Hi all,

This is Dylan LeClair, presenting this week’s digest with critical highlights from the Bitcoin landscape and noteworthy macroeconomic updates.

Before we get started… If you’re a HNWI or Institution looking for the best way to get exposure to bitcoin before taking on self-custody, Onramp Bitcoin could be the right fit for you – schedule a chat with us to discuss your situation & needs.

And now, here’s the weekly roundup…

Regulatory Crackdown in Crypto Ecosystem

SEC Targets Binance, CEO CZ with Lawsuit

• The allegations allege that Binance commingled customer funds, engaged in deceptive practices towards investors, and evaded regulatory authority in the United States through the use of a U.S. entity to (appear to) satisfy regulatory requirements, while allowing U.S. residents to trade on their international platform through loose KYC (Know Your Customer) compliance.
• While the vast majority of Binance users, customer asset, and trading volume take place on the international Binance(.)com platform, the suit filed by the SEC, which follows a similar action by the CFTC earlier in the year, highlights the increased regulatory clampdown by U.S. agencies after the spectacular failure of FTX late in 2022.

SEC Doubles Down, Coinbase Enters Crosshairs

Merely one day after the SEC filed their lawsuit against Binance, leading U.S. crypto exchange Coinbase entered the regulatory body’s crosshairs. This was an expected move following the agency’s filing of a Wells Notice in March of this year, and was met with immense pushback from proponents of the crypto industry, who argue that securities laws from the 20th century are antiquated and outdated.

Here are some details on the suit:

• The SEC alleges that Coinbase’s Staking Program, which allows investors to earn returns through Coinbase’s managerial efforts, constitutes an investment contract and therefore a security, as the agency argues that the Staking Program falls under the Howey Test definition of a security due to the expectation of profits derived from the efforts of others.
• The SEC accuses Coinbase of operating as a broker, exchange, and clearing agency without proper registration due to Coinbase providing trading services for crypto assets that qualify as securities, thereby acting as an unregistered broker.
• According to the SEC’s allegations in the suit, the following altcoins are mentioned as unregistered securities: ADA, ATOM, ALGO, DASH, DOT, LINK, XTZ, and others.

In our view, regardless of the official stance of a U.S. regulatory agency, it is abundantly clear that bitcoin is in a league of its own compared to the rest of the “crypto ecosystem”.

With no central issuer, no official foundation or controlling board, and no pre-miner supply issuance, bitcoin is uniquely placed as a commodity; a digital synthetic monetary commodity with a tangible marginal production cost to reinforce the absolute digital scarcity of the asset, an improvement upon the relative atomic scarcity of gold, its most similar monetary predecessor.

Bitcoin Bounces Back After Largest Futures Liquidation Event of 2023

Directly following the announcement of the lawsuit against Binance on Monday morning, there was a knee-jerk reaction from market participants, particularly in the offshore futures/derivatives, resulting in the largest liquidation of long positions in 2023 as short bets piled in.

• In spite of the negative news flow, Bitcoin managed to fully retrace the move off the lows, with late short positions getting squeezed as follow-through selling in the spot market remained limited, a sign indicating a potential shortage of sellers in the market.
• As highlighted in previous issues, the bitcoin supply remains extremely inelastic, particularly following a year in 2022 where vast amounts of indiscriminate spot selling occurred amidst industry contagion. With free float supply more constrained than ever before, zero-sum derivative trading is the dominant driver of exchange rate fluctuations, while long time preference oriented investors continue to take available supply off the market for the long haul.

Macroeconomic Roundup: Warnings Arise from Global Economic Institutions

World Bank Sees Sluggish Growth Lasting Into 2024

The World Bank warns of a significant global growth slowdown due to rising interest rates and continuing fallout from the pandemic and geopolitical instability.

• The global GDP forecast for 2023 is revised upward to 2.1%, but 2024’s outlook is reduced to 2.4%.
• The central banks’ tightening monetary policy and higher borrowing costs could potentially stir vulnerabilities in lower-income countries, thus reducing the liquidity in the financial system and creating overall market instability.

OECD Warns Global Economic Growth Set to Slow Throughout 2023

The OECD cautions that the global economy’s recovery will be weak, hampered by persistent inflation and major central banks’ restrictive policies.

• The OECD forecasts a modest global growth rate of 2.7% in 2023 and 2.9% in 2024.
• The slower-than-expected economic recovery and the persistence of high inflation may strain the global financial system’s liquidity, creating more uncertainty in the market.

Podcast of the Week

Veteran investment manager and hard money advocate Larry Lepard joined Marty Bent, Jesse Myers, and Michael Tanguma on the most recent episode of The Last Trade.

The conversation covered the investment case for gold vs. bitcoin, what government data can be trusted (and how high inflation actually is), and what Larry sees for America’s future (and what gives him hope). Check out the full episode here.

Wrapping up this week’s digest, Onramp Bitcoin invites you to explore our offerings on our website.

With an industry-leading multi-party custody solution, Onramp allows Bitcoin withdrawals without triggering a taxable event. Onramp stands as an optimal solution for HNWI and institutions seeking Bitcoin exposure prior to transitioning to self-custody.

If Onramp’s offerings align with your needs, or those of someone you know, feel free to schedule a chat with us here.

Onward and Upward,

Dylan LeClair