WBD305 Audio Transcription
The Bitcoin Shakeout - Jan ‘21 Trading Update with Willy Woo
Interview date: Sunday 31st January
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 run-up to $42,000, what the on-chain data indicates, price targets for Bitcoin and how to call the top.
“It would take a black swan to push the price below, essentially what we bottomed out at, in the $29,000 range on the daily close… it would really take something extreme.”
— Willy Woo
Interview Transcription
Peter McCormack: Good to see you, Willy. How are you, man?
Willy Woo: I'm doing good, Peter, doing really good.
Peter McCormack: So, it's been quite a busy month since we spoke last!
Willy Woo: Yeah, I guess so. It's been a bit FOMO-ish, hasn't it?! Not much sleep over this side of things.
Peter McCormack: Yeah, I can imagine, man. I'm trying to remember what date it was we actually spoke. We spoke on, I've got it here; we spoke on Tuesday, 15 December, and I'm just going to look at the price of Bitcoin on Tuesday, 15 December.
Willy Woo: Tuesday, 15 December, okay.
Peter McCormack: That's taking us way back to around --
Willy Woo: Oh my gosh, that was just before it teleported up, right?
Peter McCormack: Yeah, so we hadn't even set the new all-time high, we were just jogging around there.
Willy Woo: That's right.
Peter McCormack: Bang, we set a new all-time high, we race up to $42k, and now we're in this choppy area. But, okay, before we start, just give me your whole read on that entire move?
Willy Woo: Okay, so we'd been rallying from mid-October from $10,000, $11,000, in that premise of, Bitcoin's dead; it's going to go sideways for the rest of our lives. And then, unbeknownst to us, the big whales kept coming; the Michael Saylors of this world were slowly sweeping up coins, and it was actually October, there was a supply shock that happened and it caused this entire rally.
Then, we bounced off the 2017 December all-time high, just below $20,000 and all the time, every time we had an all-time high, there's resistance. And, we're chopping along and actually, the structure was actually longer-term consolidation, little bit sideways, little bit downish, and then Michael Saylor suddenly decides he's going to raise $650 million in bonds and then he's going to buy Bitcoin. But, rather than just doing it, I'm imaging that he's got some compliance being a publicly traded company, he announces it to the world that he's completed the raise and about to buy Bitcoin.
It was around $18,000 and immediately, all the traders on exchanges started to front-run him and we hit just below $20,000 and it sort of wandered there for a bit, wearing down the resistance in the cell walls there. And the whole thing just took off and it went straight to $23,000 in a matter of 48 hours or something; 36 or 48 hours, and front-ran Michael Saylor and MicroStrategy. And they announced a few days later, they managed to complete their purchase at, what was it, $22,000, $23,000; so, they didn't actually get to buy in the 18s, and that was that sort of zone when we spoke last.
Peter McCormack: Yeah. Well, I bought a bit more at $17,500 before I knew Saylor was going in. I was just like, "I've got to do this".
Willy Woo: You got the dip?
Peter McCormack: Yeah, I got the dip. I think I averaged it at about $17,800 to be honest, but I was happy with that. And I'm not a trader, but…
Willy Woo: Well, if you're buying to hold, that's the thing. This thing's going to $200,000 and upwards, and who's going to sweat a few hundred bucks or a few thousand dollars?
Peter McCormack: Exactly.
Willy Woo: I saw so many people waiting for more of a dip, more of a dip, and then they missed and then it ran to $23,000 and they were waiting for dips, and then it ran higher and they were waiting for dips. That's what happens.
Peter McCormack: I'm not much of a trader, but when I look at the chart and I see some dips, I kind of tend to look at something and if I see quite a big wick, I'm like, that feels like a good dip for me to jump in when I jump in. But, I'm not a trader, I'm not creating lines on charts, but that $17,500 just felt like a good one; it looked like a good dip for me, as somebody who doesn't trade actively. It felt like a good point to long a bit more Bitcoin.
All right, so that took us over $20,000, got us comfortably into a new all-time high, but then we pretty much doubled from there; we went up to $42,000. I didn't expect that, man; did you expect that?
Willy Woo: Yeah, totally.
Peter McCormack: You did?
Willy Woo: It was ridiculously bullish. And, I recall there were so many people waiting for it to retest the $20,000 zone, which often happens; whenever you break resistance, you retest before shooting up. But, just a tidal wave of money was coming in and it was very visible on chain. In fact, it's been very fortunate for me over this phase, because it's a phase where fundamental money is coming in and it's coming in through the spot exchanges, and you can see those flows on the block chain.
So, it's unlike the last two years, where we've had a lot of exchange-driven trader activity on futures exchanges moving the price around. Right now, it's dominated by real money coming in in great swaths, and you can see that on chain and I know a lot of the technical traders have been kind of rekked by trying to short this thing, looking like it's overheated. And, it gets overheated, it's signalling overheated, and it just goes up and up and up.
This is one of the things that Bitcoin does, you know; it has a habit of teleporting upwards without retesting the lows, because it finds a new capital base to draw capital on, and we've seen this through the entire history of Bitcoin again and again and again; from the early days of, say, Mt Gox opening and then the price teleported up something like 10X at the time, way back in those early, early days, because the whole world had access. They could see in Mt Gox money and they could buy Bitcoin, when previously it was very difficult to buy.
As late as the 2017 phase when the Winkelvoss twins announced this ETF attempt and it was published in the Wall Street Journal, we had all these high net worth individuals that read the Wall Street Journal go, "What, it's not drug money; it's not for money laundering; it's actually a legitimate investment?" and we saw this influx of capital and it just moved up a gear. It never retested down, because new capital was coming in from a new source at a larger scale than previously.
That's how I look at what's happening right now, is that we've just unlocked the next level of capital inflows, and it's ridiculously large compared to what we've seen before.
Peter McCormack: And so, do you think we've got a new capital base around $30,000 then; are you pretty comfortable around this area?
Willy Woo: Yeah. I think that we're just at this consolidation band. The buying momentum has stopped; it's pulled back; and actually, a lot of the pullback has been -- you know, we've had such a strong rally that we've had a lot of new people buy in under an immense amount of FOMO. And, whenever you get these strong rallies, whenever it pulls back, the weak hands, the people who aren't very strong, they get shaken out.
We saw that, actually, I can analyse this on the blockchain, and you can see the coins that are moving right now in this consolidation band from $42,000 down to the low of $29,000. The age of the coins, the vintage of these coins that have been sitting inside the wallets have been very, very young coins; they haven't aged much. So, it's very much these young guys, well not young by age, but the coins are young; they just got scooped up, they just got bought and then they got freaked out and they're being sold.
And, what's happening right now is the buyers, either very, very wealthy people, the whales that have 1,000 Bitcoins or more, whether they're new or not, they're very sophisticated, because if you're going to hold $30 million, $40 million of Bitcoin, you are a sophisticated investor. And, we can see that the coins are moving to these wallets that are -- you can analyse the behaviour of these wallets, and they're moving to wallets that are controlled by participants that tend to buy and hold, tend to buy and hold, without selling much.
So, it's very much this picture of weak hand selling to strong hands, and we bounced off the $29,000 floor and I think we're just consolidating. We've reset the overheatedness completely and we just need to wait for this consolidation to complete.
Peter McCormack: I think, I don't know if you saw them, that company, NexTech, who had bought something like $4 million of Bitcoin a few weeks ago, and when we had the double spend FUD the other day, they sold?
Willy Woo: Oh, yeah, like --
Peter McCormack: Yeah. They'd made like $200,000 or something.
Willy Woo: Oh, did they? Oh, okay.
Peter McCormack: Yeah, the article said $200,000 they'd made. But then they quoted the fear of what was happening with the double spend, which obviously was FUD, but it was quite interesting, because I almost feel like if that's shaken them out, that almost feels like it's a CEO's decision and either he's panicked, or the board has panicked, but they weren't really into this for the long run; they didn't really sit down and say, "Okay, this is like a 5-year, 10-year, 20-year hold for us".
Willy Woo: Are you saying that they actually -- I have been keeping up with the news; I actually don't follow the news much because it throws me off! But, are you saying that they actually announced that they sold because of the double spend?
Peter McCormack: Yeah, listen to this; I've got it here. "Vancouver, British Columbia, NexTech, AR Solutions, a leading provider of augmented reality… etc… today announced it sold its Bitcoin ownership of approximately 130 Bitcoins and booked approximately a $200,000 profit. The CEO comments, "Our investment in Bitcoin in the past was part of our capital diversification strategy with the intent to maximize long-term value for our shareholders. The sale reflects our awareness that something potentially has changed with Bitcoin, which is seen as the digital version of gold. The news that has emerged is that a critical flaw, called a 'double spend' may have occurred, which if true allows someone to spend the same Bitcoin, undermining faith in the system". So, they actually quoted the double spend!
Willy Woo: Well, this is actually from that, this is all I read from the entire article; all I read is how many Bitcoins do they have and how much profit did they book, and I'm like, okay, they bought enough Bitcoins, which was $3.5 million worth of Bitcoins and they booked a $200,000 profit, which means they'd held these coins for a very short amount of time.
Anyone who has $3.5 million of Bitcoin knows that their balance fluctuates by roughly that $200,000 balance within days. So, they were one of these weak-hand sellers that came in and changed their minds.
Peter McCormack: Yeah, it was funny, I was talking to Dan Held last night, and we did a show talking about cycles. And I said, it's really funny, these cycles, because you really have to experience a full cycle yourself just to become comfortable with it. I was explaining how my first proper cycle, the 2017 one, I kept making that stupid mistake where the price would go up and you're like, "Shit, I should have bought some". You buy it and then it drops and you're like, "Shit, it's dropped and I should sell it", and you almost start day trading like a panicking idiot.
Now, I've been in it for a full four years, you see a drop from $42,000 to $30,000 or $28,500, whatever, and you're like, "Okay, Bitcoin's doing its thing". But, you have to go -- you can't teach somebody that; they just have to experience it.
Willy Woo: Yeah, you can see it on a chart, but you need to be exposed to the emotional ride of it before you get that kind of intestinal fortitude to really be in this asset, which is the highest return in the world, the highest risk-adjusted return in the world. But, yeah, to be able to get those kinds of returns, you have to be very able to handle the volatility, because there are no kid gloves in the real world out here.
Peter McCormack: Let me ask you. So, I've got a personal question before you get going; something I want to ask you. How much do you look at macroeconomic data versus on-chain data; are you just primarily taking your read from on chain, or are you looking at wider macroeconomic data?
Willy Woo: I've found that the only bit of information I pull in from macro is the DXY, which is the US Dollar Index, because that's the only one that I see a very high correlation to Bitcoin with. Outside of that, there's a lot of macroeconomics stuff that floats around, and a lot of it's narrative, because there's no data. Well, the data isn't very prominent; it's, "Such and such is going to have this policy". With that kind of stuff, I think it's not very precise and the timing's not so great and there's narrative of, "If this happens then that might happen then this might happen".
So that, really for myself, I capture that on chain, because all I'm looking for is, are people selling or are people buying, no matter what happens on that machine, which is relatively amorphous and slower in its timeframes. So, you can't really make a decision over the next three weeks or six weeks what to do. But, what you can do is, if that impacts buying and selling right now, you can see that on chain and then you can immediately know, within two to three to six weeks, which direction the price may go because of it.
So the short answer is, no, I don't really look at the majority of the macro, but I do look at the stuff that's totally correlated, which is the US Dollar Index, as the only thing that's highly correlated right now.
Peter McCormack: Right, okay. Because, I was looking through Twitter before we spoke, and a few of, like you say, the technical traders, they all seem quite bearish. And, I've seen quite a few people calling $24k, $25k as a potential next step down. But you've also, when you're looking on chain -- yeah, see, you're laughing! For you, this period of profit-taking has completed.
So, if it was to take that step down, what read would you get on that? Is that people actually then selling at a loss; is something weird going on there?
Willy Woo: The only time these kind of on-chain models I've experienced break is in the COVID white swan, and a lot of that is very, very short timeframe stuff where everyone freaks out and they dump. And, normally what happens is they go really down into a deep pit and then it rebounds and comes back to the norm of what the fundamentals say. But, that is a 1-in-100-year pandemic and we saw that and it broke the models, but that's what a black swan is meant to do; it's meant to break all your models.
If that happens, then the model's either broken, or something -- we've had a black swan. So, I've been doing these tweets lately where, you know, I've had a lot of pushback on them; people say to you, "Never say never", and I've been saying, "We'll never go below $20,000. It will take a black swan to go under X amount; it changes every week", and people say that's really foolish.
But, what I like to do is put something falsifiable out there so that if you're wrong, someone can point you out. Because, you can say something that's fluffy; so one of the things right now is, for me and the models I have, "It would take a black swan to push the price below essentially what we bottomed out at, in the $29,000 range, on a daily close, maybe slightly below", but it would really take something extreme. And, that's based on the amount of money that's come in.
Technical traders, these are kind of mechanical machines that look at assets when they're up, overheated or down. And actually, a lot of these were designed on stock exchanges, stock markets, commodity markets, where these things trade at saturation; and Bitcoin's like this tiny, little startup. It's like 2% of the world and it's going for it, you know, it's going to get to 30%, maybe 50%, maybe 100% like the internet adoption curve.
So, you have this really strong bullish pressure upwards and you will notice, you know, you've been in this for a cycle now; you'll notice they do these crazy step changes up that sort of consolidates, and then it goes up again. So, most of the majority of the time, you will see the needle go to overheated red, if you're a technical trader. This stuff works really well in short timeframes, but when you pull out to multiple days and weeks, they tend to break down quite often.
But, I enjoy that there are people in the market that are expecting bearishness, because --
Peter McCormack: Time to buy.
Willy Woo: -- that helps the bull side of it. When so many people are shorting, it actually allows the price to rise, funnily enough. It's just the way the derivatives market works.
Peter McCormack: So, can you explain that so that other people would understand?
Willy Woo: Okay. For example, let's say the majority of the market is bearish, okay, what happens is suddenly it becomes very, very profitable to take the other side of the trade, because anyone who's in a trade, we're not talking fundamental investors here; we're talking about people who are going to bet on one side of the trade and they will always put a stop loss essentially. If the price goes in the other direction, I'm getting out of the trade; so, I've sold X amount of asset, Bitcoin, which I don't actually have. I'm going to exit that trade and buy back if it goes above a certain range.
So, when the majority starts to come down and short this thing, and you'll read this on the funding rates; it becomes very, very expensive to short, and you'll see the amount of contracts that have been put in position. When you see that and everyone's short and the open interest, what we call the number of contracts on the market, is very high, it is incredibly lucrative for someone who has a lot of funding to just keep buying up Bitcoin until the price pushes over the stop loss limit. And then, this is what we call a short squeeze.
So essentially, it's super lucrative and actually, there's a whole strategy around trading where you squeeze short or long out; long squeeze, short squeeze. And so now, we've got very high volume futures trading. It just becomes… Whenever you see the market go in one direction, there's no way those guys will ever make money, because there's too much money on the line to take money off those guys.
So, you'll notice that, if anyone's trading Bitcoin, it's very well known that whenever the funding rates go in one direction, the price has to go the other. Very seldom can it move. You'll be looking for these windows. Like right now, we're waiting for a window where everyone's scared, because whenever the price drops a little and then it starts to move up, everyone starts longing. And what we're looking for is people who are -- this kind of phase where people are so defeated and scared to go long; that's when the price will go up in the short-term timeframes. It's a game, you know.
Peter McCormack: So right now, if it keeps dipping around, if it looks like it's struggling around this £30k mark, it just keeps trying to shake people out, keeps trying to shake people out?
Willy Woo: Yeah, essentially, or they get bored, or whatever. That's it.
Peter McCormack: How privileged are we to be pissed off at $30k?!
Willy Woo: I know! And like, you zoom out of this, I'm looking at the long-range chart; it's just such a tiny, little consolidation, and you need that. If it didn't consolidate, I'd be very scared.
Peter McCormack: Willy's long, man, so I'm going to stay long. I never trade anyway, so it doesn't really matter. It's saying on TradingView, it's saying it's neutral at the moment, in terms of the chart.
Willy Woo: Oh, let me have a look. I haven't been looking at the charts for the last at least 24 hours.
Peter McCormack: Yeah, I don't know how reliable it is! All right, so listen, I've been diving through your email quite a bit. By the way, anyone listening to this, just go and sign up to Willy's email. Listen to this, go and check it out on the show notes; it's fucking brilliant. Really helpful, but I do have a couple of questions. Can you explain to me what is "responsive capital flow modelling"?
Willy Woo: Oh, it's just layman's term. It's modelling the capital that's coming into Bitcoin and it's just a very responsive model. So typically, a lot of the models we use, you get this sort of zigzag, zigzag, because things fluctuate a lot. So, a lot of what we do is we run a moving average over it to smooth it out to see the greater trend without the noise, and trying to improve the signal to the noise. And that, in effect, creates a lag. And so, if things are suddenly going bullish, you won't know about it until a number of days or weeks later; and so, this model is actually a very smooth model. We're looking at the capital coming in and you don't have to do that kind of smoothing on it to get signal, because it is very high signal coming in from it, so there's absolutely no lag on it.
So, for example, technical traders who are listening to this might think, we might use a moving average support, because normally when the price outstrips the moving average, it will come back and retest it. But, that's not very responsive. With this model, it's just, "How much money came in? Okay". It teleports the floor price upwards, so to speak, so that's all. It's responsive so I can be very, very, I guess, confident in its readouts. It's a tight model.
Peter McCormack: Right, okay. And then, the next thing I wanted to ask you about was the SOPR chart.
Willy Woo: SOPR, yeah.
Peter McCormack: Yeah, because I saw a couple of people post this up on Twitter as well. Can you explain what that is to me?
Willy Woo: So, SOPR is the latest -- I always think of soap! SOPR is Spent Output Profit Ratio, which is very Renato. He's a very technical guy. He just called it what it actually is. If you're really technical, you're looking at essentially, within a day, you're looking at the coins that have moved within that day. And so, you want to look at how much profit did they carry at the point in which, when you look at the coin that moves, just the way the Bitcoin works is, you actually know when those coins arrived in the wallet.
So, you're looking at essentially, how much profit did that person, that investor have when they moved it out of their wallet; essentially have spent this. So, this is a ratio of the profit to loss peak. And, when it reaches one, that means the coin's changing hands between people that day, investors that day, carry no profit on average. So, in layman's terms, it's essentially a read-out of profit-taking.
You will notice that SOPR starts to climb higher and higher and higher as the price rallies, because anyone interacting on those coins has made some profit. So, anyone who moves Bitcoins will have this profit with it. And what happens with SOPR is once the price starts to dip, SOPR starts to dip, because there's less profit to be made.
So in a general market, when the price starts to drop, the people who are in profit want to take their profit off the table and they want to capture it, so they sell; that adds to the sale pressure and you get this sort of compounding effect where the price drops and then there are more sellers; the price drops; more sellers; and we can track this on SOPR seeing, "Ah, these guys are taking profits off the table". And then eventually, it hits this 1.0 line and the ratio of profit to losses are exactly the same; and, that means the market has no more profit to sell. Then, that's when we've reset. People don't want to sell at a loss, so that allows the price to move up, and that's the reset that we look for.
Peter McCormack: It very rarely goes under 1.0?
Willy Woo: It only goes under 1.0 in sort of bearish phases of the cycle. It does not go under 1.0 in the main phase of the bull market. It may dip slightly below it and that is the point to buy. We reached that just a few days ago. We've totally reset SOPR on at least the short timeframe one-day chart. SOPR does not reset on the weekly chart at all until the top of the market
Peter McCormack: Right. How much do you compare previous cycles as well, because there was a chart put up by CryptoCobain where he basically showed the first 30% dip of 2017 and it looked very similar on the chart to the dip that we've just had now; do you look at that?
Willy Woo: I do look at previous cycles, all previous cycles, but I don't like to look at it just on the price domain. There's a lot of fractaling in this price pattern, that price pattern; but, what I do is I look underneath the price pattern, I look at different domains of it, so whether it's the volume happening on chain, or the SOPR, or any number of models that are looking at different aspects of that network. And then, we can compare it on that domain.
So sometimes, you get the price looking very, very similar, but the drivers underneath on the network and how investors are interacting are completely different. So, whenever you see patterns of that and, you know we can see, for example for SOPR, we can see every time in a bull market that it hits the 1.0 line and the price rallies upwards, and that's a very strong model.
And I'm looking back over all the previous cycles. And I like to see it from, I mean, all of them. So, there's the fourth cycle; I want to see the third cycle, the second and the first cycle, because each one of those cycles has a completely different dynamic, but if you can find something that's repetitive across all of it, you've got something that's probably going to work in this cycle, because this cycle's completely different as well.
Peter McCormack: It feels like this cycle, one of the things that's different is that we've got some strong hands coming in to buy who will be holding for years, maybe never selling. I was reading about the endowments buying yesterday, I was reading about different companies buying, obviously Michael Saylor, Ruffer, MassMutual as well. These don't feel like companies that are going to be selling next year for a profit; these feel like the type of companies who might realise that it's probably the best asset they'll own, the last one they should sell. It just feels like the strongest hands we could possibly have. Is there anything you're seeing in the data that reflects that?
Willy Woo: Not yet, no. A lot of this on-chain stuff can tell us where we are in the market, about the four-year cycle; it's very good for that. It can also tell us where the price might move within the next two to three weeks. It might tell us where it might move in the next three months. But, that window of what will happen at the next hop and after it, I can't see it yet. I can get maybe a timing signature, but I can't see the high resolution interaction of the investors. I have to wait until we get closer, so anything around that would just be narrative and guesswork.
Peter McCormack: Okay. And what is this "Mother of all impulses"?
Willy Woo: Oh, yeah. I have this chart and I call it amorphously, what did I call it; Bitcoins Changing Hands. So, it's really a measure of essentially that; how much of Bitcoin supply is changing hands between investors. And what you'll notice if you look at that domain, you get these impulses of coins moving between investors. They do these little pulses and the pulses, they're like little pushes on the price.
You'll see it whenever the price goes up, and then it changes direction sideways, or maybe it goes down. There's always a little impulse and there's like, "Oh, there's a peak activity of investors moving". And one side of the trade is like -- there are buyers and sellers, and one side is going to be the smarter side and they'll push it in another direction. And so, you can look at the scale of those impulses. The stronger the push, the more the price goes in a direction.
If it's a really strong push, the mother of all impulses, like we have had, then the price goes wee! That was the $20,000 to $40,000 "wee" we saw; it just squirted this outwards! It was ridiculous amounts of investment activity moving, and then it was all FOMO buying, buying, buying; not all FOMO obviously, but a lot of it buying. So, we're just pulling out of it.
Peter McCormack: We could see a lot more of that this year.
Willy Woo: Sorry, what was that?
Peter McCormack: We could see a lot more of that this year, right? We could see -- because one of the interesting things is how quickly the price moves up now. You could go up -- I think we had a couple of $5,000 daily candles, which is huge?
Willy Woo: Yeah. I think that, I mean, this is getting pretty common. We're talking about this being the 2013 cycle, and I think that's a good, fair statement. I mean, even back in, when was it; 2019 at the bottom of the bear, it was already starting to look like a 2013, just by how fast everything was. The accumulation at the bottom of the market was very much looking like a 2013 and now, yeah.
I mean, fundamentally, if you think about 2013, that was the first really major bull market, when Mt Gox was online, and then we hit the halving and a global exchange that could take all the world's money, and we hit the first full bull run with this next level scale of money that was not Silk Road dealers or cypherpunk miners and people in the know that figured out how to buy Bitcoin with a pizza. 2013 was the first year the entire world could actually go and buy.
That was Bitinstant days, I think, maybe, maybe not; don't quote me on that! But, that created this immense tidal wave of capital that flowed into Bitcoin like it had never seen before. And when you see the price just wants to go and climb a sheer vertical wall, it's almost like this thing in psychics; wherever you have this crazy ride of capital pushing it, it does these waves. And even traders will see this in very short timeframes, when suddenly the thing rips up bullish. It shoots up and there's a wave; it goes higher and there's a wave; and it goes higher.
2013 was like that. There was this new tidal wave of money coming in. It hit a wave, consolidated and then moved to the next one. And the first Bitcoin experience had five waves, which not many people have those price charts, because it was pretty Mt Gox, but that's actually what happened. And I think it's the same here. We've got the same tidal wave of money coming in.
Peter McCormack: But, it's corporate money, which is slightly different?
Willy Woo: Yeah, it's institutional. We think the main narrative has been the Michael Saylors and the BlackRocks of this world, but what I've been seeing on chain is that it's not.
Peter McCormack: Okay.
Willy Woo: MicroStrategy bought $650 million worth of Bitcoin around the $22,000 range. The following week, we had something like $10 billion or $15 billion in seven days come in afterwards. That was not one institution setting low bids and waiting for the market coming to them; it was immense numbers of these high net worth individuals coming in and competing with each other trying to buy some of this, because they had the validation.
We saw this immense explosion of not only new people come in, but very high net worth purchasers coming in on chain; and whale numbers exploded. There were hundreds of whales being birthed, which is people that hold more than 1,000 coins.
Peter McCormack: Being birthed; I love it!
Willy Woo: So, we had a whale spawning season!
Peter McCormack: Love it! That's interesting. I mean, I guess there are a lot of people around the world who have got a lot of money and seeing about Bitcoin and realising they need to have some exposure to this, and I guess it's very easy for them to do.
Willy Woo: Yeah, exactly.
Peter McCormack: So, perhaps more of the corporate stuff is still to come. I'm not sure if we'll have a three --
Willy Woo: If you can imagine you're sitting there with, what, maybe you're sitting there with $200 million of net worth and you take your financial advice from maybe people like the Chief Investment Officer of BlackRock. And suddenly he says, "Yeah, this is worth investing in", and then you realise that the price is running away and you need to get your exposure on. So, definitely within friends that are inside the family office scene, they've seen unprecedented amounts of $1 million purchases of multimillionaires that need exposure, which they haven't bothered with for such a long time. It's like they needed the validation.
Peter McCormack: Yeah, well I guess they have that now. That's an interesting thing this year and again, I was talking about this with Dan last night in that 2013, when I had my first exposure to Bitcoin, which was very limited; I was just using Silk Road and trading CFDs. I didn't know what it was and didn't really care. And then, 2017, I still had this kind of like, "This still doesn't feel legit; probably going to be banned; the regulators are probably going to ban this at some point". I think we're past all that now. We kind of have that validation now.
Globally, we've got Bitcoin markets in pretty much every country in the world, the trading volumes are high, we've got institutional-grade products, we've got nation states mining Bitcoin.
Willy Woo: Yeah, and if you look at the policies being implemented now, it's like the regulation is pro-Bitcoin and it's part of the financial infrastructure moving forward. The US seems to want that.
Peter McCormack: How will you know if there's a market top; is there any way of telling that?
Willy Woo: Yeah, it's pretty easy.
Peter McCormack: Really?
Willy Woo: So, I guess you want more information on that? Okay. So, generally in the market top, the buyers stop coming in. Market tops are not formed by sellers; market tops are formed by no one else coming in to buy it at extremely high price. You actually notice that in the volatility of the asset. Normally, you have buyers and sellers and they auction back and forth. Once you don't have buyers, there's no floor in the price and it can shoot right down, and the thing just chops around. So, buyers start reducing.
If you're, say, Kraken, you'll probably get heads up, because less people are coming in to sign up on new user accounts. We'll see it on chain by a reduction of the rate of incoming users and, you know, we can see little wallets coming in and clustering and, "That's a person; that's a person", and we can count those people. And you'll see how that's rising.
In the tail end of the bull market, the thing goes into mania, you know. Everyone's just -- it's like the zombie apocalypse; they're just running towards Bitcoin and you'll see this huge spike in numbers. And at a certain point, it starts to drop, it starts to decay. And, you get a pretty good warning one to two weeks before that happens, maybe a month. Well, you're on heightened alert. You get a pretty good signature on that. So, yeah, that's how you do it. You look at the user numbers coming in.
You can look at the capital flows coming in as well. They start to pull back. The trick is to really -- it's really hard to tell a market top from a consolidation, because you'll see a signature similar, but there are certain differences. Like, right now, the capital coming in is slowing, but the amount of people coming in is as high as it can be, so people coming in and buying all of this stuff. So, it's definitely really early.
The other thing is, right now, we have an incredible number of whales coming in and buying and new whales being birthed. And, you can look back on all of the cycles and the whales come in early in the cycle, and they start selling near the tail end of the cycle. And if you've got, whatever -- well, by that time, it will be hundreds of millions of dollars of Bitcoin, you can't actually wait until after the top; you have to sell into the top. And, when you start to see the whales start to reduce their balances, then you know that we're now in that final phase. So, there are all these sorts of signatures you can see.
Peter McCormack: And I guess some whales will reduce their position, but some of them won't be able to sell out their whole position, because if all the whales start selling out their whole position, it will crash the market too much, right; there's a kind of balance to strike? And, that's where you get those big chops?
Willy Woo: Yeah, I think every whale's different and I think they invest for different reasons. I totally can see that some whales may sell completely. The market can swallow 1,000 Bitcoins; it's just, if you're the first whale…! So, the early whales might sell more; it's possible, like the first ones to sell. So, yeah, I think it will vary between whales, but yeah.
Peter McCormack: I'll have to monitor my show downloads. Once I start to see a slowdown in the growth, because right now I've got like, pow. But once I start to slowdown, I'll be like, "Willy, I've got a signal here, dude".
Willy Woo: Yeah, I mean this will be my second full-on -- I entered Bitcoin really when Mt Gox made headlines. I didn't know what it was and then someone told me; one of the developers in our startup told me what Bitcoin was. And so, I managed to buy the dip at $600 and I did research later. But, I entered in a bear cycle. I only really had the one full bull cycle of 2017 and all my learning really is from the 2017 bull cycle and kind of back-tracing it.
So, I'm kind of very much interested to see, in live trading and a live market scenario, whether or not I can figure out how close I can get to the top. The last top I actually did, I did actually have a strategy around it using NVT, which was the first on-chain indicator, to determine what was a bear phase versus a consolidation; so, that worked quite well.
Peter McCormack: All right, so we'll have to see if it plays out again then. Have you changed your top price target yet? What is it you were saying; $400,000 potentially?
Willy Woo: Oh, the top price target is -- I don't have a target like stock-to-flow. It's what we call mean reversion, you know. It's basically this thing starts to move with the price each day, so it continually adjusts and we can kind of look at the trajectory. And, it's above $200,000 currently and $200,000 to $300,000 is the sweet spot, but I don't have enough price action data. I'd like to see how this thing goes for the next three to six months and then we'll have something very solid, because it will get closer and closer to the top target, obviously when it gets closer.
Peter McCormack: Well, that's in PlanB's range, because I think his was like, what was his, like $288,000?
Willy Woo: Well, yeah, it's all consolidating. I do wonder if we get to $400,000 these days or $500,000 if this continues. The amount of capital coming in is ridiculous.
Peter McCormack: Anything else before we close out that you're looking at; anything else I should be keeping an eye on, or just sit and ride this beauty out?
Willy Woo: You should keep an eye on everything! You know what, right now, Bitcoin is currently in a consolidation band. It's on the lower side of the consolidation band. The thing to keep an eye out on right now is when we break this; like, when will it happen. Will it happen in a week when Grayscale finishes their next unlock cycle of their -- it's always been bullish whenever the initial investors that put in and put in capital and got shares, they can unlock and then go and buy more Bitcoin off the capital. And that unlocks on 3 February, so we could shoot up from there, or whether we bounce up and down. That's the thing I'm looking for right now is, how long will this consolidation last for.
Peter McCormack: Right. Well, listen, tell people where they can go sign up to your email and I'll put it in the show notes anyway.
Willy Woo: Okay, so you can go visit me on Twitter @woonomic and you can look on the profile page. Or, you can go straight to willywoo.substack.com. That's my newsletter over there. We put out a newsletter every -- now, it's like two weeks, but they're two to four weeks whenever on-chain structure changes. It gives you a good read of where the price may go within the next two to four weeks and certainly gives you a good readout of where we are in the bull cycle.
Peter McCormack: Wicked. Well, listen, I'll put that in the show notes.
Willy Woo: It's early!
Peter McCormack: Well, yeah, that's what I feel like. I'll put it in the show notes, get people to download it. Anyway, Willy, look man, thanks for coming on. I look forward to doing this next month and yeah, have a good month of trading and hopefully, next time we speak, it will be another all-time high again; that will be fun, won't it?!
Willy Woo: Yeah, it will be!
Peter McCormack: All right, man, take care.
Willy Woo: Back at ya.
