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*Ninepoint Digital Asset Group, is a division of Ninepoint Partners LP.
PRICE SNAPSHOT
(7 Day Change as of Sept 22, 2022 1:30PM ET)
Bitcoin Price: $18,967 (4.24%)
DeFi Total-Value-Locked: $54B
Ethereum Price: $1,274  (15.29%)
Crypto Market Cap: $922B
Bitcoin Range: $18,358 - $20,183
BITC.U Close: $5.68
Ethereum Range: $1,233 - $1,515
BITC.U NAV: $5.74
Bitcoin Dominance: 41.02% 0 .98%
BITC.U Discount: 0.01%
DIGITAL ASSET COMMENTARY

White House Releases Digital Asset Report

Headline: Last Friday, the White House released its report on blockchain and digital assets, calling it the “first ever comprehensive framework for responsible development of digital assets” 

Analysis: The White House report tries to strike a tone between enforcement and consumer protection on one hand and innovation on the other, stating, among other things a desire to “promote innovation by kick-starting private-sector research and development and helping U.S. firms find footholds in global markets. The report received mixed reception from industry analysts who felt the tone around innovation was constructive while critiquing it for vagueness. For more information, read our analysis on the White House executive order. Click here

Microstrategy (NASDAQ: MSTR) Keeps Buying More Bitcoin

Headline: Microstrategy (NASDAQ: MSTR) announced it purchased 401 Bitcoin for approx. $6 million. The firm now holds approximately 130,000 Bitcoin at an average cost of around $30,000. The company is now a Bitcoin holding company in all but name only.

Analysis: In the U.S., a spot Bitcoin ETF has not been approved by securities regulators, so many public equity investors who want Bitcoin exposure but don’t want to hold the underlying asset end up buying MSTR as a proxy, despite the fact that they’re not necessarily getting the direct exposure they want. By contrast, in Canada, the OSC has approved spot Bitcoin ETFs, which are a simpler and more cost-effective way to gain exposure to Bitcoin – To learn more about Ninepoint’s Bitcoin ETF, click here

A Few Other Stories Making Headlines this Past Week:

    • Nasdaq Makes First Big Crypto Push to Lure Institutional Clients (Bloomberg) – Despite the pullback in prices, we do not see any sign of slowing down from institutions on their cryptoasset and Web3 strategies.
    • Alameda Research happy to return $200 million loan to Voyager (CoinTelegraph) – Alameda is owned by Sam Bankman Fried who has played an outsized role this year as crypto Kingmaker, mimicking J.P. Morgan’s role in the 1907 Financial Crisis.
    • Colorado becomes first state to allow citizens to pay taxes with Bitcoin (CoinDesk) – Colorado has become a state with a thriving and growing Web3 community thanks to a positive government outlook on the technology, something other jurisdictions can take note of (see Alex’s section).
    • ECB Taps Amazon, Four Others to Pitch Digital Euro Prototype (Bloomberg)- A so-called central bank digital currency could broaden financial inclusion and improve the responsiveness of the Central Bank to crises. It could also undermine privacy.
    • South Korean prosecutors ask Interpol to issue red notice for Do Kwon (FT) – Kwon was the founder of the UST stablecoin which de-pegged causing significant losses to holders.
STORY OF THE WEEK
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The Silicon Valley of The Future Will not be a Place
By Alex Tapscott

The Rise of Web3

The Internet is entering a third era known as Web3. Web1 (1992-2002) was the Read Web, a one-way medium for presenting and consuming information. Web1 democratized access to information, but it was static and non-interactive. Web2 (2002-2020) is the Read/Write web, a platform for communication and collaboration. Web2 democratized access to publishing but was captured by large platforms and digital conglomerates. Web3 is the Read/Write/Own web. Internet users now have digital property rights and can be economic stakeholders in the platforms they use and services they consume. Web3 democratizes ownership of the Web.

Who will lead in the next era of the internet?

Where will Web3 be built? For the past thirty years, the U.S. and Silicon Valley in particular, has been the chief beneficiary of the commercial internet. Web1 and the Dot-com companies it spawned, were mostly American. Web2 giants like Facebook had a global userbase, but the wealth, jobs and influence remained in the Valley.

Silicon Valley historically has been home to the technology, the capital and the talent needed to breed new path-breaking ideas. While other countries have more recently entered the fray with their own internet giants (China comes to mind with Alipay, Tik Tok and others), the U.S. is still the leader.

Silicon Valley was once called a “Tech Galapagos” by historian Margaret O’Mara for the blend of talent, money, technology, culture and government research and development that led to the peculiar species of tech founders who went on to build the commercial web. Like an island isolated from the rest of the world, they developed certain traits and characteristics which made them well adapted to the changing times. Throughout history, technologies from the printing press to the steam engine to the railway have started as local breakthroughs before spreading, sometimes over centuries, around the world.

This time is different. The leaders of Web3 have unprecedented access to technological tools that only existed in the domain of science fiction a generation ago. Twenty-five years ago, half the world had never made a phone call. Now more than four-fifths of people own a smartphone. Web3 organizations, known as DAO’s are decentralized and global by their nature. They have contributors all around the world. For example, blockchain gaming is taking root in the Philippines and other Southeast Asian countries. When it comes to Web3, and perhaps for the first time in technology history, innovation is happening to “everything, everywhere, all at once”.
Silicon Valley will be fine. Many great Web3 start-ups have emerged from there. But the days of the Valley dominating the internet are over.

Dispersed technology also distributes power and control.

Canada’s Lost Opportunity

What can countries, and cities do to attract the talent, capital, and know-how to build great Web3 businesses? This topic is on my mind again following the Ethereum Merge (which we covered last week). It was a momentous achievement for a $200 billion computing and transactional platform which supports thousands of applications, millions of users, tens of billions of dollars of assets and hundreds of billions of dollars in yearly transaction volume.

The Merge led the business section of the New York Times, rightfully so. It was the subject of Bloomberg’s most popular podcast Odd Lots. However, in Canada, where I live, the Merge barely registered on anyone’s radars. The Globe and Mail’s story could only be found at the bottom of the ROB website, and it only tangentially dealt with the Merge.

This is surprising and disappointing for two reasons: First, Ethereum is one of the most important technology innovations in a generation and second, it's a made in Canada story! The founding team are Canadians from Toronto. For a golden moment at Ethereum’s founding it looked like Canada would lead the next era of the internet. Ethereum’s roughly $200 billion USD market capitalisation makes it about 5x bigger than Shopify and nearly double the size of RBC, Canada's biggest company.

In my opinion, the lead developer, Vitalik Buterin, should be given the Order of Canada, the country’s highest honour, for his contribution to Canada and the world!

Instead, Ethereum community has left. They’ve decamped to other countries like Singapore, Dubai, Germany, the United States and Switzerland, which offer more attractive conditions for Web3 innovation. Today, Canada's Web3 scene is a shell of its former self. The country's mainstream institutions, from banks to the media to government, have never recognized its potential for Canada. Today the discourse around Web3 has been reduced to mudslinging over Bitcoin, truckers and politics. That is regrettable. I worry Canada may once again miss an opportunity to lead a new era of human progress. There is hope. To learn more about what some of the industry’s Canadian leaders are doing, check out this week’s DeFi Decoded episode with Ethereum Co-founder Anthony Di Iorio.
DEFI & DIGITAL ASSETS
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Ethereum Co-founder Anthony Di Iorio on the Merge, PLUS How to Unleash an Innovation Economy
On today’s episode of DeFi Decoded, Alex and Andrew speak to Anthony Di Iorio, co-founder of Ethereum and Founder of Jaxx and Decentral. Anthony dedicates much of his time to helping Ethereum and other blockchains become more decentralized, resilient, and widely used. He’s also a passionate advocate for Canada and his hometown of Toronto. It’s a little-known fact but Ethereum is a made-in-Canada story, with key founders including Vitalik Buterin, from Toronto. Anthony talks with Andrew and Alex about how Canada missed an opportunity to be the center for Web3 and what it can do to be a leader again.
QUANTITATIVE ANALYSIS
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Source: Y Charts
Grayscale Bitcoin Trust at 32% Discount to NAV, Near All-Time Low
After trading at a premium to NAV for many years, Grayscale’s Bitcoin Trust plunged to a discount last year following the advent of Spot Bitcoin ETFs like the Ninepoint Bitcoin ETF. Currently the discount sits at a staggering 32%. Grayscale has said they would convert the Trust to an ETF if the SEC allowed it, so the market is effectively pricing in a very low probability of a U.S. ETF getting approved soon.
COMMENTARY & INSIGHTS