WBD313 Audio Transcription

Bitcoin Bull Market Strategy - Feb ‘21 Trading Update with Willy Woo

Interview date: Tuesday 23rd February

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, we discuss the Tesla & MicroStrategy news, the recent drop in price and what retail entering the market will mean for bitcoin.

“Buy the dip is the main thing you want to do, and the only time you really want to consider selling the top is the macro top.”

— Willy Woo

Interview Transcription

Peter McCormack: Hey, man, we've got a lot to talk about.  So much has happened in the three and a half weeks since we've spoken; it's quite unreal.

Willy Woo: I know.  Everyone's saying, "When's the newsletter out; when's the letter out?" every other day.

Peter McCormack: I think where we should start, because we topped out at, whatever it was, like $58,000-something last night.  We're seeing a dip now.  For some people, they're going to naturally panic.  For me, I'm like, I expected this; but I've expected this two or three times since I last spoke to you.  We just keep going up; so, this kind of blow-off is expected.

Now, on the last one, the Willy Woo Voodoo, you set the price floor on that current cycle to $29,000 and I think it hit $29,156?

Willy Woo: Yeah, that's right.  And I'd say that's specific, though.  That's calculated and it's calculated using daily close prices; so, the result is also daily close.  So, it could drop to $27,000 within the day and then bounce back up.  I think the daily close wasn't close to the $30,000, so it didn't hurt; £30,400 so yeah.  But, it looked pretty spot on to that floor and it double-tested.

And then we had the lovely Elon pump and then I think Ruffer, the hedge fund, that bought at $10,000 decided to take profit and sell off half their coins, which was $650 million, and I think that happened after the Elon pump.  And so, I think a lot of us were quite surprised.  We thought that would really stimulate buying, but it got slammed back down and it almost looked like it was a speculator pump went up and then went back down.

But then, we had that kind of really weird price action, if you were watching it.  It just smoothly went up and up and up and then, Elon Musk did his little change of his profile to show Bitcoin.  Oh, no, that was the first pump.  The second one was the SEC announcement, and it showed us that some of that buying, that really weird buying that was just up and up and up, was actually Tesla buying their $1.5 billion.  Was it $1.5 billion?  Yeah, $1.5 billion.

Peter McCormack: Yeah.  Well, there's a lot to break down there, and I'll definitely come back to the Tesla stuff.  I think I'll start with where we're at now.  So, we're seeing a bit of a dip now.  I guess you were expecting this, right?  You talk about, in your newsletter, which by the way I am loving; anyone listening to this, go and sign up.  It's in the show notes, it's the best money you'll spend every month; you'll learn so much.  I'm loving that newsletter. 

But, you were talking about previously, when we were at $47,000, that the floor support was like $34,000 and it was rising like $600 a day.  So, you've been expecting for a while, because you're saying we're ahead of the floor support, so whereabouts are we now; what is the floor support now; what are you looking at?

Willy Woo: It's rising, it's still rising.  What was it?  Currently, it's $38,600, which is very -- and this thing keeps rising over time.  So, it's very seldom do you get it to drop even a little bit.  So, I don't think, you know that prior high we had at $40,000 to $42,000 before we got the pullback, that's probably going to be a very, very strong support zone; particularly since the floor's going to be there by the time… 

If we ever ran down there, and I'm not saying we will; if we ever ran down there, the floor support, that model's never broken in the history of Bitcoin.  So, I say that you'll almost need a black swan to break that model.  So, that will coincide with the technical support there and so, yeah, we're quite high above.  I mean, if you calculate that as where we were at the start of the day before this pullback, we went as high as, I think it was 33%.  Let me just pull it up right now.  Yeah, we got to 33% price pullback range.

Put that in perspective when we topped out $42,000 on the last top; that was in the 32% pullback zone.  So, you know, it's hot, though in the last six weeks I would say, five to six weeks, we saw a step-jump in numbers of users coming on board the Bitcoin blockchain; so, that was a very strong signal that retail had arrived.  And so, it wasn't a small graduation; it was like an overnight 3X in numbers per day coming in.  And I'm sure if anyone's operating an exchange, they'll be seeing that also.

So, it's a different dynamic now.  Previously, we had a lot of these institutional buyers and high net worth family office types buying in, and now it's a sea of people coming in with a lot of small buys.  And the price has moved up quite high above the floor and what that means is a lot of room to move.  And, a lot of the work I do is really reading the data that's coming off the blockchain.  And, when the retail come in, they're buying, but they'll buy and often the majority of those guys will buy and then leave their coins on Coinbase, or whatever exchange they're using, and not even pull them off into their personal sovereign wallets.  So, we see no data when that happens.

So, we're in this zone where, you know, in the last four months in this entire run-up, I had a very high resolution view of what's happening in the markets.  All I know now is we're really floating quite high above that floor, and retail's here.  When retail's here, it can get really FOMO-ish, right; it can go really high.  And, it can pull back suddenly too, because that FOMO can turn into fear very quickly.

Peter McCormack: Remind me, Willy, how do you calculate that floor?

Willy Woo: It's proprietary, actually!  I kind of feel if I released it, it's like a target for everybody to countertrade.  And so often, when you release signals, they cease to be true, because it's not data asymmetry.  So, I don't want to tell you how it's calculated.

Peter McCormack: No, don't.  Is this your equivalent of Grandma's secret recipe?!

Willy Woo: Yeah, a little bit, a little bit!  So, yeah, I don't want to give it out, but it does work on the capital flows that are coming through that we're seeing on the blockchain, and it's been quite accurate to date; to date, being the last 12 years of price action.

Peter McCormack: So, let's talk about the Tesla thing, right?  Obviously, you saw something weird was going on, some weird buying, and there was something posted up on Reddit, and I'm not sure whether that was true or not; but, somebody was talking about the company they worked for.  I'm not sure if they named Tesla, or people assumed it was Tesla, but they were talking about the buying strategy.

So, my assumption is, if you're going to buy $1.5 billion of Bitcoin, you're not going to fat-thumb a spot buy of $1.5 billion of Bitcoin in one go, right; you've got to have a strategy for doing it.  I don't know the daily flows, but I'm assuming at that level, you've got to be buying across multiple exchanges and you've got to have kind of strategy so you don't alert the market, you don't overpay; but at the same time, you keep picking up.  What's going on there?

Willy Woo: Yeah.  You'd probably have to talk to someone who is --

Peter McCormack: OTC.

Willy Woo: -- head of an OTC desk.  I know that here in Asia, obviously trying to match buyers to sellers but, "Hey, anyone want to sell $1.5 billion of Bitcoin; anybody; anybody in this bull market?"  That's not going to happen so generally what happens is, that mismatch gets sucked off the exchanges.  And of course, the exchanges are very, very efficient, so you tend to break that buy into tiny little bits, like you say, and you split it around all the exchanges through the entire world, actually.

Anyone who's running kind of a market neutral hedge fund, where they're trying to close those inefficiencies and extract a little bit of revenue from it, that's a very profitable endeavour; they have all the technology to buy lots and lots of little, small parcels every second of the day, very high frequency, and that kind of infrastructure is what some of the OTC desks piggyback on to; because, you know, the hedge funds have built it.

So, even over here in Asia, FTX here has an OTC portal and I think Binex has as well, and I think that's very much the infrastructure that Alameda built when they were doing their funding arbitrage.  So, yeah, the technology has been built, so you'll just see the price move; you'll see it move up and you won't see it's coming from one exchange or the other.

What we do see is, often what we see, is USDC being bought and created, I guess.  That happens on Coinbase and, I think, a lot of the US institutions are going through in that direction.  But, to be honest, I don't know exactly how that machine works over there in Coinbase, and you'd probably need to talk to someone else regarding these things.

Peter McCormack: Yeah.  Because, there are questions I have, like other things are like, once you are buying, you also don't want to be sending it all to a single wallet, because anyone looking can see what's going on there, and it becomes very obvious and it becomes an opportunity to front-run it.  But at the same time, like you said, something was going on there, like going on very smoothly, and even I could say that every single dip seemed to be being bought up?

Willy Woo: Yeah, and it was after this big shake-off, right; and, everyone was a little bit scared and a little bit gun-shy.  And yet, the price just went up and up and up.  But you know what's interesting is that, the Bitcoin price movement, I kind of wonder if there were more buyers than just Tesla? 

What is it; I worked out if you were to look at just the numbers of it, Bitcoin's in that region where the market goes up $3.40 for every dollar you buy, so you would kind of expect the market cap of Bitcoin to go up about $5 billion, I suppose.  And of course, it moved up much bigger, and I think that's because other people piggyback on top and, when they see a buy going up, they buy as well.

Peter McCormack: Well somebody put out on Twitter the other day, and I'm not sure if it's true, but I think it's something like Coinbase has something like five people in the S&P 500 who've been buying; yet, the only one we know of is Tesla.  So, perhaps there are others.

Willy Woo: Oh, right; I hadn't kept up with that news.  There are five in the S&P 500?

Peter McCormack: Well, that's what this tweet said, and I haven't been able to verify it, but that's what they said.  But, I suspect there are others as well.

Willy Woo: Yeah, it's interesting, it's really interesting, because we have been seeing a lot of -- like, you're saying how you've got to be careful and if you pull the coins off the wallet, other people front-run you.  I think what generally happens is they've already bought at that point, and you want to really wait to buy-to-complete before you pull it off.

But, yeah, in that zone, it was very, very bullish and coins were being pulled off, and we've had that quite consistently.  It definitely was -- I thought we'd pullback after that news was out.  It was a huge spike upwards and we broke the all-time high above the $42,000, and I kind of thought that would -- because, that was just on news and speculators just front-running the price upwards.

But, it just kept going up, and it was the same pattern.  Every time it dipped, it went up.  I was expecting more of a proper consolidation where the price would come back down and it would form more of a triangle pattern where, each time it came down, it would be bought up more and more; but instead, it kind of went upward in a sort of channel where, every time it tried to go down, it got bought up.  So, yeah, it was just really interesting past that point.

Peter McCormack: Yeah, I also wonder sometimes, like now, right, it's just dipped now.  As we're having this conversation, I don't know if you just saw that, it just went down to $46,700.

Willy Woo: Oh, let's have a look.  That's pretty vicious.

Peter McCormack: Yeah, but it's bounced straight back to $50,100.  I also wonder if there are some people who maybe have a target of buying $1.5 billion, but others are also saying, "We'll buy X if it drops to this price.  We're only interested if it drops.  Under $50,000, we'll buy; otherwise, let's just stay out". 

I mean, I'd love to know some of the buying strategies of these companies and how it works; it would be really fascinating to understand.  Or, if it's just, "Buy at any cost, because we know it's going to go up", if they've got these expectations of these long terms.  I don't know if it's, buy at any cost, or just buy at opportunity; I'd love to know that.  It would be an interesting thing to talk to Michael Saylor about, I think.

Willy Woo: Yeah, I mean it's normally you say, when institutions buy -- I mean, I think he went on record saying that, "You wait for the market to come to you"; but, in this kind of bull market, the price really starts to run away from you, but it wasn't an overheated zone.  So, I'd be really interested to know how they have that strategy.  I imagine they just take the advice of the traders they employ, or the OTC desk that they're using.

I'm curious at how MicroStrategy bought their coins, whether or not -- they're a tech company; whether or not they built the infrastructure for themselves?

Peter McCormack: Yeah.  It's probably something to get into with Saylor.  I'll try and reach out to him and see if he wants to talk about it.

Yeah, so this $58k blow-up; the funny thing for me, I don't ever trade, Willy.  I buy as and when.  I buy sometimes on opportunity, or sometimes because I've got excess cash flow in the business, and they're the two times I buy.  To be honest, if we weren't doing this conversation, I'd probably buy a little bit now, and I might do afterwards.  If it dips back below $50,000, I might buy some more.

I buy dips, but I never seem to sell tops, because the one problem I have is that, if I go and look at the chart now, I'm going to draw it up in front of me, right.  Since we spoke last time -- I've got it here, I've written it down.  When you and I spoke, it was when you were saying the potential price floor of $29k.  So, if I look at the chart, let's get a one-month chart.  Yeah, I've got this dip down to $29k, right; that's about 22 January. 

If I thought I was going to sell tops, when it went up to $44,000, $46,000, that felt like somewhere where I'd be, "Okay, I should sell off", because it very quickly jumped, on the 8th, from about $37,000 up to $42,000.  That felt like something to sell.  But then it just carried on.  I know it dipped back, but it just kept going up and up and up.  So, I always think, buying dips is fine, because you're in a bull market and you expect it to go up.  Selling tops in a bull market seems very, very difficult?

Willy Woo: Yeah, that's pretty wise.  I have a rule only to sell during a bull market; I only buy dips on margin, and then I'll exit when it gets toppy.  And, I've actually run a simulation of it and you kind of -- it's very, very minor returns you get from selling tops and then buying a dip.  And of course, the simulation, you have to give it a strategy and mine was just a simple moving average; you sell a bit high, you buy a bit low, and it's a big leggy.

But instead, if you flip that strategy and you go, when it crosses bullish, I buy on margin; and then, when it crosses bearish, I sell there, it's a ridiculous return.  It was just, I think, about ten times higher than the other way around.  So, I think a lot of people come into this market and they're used to buying spot position.  They buy the coin and then, they're used to selling the coin because, you know, they bought it on Coinbase or Kraken and that's what they're used to.

They haven't been accustomed to how to essentially buy on margin, which is exactly how we buy our houses.  Very few people buy the full price with cash to buy your house.  You go to the bank and you buy the rest of the, what, 70% or 60% of the house from a bank loan.  And that's essentially what you do when you go to Kraken and you buy on margin.  It turns out that's a better strategy.

I think a lot of people like you, it's not really recommended that you want to play that margin game.  It's far better to do what essentially you're doing, Peter, is just to buy, hold and forget about it.  But, you know, everyone seems to trade and if you're going to trade, I just found that it's very, very important not to try and sell the tops, unless you're a pro day-trader. 

You're better to buy dips, just like all the bitcoiners say, "Buy the dip".  And if you want, buy the dip with margin and then, when you feel like it's toppy, you can sell that.  At least you're selling the coins you bought that you wouldn't have bought anyway; so, you've still got your spot position there.  So, yeah, buy the dip is the main thing you want to do.  And the only time you really want to consider selling the top is the macro top.

Peter McCormack: Yeah, the end of the cycle.

Willy Woo: The end of the cycle; that's right.

Peter McCormack: Well I'll you what, I'm trying to develop a strategy for me which I think works for everyone else and, whilst dollar value's great, what I don't want to do is end up with less Bitcoin during the cycle.  And, the way I can see can end up with less Bitcoin is, I sell what I think is the top and the price goes up and then I have to buy some more, right; so therefore, I end up with less Bitcoin.

The other thing is where I can ever be in a position where I'm margin-called.  If I can ever be in a position when I'm margin-called or stopped out, right, then I can lose Bitcoin; so, I don't do any of those things.  But like I say, I buy dips, I stack my sats, I keep going and I'm waiting this big macro pitch to play out.

But, what I did do is, the first time I ever bought Bitcoin -- well, I didn't actually buy Bitcoin.  The first time I ever traded Bitcoin back in 2017 was on Plus500 CFDs.  And, I reopened and account after our last conversation.  I thought, "I'm just going to put in £2,000 and have a play", and all I've done is every time there's been a dip, I've bought; and I've watched it go up 15%, 20% and then I've sold.  And in the space since we had our last conversation, I've got it here, I've got it open; that £2,000 I put in is now £3,086, so I've made 50%, right.  But, it's play money; it's only £2,000.

But I felt like, what I could do is I could use this entire cycle just to learn and see if that strategy works for me and then, if it does, maybe next time, Willy, I'll actually try it.  I'll put a couple of Bitcoin or -- well, it depends what Bitcoin price is; maybe I'll put half a Bitcoin or a Bitcoin by in the next one and actually start executing that strategy.  But, it works for me; I'm not losing any money.

The one thing I would ask you though, does the reverse work in a bear market, that you sell tops?

Willy Woo: Yeah, it kind of does; it does.  I think I'd have to wrap my head around it.  Like, I had it in my head from the last bear market.  I think it's just diminishing returns, from memory.  When the price is going up, it can go to infinity, right; literally, if the US dollar goes away.  But, in the bear market, it can't go below zero; it can only to zero, so you can only capture the gain of the price. 

Say Bitcoin's at $10,000 and it goes to, say, $3,000; you're only going to capture that move downwards, whatever that is, like $7,000 of movement.  If it goes to zero, you're going to capture $10,000 of movement.  So, it's very diminishing returns, so it's not as great to short in a bear market in that regard, especially in this kind of asset class which, it's essentially an adoption curve where we're going from nobody in the world having Bitcoin to the majority of the world. 

That, by the way, is 2% of the world own it right now, so you can imagine the growth that is to come.  What is it, 1994 I think, in terms of internet adoption?  That was when we had the 140 million people using Bitcoin; or in that case, the internet back then.  It's higher than that; that was January, by the way; that was the January figure. 

So, trying to short the internet, it's not a great strategy, you know.  You might get lucky timing it right over the next few weeks or months.  And, the bear markets don't last more than 12 months so, yeah, remember the last bull market was 100X and the bear market went down from $20,000 to $3,000, so there was barely a $16,500 move.  You're not going to do the kind of ridiculous returns you get on a long market.

So, you get these people, like ParabolicTrav, who will just disappear from the whole scene.  He'll only pop up when the bull market's there, because he's on.  He'll just go and take his holiday in the Bahamas, or whatever he does!

Peter McCormack: Three-year holiday!

Willy Woo: Yeah, exactly.  Because, it's a lot of work shorting a bear market and, you know, you're playing chicken with a freight train really.

Peter McCormack: For smaller gains; that kind of makes sense.  That's one hell of a wick we're seeing right now, dude?

Willy Woo: Yeah, I'm constantly like, hmm…  I'm kind of in a neutral position right now.  I just moved out of all trades, but that looks like it's going to move up, isn't it?

Peter McCormack: Well, it depends, because there are a couple of things.  Like for example, Tesla are in a very good position, right.  They bought a bunch of Bitcoin and it turns out that they've made more money on Bitcoin in this couple of weeks than they've made in the last year selling cars.  And we've got no idea if someone like Elon Musk is getting that kind of FOMO you get after you first make a bit of money with Bitcoin.  He could be thinking, "We should put some more in", or, "I should put some of the SpaceX money in".  We don't know if Michael Saylor's raised his money and thinks this is the opportunity to deploy that $900 million; we just don't know.

The other thing that's on my mind is that I think, I feel like, there's something different going on this year.  These dips are getting eaten up really quickly and I don't know what's going on.  Perhaps you're seeing something, but I'm seeing a lot more people this time who are saying to me that, "I don't want to sell my Bitcoin ever", and we've got this maturing market for borrowing and lending, the likes of BlockFi, the Unchained Capitals, the Ledns, the Genesis, and I wonder if people these days are thinking, "I don't want to sell my Bitcoin.  I'm buying them and holding them for ever and I'm just going to leverage against it".

So, I'm wondering if these dips that are getting eaten back up, there's something going on there based on the fact that there aren't that many sellers.  It's hard to wipe out that many sellers, because there aren't many.  I don't know, you might be seeing -- are you reading anything different?

Willy Woo: I'm reading the same.  There are number touchpoints regarding that.  I did a study a while back, I just mentioned earlier, it was really a measure of this, you know, there's this term called "reflexiveness", I think.  It's a George Soros term, which is essentially this feedback loop in commodity markets, where as an asset price goes up, then there's less selling and it's a feedback loop, and it tends to go more exponential.

So, I did a little calculation from the on-chain data we had, and you can kind of measure the capital that's been stored in Bitcoin, because you can kind of see when the purchase bought and what they paid for it, and that was actually the capital they put in.  So, you can do a ratio of the capital that has been stored in Bitcoin and how that tracks upwards versus how the price moves upwards; and therefore, you get this ratio of how much the actual price goes up to the amount of buying that was done with it.

It didn't really support the theory.  We always thought, in the bull market, less and less people would actually sell because it's going up.  But actually what happened, from the data you can see that actually, people did sell into it.  These old-time whales, and we can tell it was the old-time whales because you can see the age of those coins being sold, they bought at like pennies.  So, they sold on the first bull runs and then they sold into the 2013 run, they sold into the 2017 run; and across the span of that bull market, the dollar gain of Bitcoin was static compared to how much money was coming in.

Yet, this one's been unique because that is ramping up.  As the price is going up, there's less capital needed to push it up even further, because there are fewer people selling into it.  So, I'm seeing that on the data for sure.

Peter McCormack: So, you're talking about essentially, it's a redistribution from OGs.  Every cycle, I guess some of them probably don't want to sell; some of got less left to sell, for a range of reasons?

Willy Woo: Yes.  I mean, I was saying, say you're 30 and you bought into Bitcoin ten years ago and now you've got $500 million of Bitcoin and you're 40.  You've probably got 20 good years to spend that money, so you're not really in the game of collection more Bitcoins, because it's going up exponentially.  You're in the business of selling and trying to figure out what to do with that money, because you've now got the problem of having too much money probably without a project to spend it on, like maybe Elon Musk would have a project to spend that kind of money on to get us to Mars!

But, yeah, I think it's a different mindset and certainly, the OGs have constantly been selling, and that's been creating a very nice distribution, which flies in the face of this FUD that the popular media like to throw at Bitcoin, where it's controlled by a very select few.  What we're actually seeing from the data is it's being distributed, and more and more so.

Peter McCormack: But, it's that "never sell" narrative that's coming up.  There are a few different things.  Michael Saylor said it quite a bit about that, "Why would you sell a pristine asset?  You can leverage this".  He can borrow money in the markets for 0%, right.  I spoke with Jaime, the CEO of Hut 8 Mining.  She was talking about the fact that to cover certain capital expenditures and cost, they just borrow against their Bitcoin; they don't want to sell their Bitcoin.  And, I'm feeling similar, Willy.

I had this long conversation with my son yesterday, because he was like, "Oh, dad, but you could buy that car you wanted, or whatever", and I was like, "Yeah, I could, but this Bitcoin might go up to X price".  But what I can do is I can leverage against it.  I think it's slightly different, like if you want to buy a house, I think it's slightly different, because the loan you might get against the Bitcoin is really expensive, and especially if it's towards the end of a macro cycle.

But at the same time, I did an interview with Dan; we talked about the supercycle and I've talked to a few people.  There does seem to be this change in mentality now that people aren't thinking, "I need to sell my Bitcoin".  There are a lot of people now talking about, "What can I do to not sell my Bitcoin and keep holding it forever?"

Willy Woo: I mean, it does make sense, right, because it's so scarce.  And, if fiat is going to self-destruct, I do think that we're coming into a new era of money.  I don't think it's too crazy to think that the structure of money's about to be reinvented.  I mean, Ray Dalio would talk about this as reset of long-term debt cycle.  Every time, every 100 years, we reset the money.  So, maybe we reinvent it with something like Bitcoin that backs it, or Bitcoin becomes it, I think, makes more sense there.  So, if that's the case, then yeah, you're never going to sell; it's valid.  I think we're in a -- I don't know when that will happen. 

I think, in the shorter term, I honestly don't understand the structure of what's happening behind the scenes when you go and get maybe a BlockFi loan and you over-collateralise your Bitcoin, so you're essentially giving it to another player.  They are figuring out how to make money on that by having more Bitcoins than the loan you've taken out, but essentially you're doing a margin position.  You're getting a loan on fiat, in this case, on your Bitcoin, so you're probably going to be more sensitive to selling your Bitcoins now, because a lot rides on it.

If the Bitcoin price starts to drop, you're probably going to call in that loan, or you're going to sell your Bitcoins.  You'll probably sell more Bitcoins because you've grabbed the loan to buy some stuff, than if you were just holding without the debt.  So, I do think that as people are not selling their Bitcoins in the bull market run-up, it's adding fuel to the upward trajectory of Bitcoin.  But, once that starts to turn, I could see that reversing really quick and everybody selling their coins very quickly, and we'll get the same sort of amplified downward selling that we got on the run up.

The question with the supercycle that Dan mentions is, when will that happen?  Will it not happen end of this year when we normally expect it; will happen sometime further into the future?  So, I don't think anyone knows definitely when that's going to happen.  We probably need to see data when we get closer.  We'll see it when we get closer, I think; the signs will be there.

Peter McCormack: Well, it depends who's selling as well.  I have a gut feeling that it's more likely to be retail who are looking for that opportunity to sell at the top.  I can't see Tesla looking to unload $1.5 billion of Bitcoin towards the top, because I think they potentially end up -- like, if it does happen and then Square does and all those companies look to unload those billion-dollar positions, that could be quite catastrophic for the price.

Willy Woo: Yeah.  I think no doubt it would be!  If, let's say, 25% of the S&P 500 decides to unload their positions, that would be catastrophic!  I think that when we talk about institutions, it's quite an interesting term.  It's like, "Let's create a word.  Let's call it 'institutions' and if we translate that, it means menagerie".  It means it's this kind of species which is a Tesla and then, there's this other species which is MicroStrategy, and it itself they're two different animals.

MicroStrategy is essentially an ETF without being an ETF.  They issue convertible notes and then that's how they buy more Bitcoin.  You can convert that debt instrument into the equity, which is essentially the Bitcoins; and, it tracks like an ETF.  So, I think that's a different animal from Tesla, who just actually want to use that to shelter from the inflation that's happening on their cash position.

Then you've got Grayscale; then you've got Ruffer, who just sold $650 million worth of their Bitcoin back at the $40,000-ish range.

Peter McCormack: Well, the Ruffer one's interesting, because I was chatting to Nic Carter about this, I think it was Nic Carter; but essentially, their Bitcoin position's now a free position because essentially, they sold off their original investment cost; so, all the Bitcoin they're holding now, they essentially hold for free.  And, they received some criticism. 

But, there is also that situation where some companies are saying, "We're going to have a 2.5% allocation", but if the price doubles, maybe their allocation becomes 5%, so they have to sell off.  I think, if we see an increase in these companies who are just setting an allocation, whether it's 2%, 5%, whatever, that's going to hopefully give some stability to the price because therefore, if the price drops, they'll increase their position.  Do you follow that?

Willy Woo: Would they increase their position?  I don't know.  Their directive was, "Too much of our fund is within this", you know; did it go up to 5% or 10%?  They will have a particular risk-management strategy.  That strategy is, in that particular hedge fund, they don't know if probably; they don't know that they invested in the closest thing to a publicly traded startup.  And so, what their directive was is to sell their winner to buy more of their losers.  You never do that in tech.

So, I don't know if the free Bitcoins they've got now, if it becomes like 70% of their portfolio, which I think a lot of bitcoiners who've been in the game long enough, they put in like 1% of their assets and now it's 90%; they understand this happens.  I don't know if that kind of fund would just decide to not sell anymore, or buy more, because why would you buy more?  It's already 90% of your portfolio; it doesn't even make sense.

So, I don't know if that would be the case.  It would have to be down to the directive of each fund.  I mean, Nic Carter, I think, has a fair idea of how funds operate but again, each fund is different.  You can have funds that buy and hold for long term, like Placeholder, and you can have more trading funds.  They might be playing all sorts of strategies.

When we say "institutions", they're a complete menagerie and they're almost like people; everyone's got their own strategy and I don't think we can make a call on that this will happen because institutions are here.  I can totally see institutions selling tens of billions of dollars of Bitcoin at the top, like serious amounts, because they're more actively traded.  They've got very strong risk-management protocols. 

We were pretty sure that MicroStrategy won't be selling, because I just re-watched Michael Saylor essentially reiterating, in very, very strong terms and not mincing words, to Laura Shin in her show.

Peter McCormack: What did he say; I've not listened to that?

Willy Woo: It was like a ten-minute case that, "This is the monetary network; why the heck would I want to sell?  Would I want to sell the electricity technology to buy back what we had before?  Essentially, this is the future; I'm not selling that over a silly little short-term trade.  If you're a trader, you might want to sell the top and buy the dip".  But he's in it because this is the future; so very strong arguments over a long arc of time of where we are going, without a shadow of a doubt, which I agree with.  It's just whether or not that…

The bear markets to date have been pretty rough and I'm thinking Michael Saylor is resolute in that position.  I don't know if the shareholders would be, and he'll have to weather that.  And I think anyone who's been in more than one cycle understands what it feels like to weather a bear market in Bitcoin.  So, I'm interested to see how that works out.

Peter McCormack: Do you know what though, Willy, the bear markets are rough.  I've kind of been through two now; one actively, which was the last one; the other one more passively.  But, they're rough, but in some ways they're less stressful?

Willy Woo: Oh, it's so great that you can take a break.

Peter McCormack: Yeah, like the scammers go away, my emails have more of a break, you can focus on building things.  It's a bit more stressful now.  There's a lot more pressure on your time but, I don't know, there's something enjoyable about a bear market. 

Willy Woo: I agree!

Peter McCormack: I guess, if you sold near the top especially as well!  I remember a friend of mine in the last bull market, he came to me when Bitcoin was about $2,000.  He was thinking of getting in and he bought a few Bitcoin, and he contacted me when he sold at $19,000.  I was like, "Mate, you've killed it"!

Willy Woo: Yeah.  Was the luck, or was it just he was a pro?

Peter McCormack: No, I think it was a bit of luck.  It went up, he thought it was a good time to sell.  You know when it hit $20,000, dropped and bounced straight back up?  On the bounce back up, he sold it.

Willy Woo: Oh, that's perfect; that was absolutely perfect.

Peter McCormack: Yeah, whereas I held that shit all the way down!

Willy Woo: Yeah.  You see, even if you sell, maybe you sell half, something like that.  Or you at least know, if it goes up, you should be happy; if it goes down, you should be happy.  Unless you're the other type that's going to be sad either way!

Peter McCormack: What are your views now on the wider macro cycle, because I had a conversation with somebody yesterday and they've talked about, there was a tweet that went up from Cobain, who seems to always be very accurate with his, talked about $800k by November, talks about $200k Q2, and then a very painful Q3.  You've talked about a $400k potential top. 

Have you got a changing view over the wider macro thing; what are you looking at; what are you seeing?  Because, we're at the stage where we've got corporate FOMO and these people have got deep pockets; and, that's against a backdrop of wider economic problems.  And, we've also got the kind of first-ness of nation state adoption, the kind of messages of the rumour of Kenya adopting, the senator in Nigeria saying that Bitcoin makes their currency look effectively worthless.

My assumption is someone somewhere within the central bank or government has got to be looking and going, "Hm, we might want to think about this".  If we start to see a wider corporate FOMO and a wider, potentially even nation state, we could really see something like we've never seen before, right?

Willy Woo: Yeah.  I've thought about it from a while back, that we're used to these four-year cycles and we're locked into the gravity impulses -- not the gravity, but essentially the impulses of the block halving every four years.  But at a certain point, that kind of supply shock which gives it a shove becomes weaker and weaker and weaker.  And, I think we were talking about it on your show the first time where actually, the selloff from exchanges to pay their salaries and profits and move it into cash, is actually more significant than the sale pressure of the miners now.

So, the halving cycles become less important and what's happening in the macro space, the traditional markets, who's buying, who's selling, becomes more important.  I kind of thought that might happen in another four years, but I did not initially think that suddenly, we'll have all of corporate America starting to look at buying this stuff.  Certainly, that's kind of an order of magnitude of buying power that we've seen before -- well, we've seen that once before. 

I saw that in that first really crazy bull market in 2012 to 2013, and we had Mt Gox that was live and people around the world could buy the coins, instead of having to figure out who was mining it and trying to contact them.  And so, that was a big mismatch in buying power, compared to what was traditionally there.  And, we're seeing this now with these huge amounts, trillions of dollar sort of corporate treasuries looking at buying in.

So, yeah, Dan's supercycle, Dan Held's supercycle; for sure, that's got a very definite logic there.  But, one thing I do is I don't try to say that we're going to do this and then going to do this, then going to do this, because what I want to wait for is to have significant concrete information that's coming off the blockchain, or coming off exchanges; or, I just want data to be able to see whether or not that's possible. 

And, I want to look at the models, and the models currently point to $200,000 to $300,000, but they're constantly moving and changing.  So, I'm looking ten months into the future with that model but really, the majority of the models that I have, and from the data, it's only within three months ahead and so, I can't make a call whether we're going to go up, down or this.  That's probably more behavioural economics of looking at the participants.  You can make guesses for sure.

Peter McCormack: But, I guess you get surprises, right?  I mean, before we had Michael Saylor, we had a price that was trying to get above $10k and stay above $10k; and then we had Michael Saylor comes in like a whirlwind and changes everything.  And then before we spoke last time, we didn't have Tesla.  Tesla's a game-changer.  I guess if, in the next couple of months, India comes out and says they're putting $5 billion of Bitcoin on their balance sheet alongside their gold stocks, again that's another game-changer.

So, I guess things can change quite significantly and you have to react to that.  But at the same time, you're still going to be using the on-chain data; you're still going to be looking for indications of what's going on?

Willy Woo: Yeah, exactly.  It's a pity I can't see which countries they're coming from, because wouldn't it be funny if it was India buying, because they banned it; and you've got 1.5 billion people going, "Buy Bitcoin; buy Bitcoin"?!

Peter McCormack: Well, I was told there's more buying coming in from South America, I don't know if you've seen that?

Willy Woo: I guess LocalBitcoins is the place to look; I don't monitor their data.  Do you see that Bitcoin's just pumping right now?

Peter McCormack: Yeah, I know!

Willy Woo: Buy; buy!

Peter McCormack: We started this conversation and Bitcoin was at $54,000.  And then, during the conversation, it went down to $46,700, and now it's basically back up to $54,000!

Willy Woo: Yeah, it's just insane!

Peter McCormack: Yeah, do you know what, it's been that year that I wouldn't be surprised if we get another all-time high today.  Like, later today, we're at $59,000, because of the way this weird year is happening!

Willy Woo: Yeah.  I think, if it gets past the -- I'm looking at the resistance; if it gets past that, yeah, it's going to go.  Well, it's going already, but it's a funny thing, this Bitcoin price.

Peter McCormack: It is this year though.  I don't remember in 2017 these dips getting eaten up like this; I just don't remember it.  Maybe it did; I just don't remember it, but there must have been some big --

Willy Woo: Oh, they were more volatile, actually.  I mean, we're kind of mind-blown by the thousands of dollars of movement, but --

Peter McCormack: We should be looking at percentages really, shouldn't we?

Willy Woo: Yeah, looking at the log chart, it's like, "Why is it so smooth?"  We pulled back, what was it; it was that tiny little wick and everyone was freaking.  It went from $58,000, just below $58,000 to $54,000.  It dropped down $4,000, which is a tiny little dip for Bitcoin.  It's like, yeah, 6%.  That was the bottom of the wick, you know.

Peter McCormack: That's a lot of volume pushing it back up now though again; look, $54,000.  Listen, I've got a couple more questions before we finish off. 

So, another thing that stood out to me was, I felt like we got through $50k pretty easily.  I expected it to be some kind of psychological barrier.  And, we bounced against it once and then Saylor announces that he's doing another convertible note, so that gave us a push.  Are you expecting any kind of -- like, how important are these psychological numbers, these kind of milestones?  Because, I look at something like $100,000 and I think anyone who's sat there with 10 Bitcoin is thinking, "I'm a millionaire".

Do you get these psychological barriers, or is it just not relevant?

Willy Woo: I think they're relevant.  We hit the $1,000 barrier and then we had $100 million was a big one, wasn't it, around $6 million, and we just stuck there for a long time.  I was surprised that we sliced through the $1 trillion mark very quickly, but it looks like we came back to retest that.  But, yeah, I think it makes a difference, I think it does. 

I think that maybe we had this kind of new cycle, and just the FOMO just on overdrive the last few weeks, we were able to slice through it.  I think, if we were a much more tentative market, these barriers would be a little bit -- the psychology of these round numbers would probably have been a little bit stronger.  I put weight on it.

Peter McCormack: Yeah, it's a strange one on these psychological barriers, because on the $1 trillion, I was similar.  I mean, I know it's a moving target, but it seemed like it for, I don't know, was it half an hour or an hour?  It seemed like to bump up and then was a flat price and it didn't move.  And then suddenly, we were through and we were gone.

Willy Woo: You know what though, we won't think of the $1 trillion mark as a resistance.  I don't know about you, but I was listening to some of the stuff, like the conference that Michael Saylor put full of corporates.  And, what was interesting that we were wanting to buy cheap, right, "Oh, it's too expensive for us now, it's like $50,000 or $40,000", whereas institutions are waiting for it to be de-risked, so they want to buy it expensive.  So, at $1 trillion, "Now we can buy it"!

Peter McCormack: Yeah, a couple of years ago, Travis Kling was saying to me, a year ago, he was saying, "Listen, there are some people who can't buy until it's over $1 trillion market cap, because it's seen as too small; it's seen as too risky", and I was like, "What?" and he was like, "Yeah.  They just can't buy it".

Willy Woo: They'll get fired for buying it for less than $1 trillion, so no one wants to get fired.

Peter McCormack: Yeah, it's a really unusual thing for someone like myself, who's not a trader; really unusual.  Right, listen, before we finish off, anything else you're looking at; anything else you're thinking about; anything on your mind?

Willy Woo: Yeah, I was trying to figure out this big sell-off, and the very peak of it started when there was a little alert that we had $1.5 billion that just moved into the exchanges to sell; the assumption was to sell.  And, I think that spread amongst traders, and we started to see the sell-off pre-empting that. 

I was just talking to Rafael, the CTO of Glassnode, and just saying, "Is this legit?" and it looks like that was actually a labelling error on the wallets, and there was just an internal movement of coins within Gemini.  That might have been what killed our momentum.  We had plenty of room to move downwards, because we were floating so high above the fundamental floor, but yeah, that might have been what caused this crazy selloff and it was just fear incited by bad data, which is pretty interesting to me!

Peter McCormack: I've had the chart open the whole session we've been doing, and it's been fascinating to watch.

Willy Woo: Yeah, it's crazy little wick down now; it's not even little.  Yeah, we're hypnotised by the chart right now.

Peter McCormack: Yeah, well we're above the wick down from that one just below $58,000.  I tell you what, I'm going to crack up if we do an all-time high today.  Imagine we finish the day above $60k; that's going to be hilarious!

Willy Woo: I tell you, that kind of wick, when it goes that deep and it's rejected, that's ridiculously bullish for the next few hours and days ahead.

Peter McCormack: When it's rejected though, what does that mean; what's going on down there?  How is that being rejected?

Willy Woo: Well, what it's saying is, "I'm selling, I'm selling".  There's everyone scared and then buyers are coming in and saying, "I'll buy that, I'll buy that" and so, you can't force the price down, because there's very, very strong buying going on.  That is a bargain, so we never got price discovery for very long down in that range.

Price discovery happens when it moves sideways a bit and they're kind of agreeing.  But, when it goes way down, asymmetrically downwards, and it gets bullet up we know, okay, it's cheap down there; it doesn't belong down there; it belongs up here.  So, that's what's just happened right now.

Peter McCormack: Interesting.  Well listen, Willy, love chatting to you, I learn so much from you.  Anyone listening, just definitely go and check Willy's email out.  Sign up; it's well worth the money.  I subscribed.  He did offer it to me for free, but I subscribed; it's well worth the money.  Listen, dude, appreciate it.  Tell people where to go and sign up, where to follow you.

Willy Woo: Yeah, just go to my Twitter profile @woonomic on Twitter.  The links are from there.  I write on Substack, it's willywoo.substack.com; but, yeah, just go to the Twitter profile and there's the link there.

Peter McCormack: All right, nice one, dude.  Well listen, look, take care, Willy, and I guess I'll see you in a month and we'll see what weird shit happens in the next month!

Willy Woo: Thanks, Peter, it's been fun talking.