the buy side. 

This metric looks at the different age of coins selling every day. Running a simple 7 day moving average over this can smooth out the picture. This week there was a larger amount of selling coming from coins aged 1 day to one week old than usual. Coins aged this young are traders moving in and out of the market. Perhaps this spike is highlighting some swing trading while Bitcoin ranges between the low $30K’s-$40K and traders are not confident in taking a directional bet at this time. 

Also, you can see a lot of recent selling has been done by coins aged 1 month to 3 months old, and also 3-6 months old. These coins were last moved in the green zone highlighted below.

At the same time, long-term holder have been steadily accumulating.

The chart below compares short-term holder supply to long-term holder supply. You can see short-term holders take up a larger portion of supply between November to mid-April. On the right side, you can see the divergence that we are currently in. This is showing the following: long-term holders are adding to their positions, short-term holders are selling, some entities in the short-term cohort have now reached the 155-day threshold for this metric and are now in the long term cohort.

On a similar note, another way to illustrate convicted buyers stacking through the dip is looking at accumulation addresses and accumulation balance. An accumulation address is defined as an address that has received at least two BTC txs but has never moved funds out of the address. This cohort continues to climb, with 7,430 new accumulation addresses in the last 7 days.

These new accumulation addresses are likely overlayed with this next metric: net entity growth. Glassnode clusters addresses together forensically to identify entities, they then subtract the new entities from dormant entities with 0 balance. This shows a v shaped recovery in new users coming onto the network after a downtrend since early March.

Meanwhile, supply held by entities with .001 BTC to 1 BTC continues to grow. Overall, it seems that retail is accumulating while whales sell-off. 

Regardless of who is exactly buying/selling, the market is no longer selling at a loss on aggregate. This sharp uptick is a sign of a recovery.

The behavior from miners has slightly changed from the previous letters sent out. For the last 1-2 months miners have been stacking heavily. However, in the last week this trend seems to be stalling out. This plateau in miner unspent supply can be seen in the chart below.

This miner selling looks to be coming primarily from China. One of the most constant sellers over the last week has been Poolin, the second largest mining pool in China. This can be shown in the chart below by looking at larger than usual transfers to exchanges. 

General exchange flows are no longer bearish, exchanges are down 14,207 BTC in the last 7 days. However, it appears the broader trend of coins moving off exchanges has come to a halt. 

Looking forward to touching base Monday. Hope you have a great weekend. Cheers!

That is it for today’s analysis. Hopefully you found this helpful. I highly suggest you subscribe to Will Clemente’s email where he breaks down on-chain metrics multiple times per week: Click here

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 180,000 other investors today.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

To investors,

The conversation around the energy consumption of the bitcoin network continues to be front and center in the mainstream media. Last night I saw a tweet from Andrew Ross Sorkin of the NY Times and CNBC that reminded me how nuanced the details can be.

It all started with a screenshot of this chart from Galaxy Digital’s research team:

Andrew immediately jumped on the chart and said that the comparison was laughable. His main point is that the legacy banking system serves many more people, along with many more transactions, so of course it is going to consume more energy. Makes sense, right?

This is where the nuances come into play. The legacy financial system has a linear relationship between usage and energy consumption. The more users that participate in the system, the more energy it consumes. The more transactions that occur in the legacy system, the more energy it consumes.

This increase in energy consumption comes from more bank branches, more ATMs, more bank data centers, more end points in the card networks, and much more. Increase the users, increase the energy consumption. Increase the number of transactions, increase the energy consumption.

Thankfully, this is not how the bitcoin network works. There is no linear relationship between usage and energy consumption. The blockchain requires the same energy consumption to process blocks of transactions whether the blocks have 10 or 100 or 1,000 transactions in them. In the same vein, the network consumes the same energy regardless of whether 2 people are using it or 2 million people. This is what a non-linear relationship between usage and energy consumption looks like.

As if that wasn’t important enough, there are also numerous efforts underway across blockchains to leverage layer 2 technology for scaling. This would allow for more and more transactions to occur on the blockchain, but without stuffing the blocks with transactions (which causes higher fees and slower transaction times).

A perfect example of this is Stacks, which builds smart contracts for bitcoin. The founder jumped into the thread last night and explained:

In the most simplistic sense, there are thousands or millions of transactions that can happen on a layer 2 or a side-chain. Those high volume of transactions can then be settled in a single transaction entry on the bitcoin blockchain. This means that the addition of thousands or millions of transactions (and by proxy many more users) would have no impact to the energy consumption of the layer 1 bitcoin blockchain.

This brings us back to the point that Galaxy Digital was making in their research that was shared in the first tweet of this letter. The legacy banking system has to increase energy consumption as more people become banked, while also increasing energy consumption to service more transactions. Bitcoin, on the other hand, does not need to do this. It simply leverages scaling technology to increase user adoption and transaction velocity without having to materially increase energy consumption.

So where exactly does the increase in energy consumption come from?

The simple answer is the financial incentive for decentralization. Here is how it works — every block of transactions carries with it the “block reward.” This block reward started out as 50 bitcoin and has been cut by 50% every 4 years. Today the block reward is 6.25 bitcoin (about every 10 minutes). This means that miners in totality are paid approximately $36.2 million per day at the current price of bitcoin. If you want your share of the $36.2 million in daily revenue, you start bringing more mining equipment online.

The more miners that the join the network, the more decentralized the network becomes. This is a beautiful financial incentive to optimize for the one thing that bitcoin presents as the most important thing — decentralization.

It doesn’t matter how many users or how many transactions occur on the bitcoin network. The greatest input for determining energy consumption increase or decrease is the value of the block reward (or daily revenue for miners). I bring this up because it is important to understand that the comparison of the legacy banking system and the bitcoin network is a solid analysis. Bitcoin could run the entire financial system on the current energy consumption (in terms of users and transactions). That would occur via the scaling technologies on layer 2 / side-chains.

Obviously, the technology is not ready for that level of velocity, but ultimately that is where we are moving towards. That doesn’t meant that energy consumption won’t increase in the future. In fact, it is nearly guaranteed to increase over time. But the reason for the increase won’t be more users and transactions, but rather because the economic reward for improving the decentralization will only increase in value.

Understanding the nuances of this debate are important. It leads to a much clearer picture of why decentralization is so important, how that decentralization is achieved, and why bitcoin is inevitable over the coming decades.

Hope each of you has a great Wednesday. I’ll talk to everyone tomorrow.

-Pomp

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THE RUNDOWN:

Michael Saylor: Mining Council Will ‘Defend’ Bitcoin Against ‘Uninformed’ and ‘Hostile’ Energy Critics: The Bitcoin Mining Council was born of a desire to help shape the narrative around the cryptocurrency’s energy use, said MicroStrategy CEO Michael Saylor. Speaking Tuesday at CoinDesk’s Consensus 2021, the bitcoin (BTC, +6.84%) evangelist said he worked with Tesla CEO Elon Musk and a handful of North American miners to create a loose organization that could publish energy usage data in an effort to address concerns that the cryptocurrency is not environmentally friendly. Read more.

Tom Brady to Speak at Consensus 2021: Football all-star and non-fungible token (NFT) entrepreneur Tom Brady has accepted a surprise invitation to speak at the closing night of Consensus 2021 with crypto tycoon Sam Bankman-Fried. Bankman-Fried, CEO of the popular crypto exchange FTX and liquidity provider Alameda, tweeted the invitation at Brady Wednesday morning – nodding to the Tampa Bay Buccaneers quarterback’s recent switch to a “laser eyes” profile picture. Read more.

Ex-High School Classmates Are Among the World’s Largest Crypto Holders: Kyle Davies and Su Zhu started Three Arrows Capital at the kitchen table of their apartment in 2012. Now they’re among the world’s biggest crypto holders with a portfolio worth billions of dollars.Read more.

Mark Cuban Invests in Ethereum Layer 2 Polygon: Billionaire investor Mark Cuban has made an investment in Polygon, a layer 2 Ethereum scaling solution. Cuban confirmed the investment in an email to CoinDesk but would not disclose its size or composition. The price of MATIC, the native token of Polygon, is up more than 9,535% year to date, according to Messari. Read more.

TechCrunch Founder’s Apartment to Be Sold as NFT: TechCrunch founder and crypto investor Michael Arrington is selling an apartment in Kiev via a non-fungible token. Arrington purchased the Ukraine apartment in 2017 through the real estate platform Propy, using Ethereum and smart contracts to settle the deal. In a sign of how the industry has evolved in the intervening four years, Propy will be auctioning the same property but this time as a real estate-backed NFT. The starting price is $20,000.Read more.

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I really enjoyed this conversation with Jessica. Hopefully you enjoy it too.

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Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe