There was a court decision in the Ripple/XRP case yesterday, which set the internet on fire.The proponents of XRP were boasting that XRP was confirmed to not be a security. The detractors of XRP were claiming that XRP sales to institutions were confirmed to be sales of unregistered securities.So which is true?The answer is complex, but both have a strong argument.First, institutional sales of XRP were deemed to be unregistered security sales.The argument is that institutions were not buying XRP as a replacement for fiat currency, but rather they were buying XRP for the future potential appreciation in the token price.Here is the relevant section from the ruling:The explanation seems crystal clear here, so you may be asking yourself why XRP almost doubled in price yesterday and people seem to be celebrating on the internet? Well, non-institutional sales—including on exchanges and secondary sales—were confirmed to not qualify as sales of a security.Ripple’s Chief Legal Officer Stuart Alderoty said:“A huge win today – as a matter of law - XRP is not a security. Also a matter of law - sales on exchanges are not securities. Sales by executives are not securities. Other XRP distributions – to developers, to charities, to employees are not securities.”This is where you are getting the enthusiasm, and subsequent price appreciation, related to XRP. In majority of the cases being evaluated by the court, XRP has been found to not be a security.I won’t bore you with more legal details. You can read those elsewhere. But the ramifications from this legal decision are going to be immense. Here are a few that immediately come to mind:If XRP is not a security, then majority of the other cryptocurrencies will probably be classified as not a security. This would create regulatory clarity once confirmed.Regulatory clarity will lead to more investors allocating capital to the space. They will have less friction in getting approvals from their compliance departments, while also having greater confidence in the underlying assets that they are holding.Exchanges, such as Coinbase, are already adding XRP back to their platforms. This means that more investors will have access to the token, but it also creates a stronger argument for Coinbase and others that they are not allowing unregistered securities to trade on their platform. Coinbase’s stock is up 100% over the last 30 days and 37% in the last 5 days.The SEC will have to decide how they are going to proceed with the regulatory oversight of the cryptocurrency tokens. There is an argument for them continuing on the same path as they were before this decision, but there is also an argument for a revised strategy that is less aggressive.It is not hard to see this legal decision emboldening various entrepreneurs and companies in the crypto industry. Some will take a path of arrogance and “I told you so!,” but others will simply use this new information to adapt their strategy to further achieve their goals without being loud and brash about it.There were a number of other people who had commentary about the clarification that XRP is not a security.Take Cameron and Tyler Winklevoss as examples.Cameron said:“The sale of XRP on exchanges is NOT a security. Which means the sales of all cryptos on exchanges are NOT securitiesand @SECGov and @GaryGensler have NO jurisdiction over them.This is a watershed moment that relegates the SEC to TradFi and makes it a dinosaur regulator. Buh-bye”Tyler stated a similar sentiment:“Today highlights how the @SECGov is a failed institution. They completely missed Celsius (whose founder was indicted on criminal charges this morning) and took a big L in the Ripple case (XRP is NOT a security).They don't know where to swing, and when they do, they strike out. It's time for Congress to cut their enforcement budget and instruct them to stick to guidance and rule making.”As expected, the SEC had a different take on the situation.They chose to focus on the parts of the court’s decision that were favorable to the regulatory body:This situation is not over yet.There will be further developments in the coming months, but it will be worth continuing to pay attention — we are getting a front row seat to the foundation of regulatory treatment in a multi-trillion dollar market.These rules will shape the way that capital is allocated over the next few decades and can have a material impact on the uses cases allowed or financial returns that is captured by investors.I am not a lawyer, nor are many of you, so I always remind myself that the lawyers on both sides will argue their best case and the judge will make a decision.##The beauty of the United States is that we respect the court of law and have the opportunity to use due process to get as close to truth as possible.

I found a number of interesting data points while I was digging into the bitcoin market over the weekend. First, there are now more than 1 million addresses on the bitcoin network with at least 1 bitcoin. That is growth of more than 100,000 addresses to this club in less than a year.The percent of bitcoin in the circulating supply that has not moved in the last two years is now at a new all-time high of 56%. This means that more than one out of every two bitcoin in circulation has not moved in two years.The percent of circulating supply that has not moved in 5 years is also at an all-time high of 29%.Over 70% of all bitcoin addresses are “in profit,” which means they acquired the current bitcoin they are holding at a lower price than today’s price point.Although there have been many people selling their bitcoin at a loss in recent months, bitcoin holders who have sold in the last few days are selling at a profit again.Miners had been selling bitcoin throughout the second half of 2022. These same market participants have been buying/holding bitcoin year-to-date. It is a strong sign to see the lack of sell pressure from miners in the market.Using the new data platform Velo Data, we can see the best day for bitcoin futures returns in a given week is Tuesday. The average futures return over the last year on Tuesday is more than double the average return for any other day of the week.Bitcoin is still down more than 50% from the 2021 all-time high in price, but the digital currency’s compound annual growth rate for the last decade remains more than 75%.The narrative over the last few months has been focused on the regulatory environment, along with a continued belief in the mainstream media that bitcoin was a bubble. These data points, along with various fundamental analysis, suggest that bitcoin is actually in a very strong position.Any time you have a highly illiquid asset that could potential see a large influx in demand (Wall Street ETF applications as one example), it is worth paying attention to. The supply/demand lesson you learned in Economics 101 still rules the day.Regards

The Securities and Exchange Commission sued Binance yesterday.The regulatory organization announced this morning that they are suing Coinbase as well.These are two of the largest crypto exchanges in the world.These actions by the SEC are a continuation of the increased regulatory scrutiny that has been underway in the United States over the last 12 months.Both filings claim that the different crypto exchanges offered unregistered securities within the United States.Binance specifically is accused of offering the buying/selling of specific assets, among other things.Coinbase is accused of offering unregistered securities through their Ethereum staking program.I won’t bore you with all the details here — you can read the specific of each regulatory action regurgitated across the mainstream media.The ramifications of these two actions is more interesting to discuss in my opinion.First, it is important to remind everyone that accusations do not confirm guilt.The United States of America continues to have a rule of law that depends on the judicial process to determine innocence or guilt.In fact, Americans are believed to be innocent until proven guilty - at least that is the way the system is designed to work.The courts will ultimately decide who is right and who is wrong in this situation.We have seen the case laid out from the SEC’s perspective, and certain things definitely don’t look great for the exchanges to the casual observer, but we have yet to see the other side of the story.As I’ve become older, I have learned to always wait to see both sides of the story before forming an opinion on a situation.Second, the public narrative around these two companies are quite different. Coinbase is generally thought of as the US-based, regulated exchange that has tried to comply with US regulations at every stage.Binance has a reputation of having started off as an unregulated exchange outside the United States, but becoming more regulatory compliant in recent years as they entered the US market.These public narratives may be true or they may not be. The public perception matters in these cases it appears though.There is the judicial system and then there is the court of public opinion.Those two things shouldn’t be related, but humans are human and sometimes they are.Third, each of these cases boils down to what digital assets are considered a security and which ones are not.This definition has long been pontificated by people across the crypto and digital asset ecosystem. There is disagreement between the various tribes, along with the various legal/non-legal functions, on what constitutes a security.Although the debate has raged on for years, there has never been a definitive answer.The SEC has long maintained that majority of the crypto assets are securities. Many crypto market participants believe the opposite. It looks like we are headed to court to figure out the answer.Whatever the answer ends up being will likely set the precedent for crypto assets in the United States.Fourth, the crypto market is a global game. The United States is a big part of the market, but it is by no means the only component.In fact, if the US continues down the path of becoming more abrasive to this technology, it is highly likely that global adoption will continue, and potentially accelerate, in other areas around the world.In a sense, the US could be pulling themselves out of the game and volunteering to sit on the bench.We won’t know for years — we have to get the ruling on these cases, have the same answer applied across the industry to different assets, and then wait to see how companies will respond.Maybe some companies continue to issue assets, and support various use cases, regardless of whether crypto assets are deemed securities or not.They could just register them with the SEC and continue in the normal course of business.Other companies may see this as detrimental to their business, so they would either shut down or move off-shore.As a reminder, Will Clemente wrote in a guest post last week:“Offshore exchanges remain the dominant venues across the entire crypto landscape, making up a whopping 86% of all trading volume; this dynamic is likely to only accelerate with regulatory uncertainty in the United States.Even Coinbase, which historically has been recognized as the publicly traded highly regulatory compliant alternative option to other venues in crypto, announced the launch of its own offshore derivatives venue called Coinbase international exchange.Harsh regulatory efforts and posturing from government officials in the US with the intention of establishing control over the industry are only going to have the opposite effect and drive talent/capital/innovation off-shore and on-chain; ultimately giving the government less control than what it would have if it encouraged activity to take place in the US; allowing it to at least retain some degree of oversight.For the foreseeable future it’s unclear why the dominance of trading volume in offshore venues won’t continue.”Lastly, the Coinbase situation appears to have one main difference from the Binance situation.Coinbase went public in the last two years, but the SEC is alleging that the company has been operating as an unregistered securities exchange within the United States since 2019.If you hold that assumption to be true, it would mean the SEC approved an unregistered securities exchange to go public in American capital markets.That will throw a lot of people’s brains in a blender.Before I let you go, I want to issue you all a word of caution — you are going to read a ton of hot takes over the next few days on these regulatory actions.People will tell you emphatically that Binance and/or Coinbase are in the right. Others will tell you that the SEC has these cases as slam dunk wins.Be very careful about what you read and who you believe. I have no clue how either case will play out.These regulatory issues can get very complex quickly. There are trained lawyers on both sides who will go to court and argue it out. Ultimately, a judge and/or jury will decide who makes the better argument.I’ve been investing in this industry for almost a decade now. I’ve probably heard every argument on both sides about whether these assets are securities or not. But I have no clue.The industry needs clarity and it appears that is what we are going to get.But remember, regulatory clarity doesn’t necessarily mean the industry will get the rules that they want.