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*Ninepoint Digital Asset Group, is a division of Ninepoint Partners LP.
PRICE SNAPSHOT
(7 Day Change as of Feb 16, 2023 3:05 PM ET)
Bitcoin Price: $24,820  13.57%
DeFi Total-Value-Locked: $50.12B
Ethereum Price: $1,708 10.62%
Crypto Market Cap: $1.11T
Bitcoin Range: $21,367 - $25,257
BITC.U Close: $7.14 (as of Feb 15, 2023)
Ethereum Ran ge: $1,462 - $1,742
BITC.U NAV: $7.06
Bitcoin Dominance: 44.61% 2 .97%
BITC.U Premium:  1.13%
DIGITAL ASSET COMMENTARY

Kraken Cuts Ties with US Staking Services, Settles SEC Lawsuit for $30 Million

Kraken, a popular crypto exchange, will pay the Securities and Exchange Commission (SEC) a $30 million fine and discontinue its crypto staking-as-a-service platform for US clients. The SEC's lawsuit against Kraken accuses the company of offering unregistered securities. Kraken's staking service offered US clients the chance to earn up to 21% through staking their tokens, but the SEC warns that staking-as-a-service providers can come with risks. Non-US clients will still be able to use Kraken's staking service. SEC Chair Gary Gensler emphasizes that crypto intermediaries must follow securities laws, regardless of their mode of operation.

Paxos Ordered to Cease Issuance of Binance USD Stablecoin

Paxos has been ordered by the New York Department of Financial Services (NYDFS) to stop the issuance of its Binance USD stablecoin. The NYDFS cited "unresolved issues related to Paxos' oversight" in its directive. Binance has stated that Paxos will still manage redemptions, but the NYDFS will closely monitor the company's compliance protocols. This regulatory action on the third-largest stablecoin follows growing scrutiny in the crypto market, including the SEC's recent declaration that crypto staking services violate securities law. Stablecoins, popular for users taking their first steps into crypto, may face challenges as a security if created with the expectation of making money.

Coinbase CEO Armstrong Stands Firm on Staking’s Non-Security Status

Coinbase CEO Brian Armstrong and CLO Paul Grewal have declared staking to be a non-security and vowed to defend it in court if necessary. This follows the SEC's enforcement action against Kraken's staking-as-a-service program, which the SEC deemed a security. Coinbase argues that staking fails the Howey test and that treating staking as a security will limit US consumers' access to basic crypto services. The company believes that blockchain tech, including staking, will drive US economic growth and that regulation by enforcement is not the solution. SEC Commissioner Hester Peirce has also criticized the SEC's stance, calling it inefficient and unfair for the emerging industry.

Ethereum Co-Founder Expresses Optimism on Ethereum’s Regulatory Status

Ethereum co-founder Joseph Lubin, the founder of blockchain tech firm ConsenSys, expressed his confidence that Ether won't be classified as a security in the U.S. Speaking at the Web3 event in Tel Aviv, Lubin stated that classifying ETH as a security is as unlikely as if Uber was made illegal. He also said that he believes the court system in the U.S. would be supportive of arguments that ETH is not a security due to its decentralized nature and multiple use cases that don't implicate it as such. However, Lubin notes that the current focus of regulators in Washington D.C. is on stablecoins.

Paxos Faces Legal Battle With SEC Over Binance USD Stablecoin Token

The Securities and Exchange Commission (SEC) is planning to sue blockchain company Paxos over the Binance USD (BUSD) token. The SEC alleges that Paxos violated investor protection laws regarding BUSD. Paxos has up to 30 days to respond to the Wells Notice, which alleges that the BUSD token is an unregistered security. However, Paxos has not commented on the issue. The notice to Paxos is part of a more significant effort by the SEC to intensify its enforcement of major crypto players. The SEC reached a compliance agreement with Kraken last week, leading to criticism from Commissioner Hester Peirce.

STORY OF THE WEEK
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A Field Report from Dubai where the Government is Making Blockchain and Digital Assets a Focal Point of its Strategy

The United States dominated the first digital age. The semiconductor was invented in America and NASA was the biggest buyer of microchips for years, helping subsidize the nascent computer industry, which gave birth to minicomputers and PCs. In 1969 the department of defence helped spearhead the development of the early internet, as a way to keep communications open during a Nuclear attack (a decentralized network is harder to take out with a Nuke). In 1993, as the internet was being commercialized via Netscape’s web browser, most personal computer and internet users were in the United States. The U.S. boasted the world’s only major venture capital investors and many of tech’s biggest companies. The U.S government, which supported the Internet’s early development in the 1970s and 1980s, handed over all its know-how and IP for commercial use. Universities and other institutions supported the development of standards bodies and governance organizations which help to govern and shape the Web. Silicon Valley was once called a Tech Galapagos for the exotic species of startups and founders who emerged from this unique primordial stew of conditions.

We are now at the dawn of a new digital age, characterized by several concurrent disruptive technology innovations, namely artificial intelligence/machine learning and Web3. Unlike the first digital age, where the key inputs were all U.S based, this time the technology tools, capital, know-how and institutions needed to jumpstart this next era of disruption are far more distributed. Governments globally have taken notice and are vying with each other to attract the next group of founders who will build the category defining businesses and protocols. This raises an interesting question: To what extent can a government enable, or for that matter quash a nascent technology industry?

I have been musing on this idea this week while spending time in Dubai, where I am speaking at the annual World Government Summit. The event draws delegates from global governments, the media, business, and the not-for-profit sector for a 3-day discussion on the most pressing issues facing the world today, including global health, the future of work, climate change and - high on the agenda - crypto and Web3. I was the first speaker in the “New Economic Opportunities” vertical, followed by Uri Lavine, the co-founder of Waze and Stephen Pagliuca, co-chairman of Bain Capital and co-owner of the Boston Celtics. The audience was receptive about the topics I covered, and the government has been even more enthusiastic.

Dubai recently set up its Virtual Asset Regulatory Authority and has been encouraging companies to set up shop in the city. It recently released a comprehensive framework for digital assets and new regulations governing their use. Some die-hards may scoff at government intervention, but the free market without some sensible guardrails is just pure anarchy and the government here understands that. Dubai would also like to be a model user of this technology and has mandated bureaucrats at all levels of government complete coursework on emerging technologies like machine learning and crypto. In March, I will be conducting an educational webinar for several high-ranking officials in the Prime Minister’s office. During my stay, the government of Abu Dhabi, another member of the UAE, announced a $2 billion initiative to fund Web3 development and attract startups to the region. This is a stark contrast to the indifferent and sometimes combative tone from governments in the “West” which for so long have been the vanguard of technology innovation.

There are limits to what a government can do, of course. And the U.S. is still a leader in nearly all areas of technology. But the marketplace is far more competitive than before, and I expect many more governments will engage in this policy arbitrage to attract talent, capital and businesses away from more established markets. Dubai is an example of where such a policy is already making an impact. Policymakers in Canada should take note.

DEFI & DIGITAL ASSETS
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"Making Polygon DeFi More Accessible Than Running Water", with Hamzah Khan of Polygon Technologies
Join Alex Tapscott and Andrew Young as they decode the world of DeFi with special guest Hamzah Khan, Head of DeFi at Polygon Technologies. Listen in as they discuss Polygon, the future of DeFi, app chain trends, and more!

Polygon is a layer 2 Ethereum scaling solution that enables developers to build scalable, user-friendly, and secure decentralized applications (dApps) by “bringing the world to Ethereum.” As the Head of Defi, Hamzah remains committed to developing Polygon’s cutting-edge technology to grow further the 37,000+ Web3 applications utilizing Polygon. Hamzah is also an angel investor who personally invests in various DeFi and Web3 infrastructure companies.

Tune in to the 82nd DeFi Decoded episode to hear Alex, Andrew, and Hamzah discuss all things DeFi and learn more about Polygon. How have Hamzah’s two years at Polygon been? What is it that has allowed Polygon to be so successful with business development execution? What does the future of Polygon and DeFi look like?
QUANTITATIVE ANALYSIS
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#1. Bitcoin Undervalued? The Stock-To-Flow Model Has Something to Say
The Stock-to-Flow (S/F) Model has been an essential tool in assessing the value of Bitcoin. It considers the current circulating supply of Bitcoin against the rate of newly mined coins. With a proven track record of accurately predicting Bitcoin's price over the past decade, the current deviation from the model's median value paired with a low deflection score, or ratio between the current Bitcoin price and the model's price, of 0.195 indicates that Bitcoin may be seriously undervalued.
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Source: glassnode
#2. Stable Growth: A Dive Into Supply Last Active Age Bands 
The Supply Last Active Age Bands metric has been used to monitor the longevity of Bitcoin's on-chain activity, with each segment representing the percentage of circulating supply last active for a certain amount of time. As of 2023, all segments have seen growth, with an increase of 0.60% in the 1+ year segment, 2.3% in the 2+ year segment, 0.3% in the 3+ year segment, and 1.1% in the 5+ year segment. This suggests that more long-term investors are accumulating and storing coins, which bodes well for Bitcoin's stability and growth moving forward.
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Source: TheBlock.co
#3. Crypto Stock Market Capitalizations React to Bitcoin’s 30% Year-To-Date Increase
With Bitcoin leading the charge at a 30% YTD increase, top crypto firms such as Square, Coinbase, Signature Bank, Microstrategy, and Silvergate have seen changes in their market capitalizations. Microstrategy shines with a 72% increase, while Silvergate saw a decline of 14.5%. Coinbase, Square, and Signature Bank all had strong growth of 61%, 20%, and 13%. These market changes showcase the strong correlation between Bitcoin and crypto stocks and suggest the potential for continued market growth in the future should if the Bitcoin rally can sustain.
COMMENTARY & INSIGHTS