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*Ninepoint Digital Asset Group, is a division of Ninepoint Partners LP.
PRICE SNAPSHOT
(7 Day Change as of Mar 31, 2023 3:00PM ET)
Bitcoin Price: $28,297  1 .65%
DeFi Total-Value-Locked: $50.09B
Ethereum Price: $1,822  3.28%
Crypto Market Cap: $1.18T
Bitcoin Range: $26,525 - $29,190
BITC.U Close: $8.25 (as of Mar 30, 2023)
Ethereum Range: $1,713 - $1,847
BITC.U NAV: $8.25
Bitcoin Dominance: 47.60%  (0.06%)
BITC.U Premium: 0.00%
DIGITAL ASSET COMMENTARY

U.S. Regulators Accuse Binance Of “Wilful Evasion” In Lawsuit

Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao (CZ) were sued by the U.S. Commodity Futures Trading Commission (CFTC) on Monday for “wilful evasion” of regulatory compliance. The CFTC’s lawsuit alleges that Binance is running an unregistered derivatives trading operation and directing American customers to evade compliance controls through leveraging VPNs. In response, CZ denied such claims, emphasizing Binance’s “best-in-class” compliance technology, processes to block American users, and their commitment to being transparent and cooperating with regulators worldwide. This lawsuit comes amid an increasingly high-profile crackdown on crypto firms in the United States; its result will have a considerable impact on the industry’s direction.

TerraUSD Founder Do Kwon’s Troubles Continue

Do Kwon, the founder of the failed stablecoin TerraUSD and its sister token Luna, has been charged with fraud by US prosecutors after being arrested in Montenegro last week. Kwon is facing eight counts of fraud over his management of Terraform Labs, which was responsible for the collapsed digital currencies. Kwon's location had been unknown since late 2021 when South Korean authorities issued an arrest warrant for him and other company executives. Kwon's cryptocurrencies triggered a market meltdown last year, causing over a $60 billion crash. It is unclear whether Kwon will face extradition to the US or undergo trial in South Korea.

Coinbase Receives Wells Notice From SEC On Future Enforcement Action

The US Securities and Exchange Commission (SEC) notified Coinbase last week of its plans to undergo enforcement action against the largest US-based cryptocurrency exchange regarding components of its exchange Coinbase Earn and Coinbase Wallet. As for now, the company's business services will continue to operate as usual, with the chief legal officer stating that the firm is prepared to fight the SEC in court, if necessary. The SEC has intensified warnings over many tokens offered by cryptocurrency companies, classifying them as securities and how such trading platforms should register with the agency.

Crypto Companies Seeking Better Regulatory Climates Than United States

According to a Consensus Magazine feature, cryptocurrency firms in the United States are contemplating moving overseas to more favourable regulatory jurisdictions amid regulatory crackdowns and uncertainty in the country. Ripple's CEO has stated that the crypto industry has already begun to shift from the US, while Circle, the issuer of the USDC stablecoin, has announced plans to open an office in Paris. Due to regulatory uncertainty, the largest US-based crypto exchange, Coinbase, is also considering launching an overseas trading desk. Crypto-focused lawyer Jason Gottlieb confirms that people are leaving, with many young entrepreneurs deciding to work in countries such as Portugal, Singapore, and the Caymans.

STORY OF THE WEEK
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Crypto Climbs the Wall of Worry. Plus, Building Through the Bear Market!

By Alex Tapscott

The headlines of the past two weeks have been negative for digital assets. Firstly, we had the collapse of Silicon Valley Bank and other financial players who service the industry. The vacuum left in their wake imperils some functions of crypto firms who, for better or worse, still need banking services. Then regulators kicked into high gear, first with Coinbase announcing that the SEC was planning an enforcement action against the company and then the news from the CFTC that they were suing Binance for willfully disregarding U.S. regulations and engaging in some, frankly, shady and potentially illegal conduct (see our commentary on Digital Assets above). As an industry, there is a reflex to get your guard up to ‘protect our own’ but we must also have the courage to call out and correct wrongdoing.

Perhaps the heightened scrutiny is driving many Web3 token holders away from centralized exchanges. As we discuss in our quantitative section, decentralized exchanges (DEXes) share of the overall volume is near an all-time high. As the underlying technology of smart contracts, which power DEXes, matures, their role will increase. This can only be viewed as a huge positive.

Despite the headwinds, many digital assets are creeping higher, nearing their highs for the year, with Bitcoin eyeing $30,000. As we noted last week, Bitcoin typically leads the industry out of the bottom and others follow on after. Though I am happy prices are turning positive, I am far more interested in what’s behind the scenes driving this move, beyond speculation.

SPECIAL DOUBLE PODCAST EDITION!

It’s a cliché that the best people build through a bear market. But then again, cliches are often true. So, in honour of the builders, this week I am very happy to share TWO new episodes of DeFi Decoded, with two of the smartest, most driven, and creative people working in Web3 today.

For DeFi fans, you will want to check out my conversation with Sishir Varghese (hyperlink to YouTube), founder of Web3 reputation and credit scoring platform Spectral Finance. Reputations are foundational to all economic activity. In every facet of the economy, we require two parties to establish trust to conduct business. It could be a bank or a protocol giving out loans and making sure that they will be paid back. It could be a gaming company looking for power users. It could be an employer who wants to hire a solid developer. This is a specific problem set and opportunity in DeFi, where despite great leaps forward in financial innovation, the promise of finance for all remains unfulfilled. In this episode, Sishir describes how Spectral’s MACRO score could open up the world of DeFi to mass retail finance, unleashing the potential and upending the world's most entrenched industry.

For those who want to understand Web3’s global impact and how it is being embraced in Southeast Asia and elsewhere, look no further than my conversation with Beryl Li (hyperlink to YouTube), founder of Yield Guild Games, the world’s leading gaming guild which creates opportunities for people to earn money in Web3. A fintech entrepreneur, she co-founded CapchainX, an asset tokenization platform that was acquired by SMKG in 2019, and was on the founding team at Coins.ph, a leading crypto exchange in the Philippines that was acquired by Gojek in 2019. Beryl has unique insights into Web3 adoption in globally but particularly in the Global South. Recently I wrote about Web3 in Africa, quoting a South African friend who told me “Africans innovate out of necessity.” Beryl agrees that many people in her native Philippines feel the same way. Web3 is a steamroller that is leveling the playing field and Beryl has a front-row seat.

Onward we march…

DEFI & DIGITAL ASSETS
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Join Alex Tapscott as he decodes the world of DeFi with special guest Sishir Varghese, CEO and Founder at Spectral. Listen in as they discuss Sishir’s journey into crypto, Spectral Finance’s founding, how the Spectral protocol works, its different customer use cases, reactions from traditional credit bureaus, the future of Spectral, and more!

Sishir has been an active supporter and investor in the cryptocurrency space since 2014, having previously founded and managed venture firm Alphachain Capital, working closely with entrepreneurs and builders. Founded in 2020 by Sishir in New York, Spectral Finance is a protocol designed to evaluate on-chain creditworthiness, allowing users to monitor their credit scores and risk insights. Users can review high-risk loan activity through the platform, view current positions, and receive low health warnings across different DeFi protocols. The MACRO Score is the world's first-ever Web3 credit score that is a numerical representation of an individual's on-chain creditworthiness; Spectral has generated over 50,000 MACRO scores for its users. Spectral's partners gain valuable access to credit risk insights for business decisions and offerings by leveraging on-chain data while users gain exposure to new financial opportunities. Spectral raised $23 million in August 2022, led by Circle Ventures and nine other investors.

Tune in to the 89th DeFi Decoded episode to hear Alex and Sishir discuss all things Spectral Finance. What lured Sishir into crypto in 2014, and what ultimately led to his founding of Spectral? How does Spectral’s MACRO credit score work, and which traditional themes were leveraged in its design? What is the competition like for Web3 credit scores, and how have legacy credit bureaus reacted to Spectral’s success?

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Join Alex Tapscott and Andrew Young as they decode the world of DeFi with special guest Beryl Li, Co-Founder at Yield Guild Games (YGG). Listen in as they discuss Beryl’s journey into Web3, YGG’s inception, the community’s rebranding, Web3 gaming genres, game development trends, the open metaverse, the future of YGG, and more!

Yield Guild Games is the world’s first-ever and largest Web3 gaming guild. Founded in 2018 by Beryl Li, Gabby Dizon, and Owl of Moistness, YGG has developed a global presence of nine guilds across five continents, established 241 partnerships, and awarded more than 3100 achievements. YGG provides an avenue for players to discover and explore Web3 games, interact with similar-interest gamers, and unlock achievements with their team while playing for free. The biggest Web3 guild recently announced a rebranding to accommodate its fast-growing community’s proposals, keeping the shield and sword to showcase YGG’s game-loving community and ultimate sense of belonging in the guilds. YGG’s mission revolves around creating a supportive and inclusive environment to transform the nature of play and empower players to achieve their fullest potential.

Tune in to the 88th DeFi Decoded episode to hear Alex, Andrew, and Beryl discuss all things Yield Guild Games, Web3 gaming, and the metaverse. How did Beryl’s journey to founding YGG begin, and what did the early days look like? Why did YGG rebrand, and what does it mean for the community? What is the adoption and structure of YGG, and what will it look like in ten years?

QUANTITATIVE ANALYSIS
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Source: The Block
Chart #1: Decentralized Exchange Volumes Surging Relative to Centralized Volumes
The Block's DEX to CEX Spot Trade Volume depicts the ratio between the monthly decentralized exchange (DEX) to centralized exchange (CEX) volume, including the most prominent exchanges with reliable reporting of such metrics. DEXs, unlike CEXs, operate without intermediaries and use smart contracts and blockchain technology to execute trades. The current ratio is 13.61%, the highest since June 2022, with a 35% year-to-date increase. This volume momentum shift towards DEXs could indicate a newfound preference among investors to distance themselves from CEXs following recent regulatory enforcement actions on centralized crypto exchanges.
DAG2.png
Source: The Block
Chart #2: Bitcoin’s Weekly Change in Exchange Balances on The Rise: Up 210% Year To Date
The 7-day moving average of Bitcoin's change in balance across exchanges has increased 210% this year, with a peak of 20.13K BTC a week and a half ago, declining to 10.08K BTC currently. Typically, such increases in exchange balances indicate more selling than buying pressure; however, Bitcoin's 62% year-to-date rise suggests that investors are in accumulation mode, positioning themselves for further price appreciation in hopes of a sustained bullish rally.
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Source: The Block
Chart #3: Fair Value Alert: Bitcoin’s Market-Value-To-Realized-Value Z-Score At 0.60
The MVRV Z-Score is a popular indicator that helps investors determine whether Bitcoin is over or undervalued relative to its fair value. This metric has historically signalled market tops and bottoms using market capitalization, realized capitalization, and standard deviation of such data. Bitcoin's current MVRV Z-Score stands at 0.6 after seven months of green zone stagnation, suggesting that the market bottom may be in. Furthermore, it reveals how Bitcoin's market value is narrowing in on its realized value, shifting Bitcoin's undervalued rating to one of fair value.
COMMENTARY & INSIGHTS