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The Wolf Den #584 - The SEC Wants To Control Ethereum

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September 21 · Issue #584 · View online
The Wolf Den Crypto Newsletter
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In This Issue:
  1. The SEC Wants To Control Ethereum
  2. Bitcoin Thoughts And Analysis
  3. Legacy Markets
  4. Public Vs. Private Keys
  5. Nasdaq To Open Crypto Shop
  6. Developers Are Dropping Like Flys
  7. Colorado Officially Accepts Bitcoin For Taxes
  8. $1 Billion NFT Domain Unicorn | Matthew Gould, Unstoppable Domains
  9. My Recommended Platforms And Tools
The SEC Wants To Control Ethereum
As you likely know, the SEC recently filed suit against Ian Balina for his involvement in an unregistered 2018 ICO. In this case, he failed to disclose that he was compensated with SPRK tokens for promoting the ICO. Further, the SEC is suing Ian Ballina for reselling Sparkster’s SPRK tokens and his failure to file paperwork. This is somewhat common.
That’s a story. But it’s not THE story.
Hidden deep in the filing was a chilling comment on the SEC’s assumed jurisdiction over Ethereum. 
In the 69th paragraph of the filing, the SEC snuck in this comment: “at that point, their ETH contributions were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.” The SEC is saying that, because a majority of nodes are U.S. based, the SEC has jurisdiction over the entire Ethereum network.
Holy cow.
Etherscan shows that 46% of nodes operate in the U.S., 19% in Germany, and 5% in Russia, with the rest being scattered around the world. So yes, the U.S. holds a substantial amount of nodes. But does that mean that the SEC now has the right to regulate the Ethereum network?
First, it’s important to note that the SEC’s comment in the 69th paragraph holds no legal weight, and the court won’t be interested in this part of this case. But this does offer a glimpse into the way the SEC views the network.
There’s no proof that the beliefs of Gensler or any of the other commissioners fully align with this statement, but its inclusion in the filing was deliberate. Identifying transactions on the Ethereum network as the exchange of U.S. securities would render the Ethereum mission effectively useless in America. I imagine there will be incredible pushback if the SEC ever chooses to take this route.
The SEC can regulate ICOs at will, but to come after a decentralized blockchain that powers thousands of digital applications around the globe is insane. ETH is simply the native utility token used to participate in the ecosystem. I do not believe that it qualifies as a security by means of the Howey Test. Either way, this filing is not a statement on the token’s status as a security, but rather on the operation of the entire network.
Just last week, Gary Gensler revealed to the WSJ that proof-of-stake currencies could be securities. He is obviously angling towards complete control of everything not named Bitcoin.
The Balina filing is scary, but far from definitive. The SEC can retract their statements from the past, so it’s important for investors and advocates to stay on top of the SEC’s views as code and opinions change.
As always, more to come.
Bitcoin Thoughts And Analysis
MONTHLY CHART
This seemed like the perfect time to revisit the massive ascending channel that Bitcoin has been trading in since 2013. As you can see, price is currently testing the support, which has three previous touches.
Did I expect this to happen? No. I thought we were heading to the top of the channel last time we were above the EQ (equilibrium, dashed line).
This is an epic support, so we want to see the monthly candle close above.
Remember, the Fed rate decision is in a few hours and will determine market direction in the short term.
Legacy Markets
Stocks Steady on Fed Day; Dollar Rallies on Putin: Markets Wrap - Bloomberg
Markets were muted Wednesday with investors mostly sidelined before another expected rate hike from the Federal Reserve. Treasuries and the dollar jumped on haven flows after Russian President Vladimir Putin stepped up his war against Ukraine.
The rate hike announcement is today, so be careful and expect volatility!
Key events this week:
  • Federal Reserve decision, followed by a news conference with Chair Jerome Powell, Wednesday
  • Big-bank CEOs testify before US Congress in a pair of hearings on Wednesday and Thursday
  • US existing home sales, Wednesday
  • EIA crude oil inventory report, Wednesday
  • Bank of Japan monetary policy decision, Thursday
  • The Bank of England interest rate decision, Thursday
  • US Conference Board leading index, initial jobless claims, Thursday
Will the Nasdaq 100 Stock Index hit 10,000 or 14,000 first? This week’s MLIV Pulse survey focuses on technology. It’s brief and we don’t collect your name or any contact information. Please click here to share your views.
Some of the main moves in markets:
Stocks
  • The Stoxx Europe 600 rose 0.2% as of 10:10 a.m. London time
  • Futures on the S&P 500 were little changed
  • Futures on the Nasdaq 100 were little changed
  • Futures on the Dow Jones Industrial Average were little changed
  • The MSCI Asia Pacific Index fell 1.5%
  • The MSCI Emerging Markets Index fell 1.1%
Currencies
  • The Bloomberg Dollar Spot Index rose 0.4%
  • The euro fell 0.7% to $0.9906
  • The Japanese yen was little changed at 143.83 per dollar
  • The offshore yuan fell 0.4% to 7.0578 per dollar
  • The British pound fell 0.4% to $1.1339
Bonds
  • The yield on 10-year Treasuries declined three basis points to 3.53%
  • Germany’s 10-year yield declined five basis points to 1.87%
  • Britain’s 10-year yield declined two basis points to 3.27%
Commodities
  • Brent crude rose 1.5% to $91.97 a barrel
  • Spot gold rose 0.5% to $1,673.22 an ounce
Public Vs. Private Keys
Public vs. Private Keys: What's The Difference | 3-min crypto
A quick video on the difference between public and private keys, in case you don’t know!
Nasdaq To Open Crypto Shop
Nasdaq Starts Crypto Custody Service for Institutional Clients
No big deal, right? Nasdaq is the newest player on the crypto scene, with plans to launch their own crypto custody service to meet the demand of institutional clients wanting crypto exposure.
Named Nasdaq Digital Assets, the new division will initially only custody Bitcoin and Ethereum. Assuming regulatory approval, the new product will join some of Nasdaq’s other crypto products that included security and surveillance tools.
As big as this news is, it is predictably being drowned out by the sea of macro disasters.
The head of North American markets at Nasdaq said: “demand among institutional investors for engaging in digital assets has increased in recent years, and Nasdaq is well-positioned to accelerate broader adoption and drive sustainable growth.
Developers Are Dropping Like Flys
Weekly active crypto devs drops over 26% over the last 3 months
Data from Blockchain aggregator Artemis shows that crypto developer activity has essentially fallen off of a cliff over the past three months, right alongside prices. Ethereum, Polkadot, Solana, and Cosmos have dropped off 30.5%, 43.6%, 48.4%, and 48.9% respectively. Some industry experts attribute this to tourist developers leaving, which is a good opportunity for seasoned investors to work their magic. With gas fees so low, now is when the solid infrastructure is built that will dominate the next cycle.
Colorado Officially Accepts Bitcoin For Taxes
Coloradans can now pay state tax bills with cryptocurrency - Axios Denver
Gov. Jared Polis has made it official - Colorado residents can pay their taxes in Bitcoin. Through online payments, residents can pay individual income tax, business income tax, sales and use tax, withholding tax, severance tax, and excise fuel tax if they wish. I can’t imagine droves of Bitcoin holders getting excited by the news, but it is a good step in the direction of a more government-friendly crypto future.
$1 Billion NFT Domain Unicorn | Matthew Gould, Unstoppable Domains
Podcast - The Wolf of All Streets
I’ve been using Unstoppable Domains for years, so having Matthew Gould, its CEO and founder, on my podcast was especially interesting. Listen to this episode if you want to know the difference between web2 and web3 domains, how Unstoppable Domains will survive the crypto winter, and how they will spend their recent round, which valued the company at $1 billion and made it a unicorn.
  • First domain name
  • Web3 Domain speculation
  • Las Vegas! 51
  • NFT domain names
  • The use case
  • Becoming a unicorn
  • Web2 vs web3 domains
  • Owning data
  • The influence of the Ethereum merge
  • Surviving the bear market
  • Bitcoin is here to stay
  • Small businesses and web3
  • Long-term opportunities in crypto
  • How Unstoppable domains are spending the latest round
  • Interoperability
  • Digital identities
  • Decentralized social media
  • Metaverses
  • Adoption
  • Correlation to traditional assets
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Follow me on Twitter at @scottmelker. This is where I am constantly updating my trades and sharing ideas.
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The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to “Buy,” “Sell,” or “Hold” an investment.
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