WBD289 Audio Transcription

2020 Trading & On-Chain Review with Willy Woo

Interview date: Friday 18th December

Note: the following is a transcription of my interview with Willy Woo. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to on-chain analyst and the co-founder of Hypersheet; Willy Woo. We discuss the current state of the Bitcoin market, the catalysts for Bitcoin’s rally and what to expect in the coming year.

“$100,000, I would rate as very conservative, probably overly conservative. I would rate $200,000 upwards as a sweet spot. $300,000 not out of the question, and I do not ridicule $1,000,000.”

— Willy Woo

Interview Transcription

Peter McCormack: Willy, man, good to see you again.  How are you?

Willy Woo: Hey, Peter, great to be here again and yeah, I'm good, sitting here in Hong Kong.  How are you going?

Peter McCormack: Good, man.  As we both said before we started the recording, it's been a strange year.  We've both historically been used to a lot of travelling, especially in this industry, and the last time we met was in America; well, the first time we met was in America and now, I don't know, this feels like a long year.

Willy Woo: I've noticed that.  You know, sometimes years go by and they just fly by, and this one's been really kind of strangely full.

Peter McCormack: Do you know what I think it is?  It's been a slow year, but I can't really think about what I've done.  Last year, I did a lot of stuff; I could list a massive amount of things I'd done but this year, I would struggle to do that.  I think the saving grace for people like you and I has been it's been an incredible year for Bitcoin, a really interesting year for Bitcoin; so, whilst we've been locked away, we've kind of had that to consume us?

Willy Woo: That's right, it's been pretty fully in the street here, yeah.

Peter McCormack: Well listen, look, we've got a lot to cover, man.  This is my first time going through a bear market into what looks like a bull market.  You've been through these cycles before.  I'm historically really just a 2017 guy who just only ever knew the way was up to begin with, and then witnessed it all come back down again, and then ride out a good two to three years of, like, a tough two to three years just trying to understand what's going on.  But, how's it been for you this time, compared to, say, what happened in 2017?

Willy Woo: You know, every year's different; every year in crypto's got different narratives, different technologies, different underlying drivers, so I'm always learning.  Every year's a different kind of learning.  This one's been really full.  You say this is, well, I guess this is your second bull market?  This one, I would say this is the most volatile bull market we've seen in a long, long time and the structure of the market's changed quite completely compared to 2017. 

You saying that we're now in a bull market tells me just how different this one is, because a lot of people have been thinking we've been in a bear market until this year.  In reality, we've been in a bull market since the start of last year, but you wouldn't know it because of just how choppy it's been.

Peter McCormack: Right, okay, interesting.  You're going to have to explain that one to me, because I felt like we had this kind of fake-out bull market last year.  I think we went up to, what was it; $12,000?  I can't remember if we hit $14,000 because it was around Bitcoin 2019 we kind of spiked and then we kind of came down again.  Then, 2020, we started building up again and then obviously, we had the big shock with COVID, which we'll come to.

I'm going to get the chart up my side, but can you explain to me what you know that tells me that the bull market started in 2019?

Willy Woo: Yeah.  I try to keep away from just reading too much in the day-to-day price action.  Obviously, you have to look at that, but a big part of what I do is looking at the investor activity that's driving the market.  So, I kind of look at this thing as, you've got these long-term investors, new people coming in, and they go through these cycles and obviously, what I do is analyse the blockchain for its data and look at flows of capital.  And, you can look at the investment flow into Bitcoin using what you see on-chain.

With that, you can see when investors are backing away a bit; there's not a lot of movement in coins.  You want a lot of movement in coins, because that means there are a lot of investors coming in because whenever an investor comes in, they're buying coins, so coins move to these new investors. 

So, that bottomed at the start of last year.  We had that crazy cliff from $6,000 down to barely about $3,000 and that kind of marked the start of the year of 2019.  It sort of ran along this bottom, and there were a lot of investors accumulating at that very, very cheap $3,000 range.  And, what I try to look for is that kind of discrepancy between what the investor dictates for price and the real daily price we get.

So, the daily price is very much dictated by short-term speculators and we saw that last year when we had this crazy run up from, what was it; it broke $4,000 and just ran up to $14,000 in a matter of a few months.  Actually, investors did come in, but it just ran far in excess of what the fundamental investment flow was.  So, that kind of led us into the 2020 phase where we overran and kind of blew off that top; and, it took a while for the price to start to settle.  And, there was a bit of sell-off, so that kind of led us into 2020.

It was kind of like this new hope, because we'd bottomed out, and I saw that on number indicators and I think a lot of that early phase of this year was dictated by the PlusToken Ponzi scheme, which happened in 2018, 2019.  This is the largest Ponzi scheme that Bitcoin certainly had.  I don't know how big the biggest one in the world is, but there was over $2 billion sucked into that Ponzi scheme.

Peter McCormack: I think Madoff's was $50 billion, or something.

Willy Woo: Oh yeah, okay, this does not count as big then, it's true!

Peter McCormack: Yeah, but it's big for Bitcoin.  Hold on, let me have a look at this; I've got it up.  $65 billion.

Willy Woo: If you could call fiat money a Ponzi scheme, that probably goes into the trillions?

Peter McCormack: Yeah.  Well, as a percentage of the amount of dollar available, it was very small; whereas, I guess, as a percentage of the Bitcoin, this was quite high.  It's probably best to explain to people what actually happened with PlusToken?

Willy Woo: Yeah.  So, PlusToken was this thing that came out of China and like all Ponzis, you bring people in and then you pay them some sort of payoff so you're earning great returns.  That's being paid by the new guys coming in.  This Ponzi pulled in 2.5 million people.  To put that in perspective, even now at the tail end of 2020, we have about just over 100 million people in crypto.  So, they pulled in 2.5 million people there and over $2 billion, so that was colossal; $2.5 billion at the time.

So, it accumulated somewhere between 200,000 and 300,000 Bitcoins, so 1% or more of the supply, and pretty much a quarter of all the coins that Satoshi mined was in that Ponzi, like, in size, was this PlusToken.  So, we had to endure the sell-off as these tokens got dumped back onto the market.

Peter McCormack: So, how were they getting away with that though?  Were they mixing the coins?

Willy Woo: Well a lot of it went through Wasabi Wallet.  What transpired was, in July, these guys got caught by Chinese law enforcement and that coincided with the peak, that $14,000 peak in 2019.  That was when the Ponzi stopped and so, in part, we could say that overly through the run-up was PlusToken buying and buying and buying.

Then on the other side of it, we started to see sell-off, and a lot of it was being mixed and it went through Adam Ficsor's wallet, which is called Wasabi, and it does a lot of mixing; so, this process of obfuscating the blockchain trail of transactions.  So, a lot of it went into Chinese exchanges and sold off and we were tracking that.  I think a guy, GoBTC on Twitter, he was tracking it on-chain, somewhere in the vicinity of 150,000 to 170,000 coins got dumped back onto the market, so 1% of the supply is huge.

Peter McCormack: Wow.

Willy Woo: And, it kind of started petering out by the time January 2020 came.  Chinese law enforcement came in around the tail end of November, I think, and they confiscated the remaining coins.  I believe they're all sold by now.  I was talking to people; I think that they're all sold out of China, so we don't have to worry about that now.  But, it certainly put us in a pretty grim mode in the tail half of 2019.  So, that was how we set up the New Year really!

Peter McCormack: So, if we hadn't have had that -- well, I guess there are two arguments: one, that the rise in price could have been down to the fact that they were buying Bitcoin for the Ponzi; but at the same, then the sell-off, it could have been because they were selling off.  So, I guess without that, looking at the chart now because I've got it in front of me, you might have had a more natural growth from about almost April to April; that whole year, you might have seen more natural growth?

Willy Woo: That's right.  You can almost ignore that bump in the middle and it would have been a normal cycle, but that threw a lot of us out.  And certainly, if you were trade in the tail end of 2019, it was one of the hardest regions to trade, because throughout all the technical indicators, Mr PlusToken Ponzi wanted to dump and suddenly, the price would go down!

Certainly people that were trading price action could do quite well whilst others, using technical indicators, which tends to work more when you're detecting an organic sea of trading; that wasn't working as well.  And so, yeah, it was an interesting one that, and totally unexpected.  Everyone loves to draw these nice cyclical charts and everyone's projecting last year's or last cycle's charts onto this year's and into 2021.  But, if anything, we've seen in each cycle, they're just so different and you almost can't guess what's going to happen next in terms of the ups and downs of how it navigates through the cycle.  

We can certainly predict the sort of cycle we get from the halving, and it's every four years, and I don't think that's going to change for quite some time; but certainly, how we navigate the ups and downs, it's different measures every time.

Peter McCormack: Well, March was pretty interesting as well because again, at the start of the year, we were around $7,000, we were building up to $10,000, I think everyone was starting to feel confident; and then, news of pandemic, jitters start and then we have that huge sell-off, was it 12 March?  Then, the volume of 12 March, 13 March was huge.  Did that hit you by surprise?

Willy Woo: Yeah, I'd say so.  I mean, I remember tweeting saying, "Here we go, relaunch 10,000!"  I mean, I would say I was looking into the COVID data a lot more than blockchain data at the time.  I remember Goldman say, "Brace yourselves".  They gave a particular number and they said, "Bid on X% of the world contracting this", and yeah, it was just really grim.

Interestingly enough, this thing absolutely collapsed and, like, we'd been waiting for this, "we" as bitcoiners, for ages.  Everyone's looking for the Black Swan crash; this is the kind of doomsday crash, and it certainly felt like that over those few days.  And, I remember running a survey on what did people think.  And, people thought Bitcoin would go up and I said, "I think it's going to go down very quickly and then rebound hard", because we saw stuff like this happen in the 2008 World Financial Crisis, because as everyone's getting freaked out, they sell and they exit all their leveraged positions; they sell everything they own into cash.  That's that flight to safety.

We saw that in Bitcoin.  Certainly, if you were trading it, there was not liquidity on Bitmax and these derivative exchanges to hold the price up.  Everyone was just dumping, liquidating, liquidations falling on top of other people's stocks and liquidating those guys.  There just was mass carnage.  And, I know people sold off as well. 

There was this time where you reassessed this risk profile of, well, we're in a whole new world now post-COVID; you reassess your assumptions; and so, while you do that, you sell to cash.  With that in mind, Bitcoin, over the next two or three months, I think, went from roughly $10,000 to roughly $2,000, and that was the assessment.  But of course, you had this flight to safety as everyone packed their exposures back to cash.

Peter McCormack: It's a really interesting chart, because it's essentially the same as almost anything at that time.  You look at the S&P; that dropped.  If you look at my podcast downloads, I have the exact same dip! 

Willy Woo: Yeah, of course, right; we were glued to COVID news!

Peter McCormack: Yeah, exactly; people weren't listening to podcasts.  There is the opposite.  You have people like Netflix; I'm sure their chart just spiked amazing, and news; but, there were a lot of charts out there that just saw that drop.  It was quite interesting. 

Volume-wise, how did that compare because that was essentially the biggest days of the year; but historically, how did they compare?

Willy Woo: Funding rise-wise, it was -- the funding over that period is very annoying, because whenever you're looking at those charts, it's a spike that's so far off the charts, it screws with all your normal signals.  Everyone was shorting; everyone wanted to short, so you were being paid to go long by an immense amount.  Of course, that was the right bet; it's usually that way.

So, yeah, I'm looking at this right now with the on-chain chart.  I remember, I was busy trying to figure out where to be over COVID and I wasn't looking so closely at the charts at the time.  But, I'm looking at it now and I'm going, yeah, the speculators sold off massively; Bitmax was the biggest pullback because they didn't have enough liquidity and even the exchange froze its order image, or it went online.  I think the order matching engine might have continued.

On-chain, actually not a lot of coins were sold off.  If you look at the investment velocity that was going between investors, that was pretty normal.  There weren't massive sell-offs by spot investors holding Bitcoins on-chain.  So, a lot of what this COVID flash was, this flash crash, was derivative traders just really getting rekked as they were liquidated.  That obviously impacts the spot markets and pulled all of them down, and it became crazy cheap coins for anyone who wanted to buy in it; all the half-price specials took until May, essentially, for us to revert back to the normal price.

I think a few people were a bit shaken by it.  I thought it would go back up, because it's a safe haven.  To me, this is what it was born to do and I had been expecting a flight to safety.  But, from that crash, we started to see very, very tight coupling with the stock market, people trading alongside it.  So for a while there, there was this narrative of, "Oh well, Bitcoin's a failed experiment in terms of a safe haven.  It's just another correlated asset that you can trade". 

So, there was that, but I think it was just very strong post-COVID, and in some regard, I think, it's an ongoing thing that started to come in around 2018 onwards, in that Bitcoin's liquidity had gone big enough so that it was big enough for pro-traders to come in; and, we had the invention of perpetual swap contracts so that, essentially, Bitmax, where you can do high-leverage trading.  So, it became this very tradable asset and pro-traders love to trade correlations.  So, that sort of developed. 

As you start to form into a trading relationship and correlations to other asset classes, it's a self-fulfilling prophecy.  It's a bit before, "Oh well, let's sell it, because it's going to dip again because stocks dipped", for example.  So, we kind of got into a gravitational lock with equities over that phase and it was very strong.  And, one of the interesting things for me is, I track on-chain obviously, and one of my indicators, you can go to my site; it's charts.woobull.com, and I've got price models on one of the charts.  And, one of these lines, you see a lot of these traces, and it's NVT price. 

NVT price looks at how much volume is circulating between investors at all times and then, it tries to map that up to a valuation and a price.  And, you can see these times where the market price starts to come down and approach the NVT price, which is like the organic valuation of Bitcoin, and it bounces it off; but often, it bounces it off.  In COVID, it whooped down and dipped underneath it as traders got liquidated, but that was very short; the spot investors held their ground.  And, I could just see this NVT price going up and up and up. 

As traders were trading as correlation to stocks, it was like this moving wall of death, you know.  As stocks go down and this moving wall of death of Bitcoin buyers, powered by more and more people parking money into Bitcoin, is coming up at you, you can't short against that, because the spot buyers will continue to buy you out at those cheap prices. 

We saw that happen for the very first time, and it's like the proper decoupling from that correlation, in October of this year when stocks started to crash while Bitcoin just went ballistic, a really organic run, powered by the likes of Michael Saylor, the likes of PayPal announcements, and everyone started buying.  And, if you were look actually at the flows of capital, they had actually started buying in March of this year.  Actually, they started buying around the COVID worries on 12 March for most of the day.

Peter McCormack: Who did?

Willy Woo: "They" did.

Peter McCormack: "They"; just the corporate side?

Willy Woo: Well, the narrative I would attach is that high net worth, but particularly the Michael Saylors of this world, I think it was them and their cohorts.

Peter McCormack: All right.

Willy Woo: Michael Saylor's been on record saying it took us six months to go through the process for our company, to get through SEC approval, board approval, and just gear up to do it.  You back-trace that final announcement that they had bought their $200 million and something, and then $425 million of Bitcoin; you backtrack that to his six-month time period and it started in March before COVID. 

He announced that he had bought something like, what was it; $;117 million in his own cash holdings and so, the narrative I put on it is that the CEOs and directors of public listed companies are some of the most well-networked people in society and when they buy, they tell their friends to buy.  I think that's the influx I saw on-chain.  I don't know who it was, but I saw 600,000 coins being depleted off the speculative inventories sitting on spot exchanges.  Never in the history of Bitcoin have we seen such a crazy depletion of the inventory sitting on exchanges.

So, that was responsible for really driving the bottom price of Bitcoin up and up and up until we decoupled.  And, it sets us up for this crazy 2021 year ahead.  I've got absolutely no doubts this thing's going to run.  I've never seen that amount of depletion.  We saw this kind of depletion happen in 2016.  I call it "reaccumulation".  You kind of have really, the people who put the bottom of the bear in.  They put the floor in; they'll buy; they'll buy; they'll buy and you'll get this price compression where sellers keep selling, because they're bearish, but it just doesn't go down because these guys just say, "No, I'll buy that; I'll buy that".

So, the volatility just drops off a cliff and it's just this narrow band.  And then, once those guys have kept buying at that price range, the sellers give in and they leave, and then the price rebounds and rebounds and goes up; and normally, that kind of shakes out.  Then, you get this new phase of reaccumulation happening.  The other guys that timed the market very well, they can see this is already sitting at the bottom, and now we go in.

And, the last reaccumulation band we had in the last cycle, 2016, it was tiny.  It was five months long and it was like a 10% or 9% depletion in the inventory off the spot exchanges.  This one's lasted for ten months and it's double; almost 20% literally got scooped up.

Peter McCormack: Right.  How much did the halving play into it as well?

Willy Woo: Well, it's not to be discounted.  I mean, it's the impulses, it's the supply shock impulses, that give us our four-year cycles.  And, I'm very quantitative, I look at the numbers.  If we'd looked at PlusToken as 250,000 Bitcoins, we've seen 600,000 coins scooped up off the spot exchanges in the last 18 months.  Over that period, it's around 850,000 coins that is new supply come in through the mining. 

So, we knew, you know, filter out these influxes of buying and outgoings of selling and these ripples, the sort of steady heartbeat of Bitcoin's supply shock from the miners is very significant.  So, I'd say it has set the rhythm, but the things that are really pushing it right now are the Michael Saylors of this world.  And, I'm just looking at the demand and supply; how much was dumped by PlusToken; how much miners dumped onto the exchanges to sell off; and still you had this inventory depletion. 

It's at 1.75 million coins that's been hoovered up by all the buyers in 18 months.  That's like almost two Satoshi Nakamoto's supply of coins in 18 months.  That's 10% of the Bitcoin supply almost; well, more than that because we say there are 18.5 million coins in the Bitcoin supply, but the truth is there are only 14 million, because a lot have been lost.  And then you say 1.75 million have just got bought up in this very compressed space.  We're going to have a lot of Lambo memes and Moon mems in 2021!  That's without much doubt.

Peter McCormack: The run-up from September is super interesting.  It's essentially, I guess, I mean it started back in March after the sell-off, but it's a massive run-up really.  It looks really similar, in some ways, to the run-up from May 2017; there are a couple of dips, and then nearly vertical.  But, the difference between this and 2017, in 2017 we spiked and dropped.  It feels like we're consolidating; we're actually consolidating at $19,000.

Willy Woo: Yeah, I write an investment intelligence letter and after that run-up, I said, "What next?" after the most organic rally we've seen in years in this recent run we've had; and sure, on paper looking at the price chart, they look quite similar.  But, the structure of what happened underneath them was completely different.  Like, what was it; sort of April, April Fool's breakout?

Peter McCormack: Yeah, about that!

Willy Woo: It was, I remember that.  And actually, it was April Fool's Day on -- I was in Valley at the time, I think it was 10.00 am at the time.  And, 10.00 am is this time when all the action often happens with Bitcoin, in Valley time, and that happens to be the lowest volume traded over the 24-hour clock.  So, during that time, at the minimum volume, Bitcoin broke out and if you're a trader, you'll know that it's just a game of bulls versus bears.  The more ammo you have, the more capital that's at your disposal, the more you can push the price around; and, the price was pushed above the resistance level at that hour.

Everyone's stocks got hit, meaning their risk protection kicked in and rather than shorting, being in a short position, their emergency stocks kicked in and they bought back their position.  As they buy back their positions, the price goes up a bit and then the next person, at the higher level of this protection; their stocks get hit and they all got hit.  So, we call this a "short squeeze".  People who are shorting got squeezed out and the price went sheer vertical from, I think it was $4,200 and it went vertical to $5,000, you know.  That's a big jump when the price is only $4,200; it's a 20% jump in hours.

Then, if you were to look at what was happening at that point, everyone was in disbelief and they kept shorting it, and so the price squeezed them out.  And it was one squeeze after the next squeeze and it was just payday for whoever triggered that first one.  And, it sliced this through, what we thought would be the mother of all resistances, because we're at $6,000.  $6,000 bottom had been trading for most of the year, all of 2018, and it just sliced through that like a hot knife through butter!

This was also happening with the PlusToken Ponzi, right, but the price was way above organic; it was just crazy.  And that's not what's happened this time.  It was a very low volatility rally.  It was driven by a lot of volume by spot investors buying the underlying Bitcoin and taking it off the exchanges.  You can see that there was a huge, you know, like since March, since COVID, there was this depletion in stock inventory; and, come the start of this rally in October, it started to go steeper downwards.  These coins were being hoovered off these spot exchanges at almost twice the rate, and so it was very much driven by organic buying.

I saw more people come into Bitcoin in that phase than unseen since October-ish of 2017.  If you can imagine a fervour in the markets of October 2017, when it was just a month or two away from grandpa telling you to buy Bitcoin, because it's the next big thing.

Peter McCormack: What do you make of this consolidation, though, around $19,000?  It's a strong signal, right?  I mean, it's had a couple of dips to $18,000 and $17,500, but recovered really quickly?

Willy Woo: Yeah.  I've been saying that the buying pressure is just so high.  But, when we topped out, you could see it.  I put out a notice about nine days before the top.  I said that we've got around a week left on this, and you could start to see that the buyers now were smaller buyers; they weren't large whales, institutional; they were more akin to the retail sect that had come in late into a rally and that's usually a sign, if you look at the back-trace, that these rallies are starting to top out.

So, I gave it a week.  It sort of went about nine days, and then we had that sort of big pullback and it started to consolidate.  That's kind of to be expected, because the buying hadn't stopped.  There were a lot of people coming in and a lot of buying.  So that, typically, when you have a rally like this, you kind of expect Bitcoin to pull back 30%, sometimes even 40%.  But, I think it was barely over 20% in that first week, and that was very fast.

Now, it doesn't really want to go down and one of the indicators I look at is the acronym, SOPR.  That indicator shows essentially for the people -- you've got to imagine surveying all the people, all the investors that are selling their coins.  You look at how much profit they made, whatever's attached to those coins when they bought and when they sold; you can see that on-chain.  You kind of run the average across the entire day of who sold Bitcoin and some were loss-making, some of them went with vast profits. 

And, generally you get this point where, in these rallies, the profit keeps increasing; as people are selling out, the rally's going higher and higher.  And, at a certain point when it flattens out, the profit carried in these coins starts to decline.  We're doing that now.  We're in that phase where people are waiting for people who are going to sell to completely sell out.  We're waiting for SOPR to indicate we're resetting now and no one's at profit again.

Peter McCormack: But, I've got a question around that because, if you look at the types of buyers we've got now, the Greyscales, the MassMutuals, the MicroStrategys, some of these buyers and the people that are buying through Greyscale, they might not want to sell ever; or MassMutual, why are they going to sell?  So, tell me if I'm wrong or if there's an indicator that shows you this, but it feels like we're getting more long-term hodlers come in, whereas 2017 felt very retail based?

I think people were buying and thinking, "Right, when do I sell this to maximise my dollar profit?"  I think we've got people now buying who are just not even considering selling.

Willy Woo: Yeah, that's a different indicator.  Chainanalysis created one that essentially measures how liquid are the coins, and as the coins become less liquid, it means that the coins are being bought and sold and bought and sold when it's liquid; when they're not, being bought and held.  You can measure that using -- you can measure coins going into wallets and just not then releasing; they're just an accumulation.

So, that's exactly what's happening and it again coincides with Bitcoins being hoovered off the exchanges, starting in March; so, that is for sure.  Those guys aren't selling.  Locally, we're waiting for the short-term speculators to move their coins out and deplete, who is going to sell and get off the bus; get off the bus now.  Once they're completed, we can move up.  We've probably got another few weeks, you know, probably into January before they get off the bus.  So, yeah, just waiting for that.

Peter McCormack: Actually, do you think this will chop under $20,000 until then?

Willy Woo: It doesn't guarantee it.  We could break above, but we don't get a free ride to the next new highs into the twenties until we can get these guys unloaded.  You do sometimes see it when the market goes into utter, utter FOMO and that, you only see in the mania phase of the bull market.  We're certainly not in that now; it's very measured buying by very long-term investors, not much FOMO at the moment.  Everything's organic; the price isn't just ripping off these long-term investors.

So, I think we just go sideways here a bit.  We might get another little pullback, but not much.

Peter McCormack: Okay, let me ask you; did we get an all-time new high?

Willy Woo: Yes, we did, slightly.  I don't call it "this year", I call it, "Yeah, if you want to split hairs, we're a little bit higher than we were in 2017".  The main thing is, we're spending a lot of days and weeks at these highs.  So, the last highs were the last dying breaths of the bull market; it just got over the line before it clattered back down.  Here, we're just sitting pretty with lots of legs to run on this thing.

Peter McCormack: Right, okay.  Well, let me ask you then, it obviously looks very good for breaking $20,000, subject to not having any crazy bad news.  $20k always felt like it would be a price that we would bump up against; we would tag it a few times before we got through, just because of historical context; psychologically it's a barrier we all remember from what happened in the previous bull run.

What happens after this?  How do you consider that?  I know you've put out a prediction, quite a strong six-figure prediction.  Pomp put out $100k, I think, the other week; I've seen people put $200k, up to $300k.  But, how do you really prepare for this yourself, Willy?

Willy Woo: How do I prepare for it?

Peter McCormack: Yeah, how do you prepare; what are you looking at; what are you thinking about?  The next mental barrier for me after $20k is $100k, because it's a new psychological big number.  There will obviously be ups and downs on the way, but we had a lot of interest, right.  If Michael Saylor said it took six months and he's told everyone he's done it, a lot of other companies looking might be thinking, right, okay we're interested, but it might then take them months.  We could have a lot of people coming in early next year.

I was chatting to another guy who trades traditional markets and he said, "This could get very choppy".  There could be a real issue with supply of coins, like a real issue with coin availability on exchanges.  He said you could see some really big jumps?

Willy Woo: Yeah, I think we're all coming into a phase where we're going to see a supply shock.  I've been measuring this.  George Soros came up with this term called "reflexiveness", which is the tendency for particularly fixed-supply commodities to have this feed-back loop.  As the price goes up, the sellers want to hold on to their commodity, or their asset, harder so there's less supply and because of that, the price runs up higher.  It feeds in on itself.

I think most people thought most definitely Bitcoin showed reflexive properties, because you just look at it, you know.  The last cycle went ridiculous; almost 100X; it did 100X.  And I measured it.  I did this study looking at how much does the market cap increase for every dollar that goes in, and it turns out that all the past cycles, they were very -- the dollar gain and market capital price per dollar put in was flat. 

What actually happened is that as the price ran up, the old hands, the whales, the guys that bought from the early days, and we see that on-chain on the records from when those coins went into their wallets, they start selling; the old hands start selling.  So, there was always this supply being sold down into these runs and it kept the reflexiveness flat.

The interesting thing about this time is that it's not flat; it's going up; it's increasing; so, it's the first time that we're behaving like what Soros predicts for these kinds of commodity markets.  And so, I weigh that with the amount of capital that needs to go in to push us to these crazy market caps.  Like, if we go to $100,000, that's a $2 trillion market cap and currently, it's about $3.50 of market cap gain per dollar invested, so I'm just going to crunch that through.  It's nearly $0.5 trillion to go into this thing.  We need $500 billion; we need 500 Michael Saylors to push us to $100,000.

Peter McCormack: Or, two-and-a-half Apples!

Willy Woo: That's assuming the reflexive, or that ratio, doesn't keep climbing, which it is right now.  So you've got on the one hand, this immense amount of capital we need to float the boat; and on the other side, you've got the amplifier of that capital to drive the price increase, because people are holding on tighter.

The next key sort of mark in the sand for me is $50,000; $50-55,000 Bitcoin.  That broaches us into that $1 trillion resistance of market cap.  Bitcoin becomes a $1 trillion asset bucket.  All major macro asset buckets are $1 trillion and Bitcoin's not even in that league yet.  So, once we break that, I think that is big news and I think that then becomes a black hole and it sucks in other assets, particularly gold because it's kind of an antiquated old version of Bitcoin.

Peter McCormack: Isn't that funny though that when people used to say that, I would say about a year ago, they would say it, like calling it "boomer rocks", or it's just a lump of yellow metal.  I was like, "No, come on".  Gold has a long, strong history; governments hold it; but, I can see retail dumping their gold into Bitcoin quite easily.  What the interesting thing there is, do any governments who are holding gold and gold reserves, are they also then themselves considering, "Shit, do we need to be getting on this train?"!

Willy Woo: I mean, yeah, who was it; not Michael Saylor; Raoul Pal just sold his gold to buy more Bitcoin!  Once you start to see these global macro guys, and of course they're in cahoots talking to each other too, start to reconsider their exposures, I think it started from the smartest money that understand this game.  Those guys are the ones that understand macro assets the best, and we're starting to see the first of those guys start to come in.

What was it; Black Rock said, "Are we working in Bitcoin?".  They manage, what, $6.8 trillion dollars of wealth!

Peter McCormack: Everyone's getting ticked off.  I mean, JP Morgan have come out with quite a few statements; the Paul Tudor Jones' investment letter this week said, "Of all the assets for the great monetary reset, the way you want to head, Bitcoin is the fastest horse in the race".  The cat's out of the bag now.  I think we have the regulatory cover; I think we have enough big companies that have done it now that, I mean, MassMutual essentially gave cover to hedge funds to do this.

Willy Woo: You're not going to get fired to make that decision anymore.

Peter McCormack: No, you're not.  But, if you've not got it within your portfolio, you might be questioned by those whose money you're managing.  It's like, "Well, why have you not got Bitcoin; everyone else has got Bitcoin?  Why are you not doing this?" and this is where this potential supply shock happens where we see that accelerated corporate FOMO in action.

Willy Woo: That's right.  So, I'm waiting for the day that someone gets fired for not buying Bitcoin, the other way round; that will be hilarious!  So, we will need $0.5 trillion to enter Bitcoin for us to hit $100,000.  So, I think next year is the race to get to the $50,000 Bitcoin mark and at that point, it hits the next power up to be able to suck in these other asset buckets, and can it get the $0.5 trillion to $1 trillion to hit these $100,000 and $200,000 per coin targets.

In amongst our unit of account being debased, that will help accelerate it so right now, these targets, $100,000 is very, very conservative I would say.

Peter McCormack: What was your prediction again, remind me?

Willy Woo: I can see it $200,000; $300,000 is not out of the question, but you know, once this thing gets going, it's really hard to see where the top is.  I can probably take a guess that Pomp's $100,000; that's pretty conservative.  I think we'll definitely get there.  I mean, I'm looking at my chart right now.  I have a model that's hit all the prior tops and that's making a beeline upwards, right.  If I just continue that line, we pretty much hit it easily by the end of next year.

But, the thing is, as these bull markets start to head up, every cycle in the past, this line starts to curve upwards exponentially.  So, if it stays linear next year, we hit $100,000, but I'm expecting it to curve upwards like every other cycle and that means, we will start to hit the $200,000, maybe $300,000; but, I don't know how steep that curve will be just yet, because it's still in the linear phase, it's still in the early part of the bull market, believe it or not.  So, I think some people have said $1 million.

Peter McCormack: $1 million.

Willy Woo: You know, $1 million.

Peter McCormack: Maybe in the next cycle?

Willy Woo: No, in this cycle.  I would say, and I'm looking at the chart for my model and, you know, it would need a very steep hockey stick, but I can't say that's out of the question.  I can say $100,000 is very conservative; I can say $200,000 is right on track.  Somewhere between $100,000 and $200,000 is a very conservative sweet spot; $300,000 for sure.  $300,000 to $1 million is actually not that much of a gap, believe it or not, on this model, because it's all logarithmic.

So, it just reminds me of to the Moon and Mars metaphors.  If you were to go to the Moon, the amount of energy that takes you to the Moon; let's just add a little bit extra and you get to Mars.  It's a little bit like that, these charts.

Peter McCormack: The interesting thing at that point, I guess, is that once you start hitting, say, $100,000 a coin, there are plenty of people out there with 10 Bitcoin who suddenly, on paper, they're millionaires.  If you hit $1 million a coin, there are plenty of people who are now millionaires because they own 1 Bitcoin.  So, I wonder if once you see a sell-off there, if there are going to be enough buyers at that point, or you go through another 80% retraction; I just don't know what happens at that point.

Willy Woo: Well, I'm seeing people that are, I guess, following Michael Saylor's lead and buying Bitcoin on margin.  He's issued a $600 million debt instrument to buy more Bitcoin and when you're on margin like that, you tend to want to sell more at the tops, because you feel more exposed.  I don't know if Michael Saylor would do it, because his loan's out to 2025 at very, very cheap interest rates.  But, I know people that are pulling on some of their mortgage overdraft to buy more Bitcoin, so certainly those guys would sell off.  It just depends how high we get.

We want to talk about, with these new institutional people coming in, they're much more longer term holders, maybe the next cycle won't be as violently downwards.  I think we will probably still have a really violent down move; it's just in the nature of Bitcoin.  I'd be very surprised if we go to, you know, whatever it is, $200,000 and it only did a tiny pullback to $150,000 or $100,000.  That would be very unlike Bitcoin.

Peter McCormack: Yeah.  Do you think Saylor's done that -- it's the only data to indicate that buying's happened yet because $650 million will move the market, right?

Willy Woo: $650 million?  A lot of the inventory depletion has levelled off since we peaked.  So, let's go $600 million divided by $19,000 roughly, so we're looking at 31,000 coins.  Look, it's really hard to see his buying in the overall scheme of things.  I think what he did was start a whole cascade of other people buying.  Even the 400,000 that was bought; was it 30,000, 35,000 Bitcoins that he bought with MicroStrategy; that's like, I don't know, 5% of the inventory depletion that we saw.

What is, say, 40,000 coins, let's call it 40,000 coins, next to 1.75 million coins that was sucked off the markets in the last 18 months?  It's still a drop in the ocean.

Peter McCormack: Yeah; that's kind of interesting.

Willy Woo: He's very visible.  In terms of the overall scheme of the market, it's still very small; certainly encouraging a lot more people to buy.  It might be that he's got a lot of friends.  I recall talking to one head of OTC and he said, "These guys; they like to swim together".  The whales like to swim together and I'm assuming that he's telling me something of his dealings with filling their orders. 

Peter McCormack: Well, he's doing a lot of work to promote this as well; he's doing a lot of media work.

Willy Woo: Yeah, I guess MicroStrategy's now a Bitcoin company.  He makes $50 million a year in his software sales and he's made $0.5 billion in Bitcoin gains in the last couple of months.

Peter McCormack: Well, it's similar with Square.  Square did amazing with their $50 million purchase.

Willy Woo: Why do you think they bought so little?  That's such a cash-rich company.

Peter McCormack: I wondered that; so, two things I was wondering.  I wonder if that was an easy small amount they could do; I don't know what rules the company has around their treasury and what they can do.  I wonder if that was easy.  Or, I wonder if it was a test, an obligatory test.  But, they must be looking now and thinking, "Shit, why didn't we do ten times that?"

Willy Woo: I'm kind of wondering if maybe their next move is to get banking licences and they need to be very, very conservative with that side of things to get regulatory approvals and whatnot; so, that's their bigger game and they bought a little bit, but they can't be seen to be loaded up on Bitcoin and now they want to do this next thing and they've got motives or whatever; I'm not sure, but something like that, I could imagine, happening there.

Peter McCormack: So, if we were going to round up, Willy, and wanted to conclude your thoughts for next year, you're basically saying don't sell, because we could go to $200,000, $300,000, $400,000 then very quickly, easily up to $1 million; is that your prediction?

Willy Woo: It's going to be more than right now; it's anywhere between $20,000 and $1 million, but let's say between $1 and $1 million just to be safe!

Peter McCormack: No way, man.  Listen, I'm going to put a number out there, and you're going to have to put a number out there.  I'm going to go with, I think we get over $100,000 next year; I don't think we get over $200,000.

Willy Woo: Yeah, I think they will be $200,000.  $100,000, I'd rate as very conservative, probably overly conservative.  I'd rate $200,000 upwards as a sweet spot; $300,000, not out of the question; and I do not ridicule $1,000,000.  I do not ridicule the McAfee target; a little bit late!

Peter McCormack: Well, we might not see him eating his dick either, because I think we'll all forgive him anyway if we get to $1 million!  Okay, useful.  Okay, Willy, look, if people want to follow you, where do they find you, man?

Willy Woo: Okay, you can find me on Twitter.  That's probably the channel that most publicly exists when I'm active; @woonomic on Twitter.  You can go to my chart site, www.charts.woobull.com, and I have a newsletter as well.  That's www.willywoo.substack.com.  You can go to any of those and they will all point there; look at my profile page and they'll point there.

I do have a paid market forecast letter that goes out, every sort of two to three weeks, whenever the on-chain structure changes.  It gives you an idea of what Bitcoin's next move might be.  If you're a trader or investor, it might be useful.

Peter McCormack: Right.  Well, listen, I'll put that all in the show notes then, let people see that for you, and yeah, thanks for doing this, man.  Wish you a Merry Christmas and a Happy New Year and we're going to be talking again in January, I'm sure.

Willy Woo: Yeah, looking forward to that.