Market Overview:

Digital assets traded in a tight range this week, with a slight upward trend of recovery from last week’s significant drop.

• Bitcoin recovered from lows of $35,670 last Thursday to a weekly high of $39,070 on Wednesday, spending most of the week trading between $36,800 and $38,400
• Bitcoin is currently valued at $37,090, representing 2.6% weekly growth
• Ether grew from a weekly low of $2,334 on Thursday to a high of $2,801 on Wednesday, but failed to decisively break through the $2,800 level despite numerous attempts
• Ether currently trades at $2,676 for a 11.2% weekly increase
• Total market capitalisation reached a weekly high of $1.78tn on Wednesday, before a sharp drop following Bitcoin’s rejection at $39,000 led to a current overall market value of $1.71
• Total value locked in DeFi dropped to $79.1bn, according to industry analytics platform DeFi Pulse

 

Digital asset markets had a steady week of recovery, although rejection at key price levels on Wednesday afternoon halted upward momentum. The week’s news proved however the growing global appeal of digital assets; Japanese regulators seek to streamline access to their $1tn trading market, India and Russia both made positive regulatory moves, a former Chancellor of the Exchequer urged the UK to embrace the digital asset sphere for the nation’s economy, and leading Singaporean and Canadian institutions were among investors in a new $400m funding round for digital asset exchange FTX.

 

What happened: Japan seeks to open up $1tn digital asset market

 

How is this significant?

• According to Bloomberg sources this week, Japanese regulators are in the process of easing access to local digital asset exchanges, potentially allowing a far greater range of crypto assets to be traded
• The Japanese digital asset sector is largely self-regulating, with stringent listing requirements across all of Japan’s exchanges
• As an example, Coinbase in Japan only offers 5 coins for trading, compared with over 100 on other localised versions of the platform
• Now, the Japan Virtual and Crypto assets Exchange Association (JVCEA) appears poised to streamline listing requirements for local exchanges, allowing them to list up to a dozen assets in one batch
• The streamlining is believed to contain some provisos in order to maintain high standards of assets, including a minimum of six months since initial release
• Digital asset trading increased 51% in the first 11 months of 2021, reaching approximately $1tn for the year, according to JVCEA data

 

What happened: Brevan Howard crypto arm grows to $250m

 

How is this significant?

• Macro hedge fund Brevan Howard (co-founded by billionaire and digital asset advocate Alan Howard) has committed capital and staff to its new crypto asset arm, to the tune of $250m
• BH Digital will open to funds from clients later this year, and has expanded to over 40 full-time staff since launching in September
• The company have bolstered their expertise in the field with recent hires from both Jump Capital and the Winklevoss-owned digital asset exchange Gemini
• The move mirrors other hedge fund titans such as Paul Tudor Jones and Marc Lasry moving into digital assets, whilst Bloomberg also reported Man Group Plc (the world’s biggest publicly traded hedge fund firm) could be entering the space

 

What happened: Sony makes $3.6bn acquisition in metaverse push

 

How is this significant?

• After Microsoft’s recent acquisition of Activision Blizzard, Japanese tech giant Sony became the latest mega-corporation to spend big in order to bolster their metaverse capabilities
• Since Facebook announced their rebranding as Meta, the topic has gained interest and attention amongst businesses, especially in Silicon Valley
• The manufacturers of the PlayStation series of consoles have agreed to pay $3.6bn for the game developer Bungie, best known as creators of popular gaming franchises Halo and Destiny
• With the potential future value of the metaverse (or individual metaverses) estimated in the trillions of dollars, established tech giants have begun positioning themselves to get in on the ground floor—with content powered partly by persistent, decentralised, blockchain-based assets such as NFTs
• The role of digital assets securing the metaverse has seen growth for company’s building decentralised virtual spaces or NFT solutions, such as Decentraland, Sandbox, or Enjin

 

What happened: Digital asset exchange FTX achieves $32bn valuation in latest raise

 

How is this significant?

• Despite recent bearish market momentum, leading digital asset exchange FTX achieved a $32bn valuation on a new $400m funding round, just one week after their US subsidiary achieved an $8bn valuation on a similar raise
• In an interview with Bloomberg, CEO Sam Bankman-Fried confirmed that the company would use funds raised for mergers and acquisitions in order to boost their platform offerings and capabilities
• On Wednesday they made the first such acquisition, announcing a deal to buy Japan’s Liquid Group
• This raise featured all the same investors as that of FTX.US, including Paradigm, Temasek, the Ontario Teachers’ Pension Plan Board, SoftBank Vision Fund 2, and Lightspeed Venture Partners
• FTX has now raised approximately $2bn of venture funding in total, and when questioned Bankman-Fried remained non-committal on the idea of the company going public as Coinbase did; “I’m not sure whether we will. I could see it happening, I could see it not happening. We don’t feel like we have any particular need to do it”

 

What happened: Regulatory roundup—Russia and India signal digital asset approval

 

How is this significant?

• Regulator approval is a key issue facing the growing digital asset industry globally, including in the United States, where President Biden is preparing an executive action to clear up the regulatory environment around the asset class
• On a more local level, lawmakers in Arizona and Wyoming both submitted bills allowing the official use of Bitcoin in their state; as legal tender in Arizona, and for sales and tax in Wyoming
• In two of the world’s major rising economies there was some regulatory clarity on the issue this week, as BRIC nations India and Russia both signalled legal approval and support for digital assets
• Indian finance minister Nirmala Sitharaman revealed in the 2022 budget that digital assets would be taxed at a 30% rate—effectively granting legal recognition—and that the Reserve Bank of India would launch its own digital currency this fiscal year
• Sitharaman recognised the rise of the asset class, commenting “There’s been a phenomenal increase in transaction in virtual digital assets. The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime”
• Meanwhile in Russia, concerns over a possible Central Bank ban on digital assets were allayed this week as Vladimir Putin asked the central bank to reach consensus with politicians who favoured regulation, citing the country’s “competitive advantage” in Bitcoin mining as an important point
• Bloomberg analysts say Putin personally supports the miner-friendly regulation, allowing the country to tax digital assets, rather than banning them outright
• Part of the desire to regulate could be down to Kremlin estimates that Russians hold $200bn of value in digital assets; about 12% of the global total
• In the United Kingdom, former Chancellor of the Exchequer Philip Hammond declared it “frankly quite shocking” how “manifestly behind the curve” the UK government is on digital assets
• He warned the country may only have a year to enact a relevant regulatory regime, or risk losing digital asset firms and services overseas; “It’s not about cryptoassets. It’s about establishing the U.K. as a major base for digital trading infrastructure”

 

What happened: Reddit founder Alexis Ohanian raises $510m for crypto VC fund

 

How is this significant?

• Web entrepreneur and venture capitalist Alexis Ohanian announced this week that his VC firm 776 Management LLC has raised $510m for a new fund centred on startups in the digital asset space
• The firm is already established in the industry; digital asset investments accounted for about 40% of 776’s deals last year, according to the Wall Street Journal
• Ohanian touted inclusivity as a key factor of the new fund, with more than half the fund’s backers being women, and profits earmarked for underserved communities
• In other VC industry news, research firm CB Insights revealed New York as the epicentre of America’s digital asset venture capital funding, a position bolstered by mayor Eric Adams declaring it “the centre of the United States cryptocurrency industry”

 

What happened: Digital asset firm Fireblocks valued at $8bn after Series E raise

 

How is this significant?

• Following a $550m Series E round, digital asset custodian Fireblock achieved an $8bn valuation this week
• CEO Michael Shaulov spoke about the scale of their growth as a reflection of wider growth throughout the asset class; “Over the last 18 months we’ve seen exponential growth… We had about 100 clients at the start of 2021 and we finished the year with 800. We’ve transferred over $2tn worth of assets”
• Fireblocks operates a SWIFT-like transfer network for digital assets, transacting about 15% of institutional trade volume
• Fireblocks said they will use the funding for expansion into new growth markets, including South East Asia and Africa

 

What happened: ETF News—Fidelity and Grayscale file for new products

 

How is this significant?

• Fidelity appears to be betting on the growth of Metaverse value, having filed with the SEC for a “Fidelity Metaverse Index ETF”
• The proposed product seeks exposure to companies that “develop, manufacture, distribute or sell products and services relating to enabling the metaverse”
• This filing comes after the SEC rejected Fidelity’s application for a spot-based ETF
• Grayscale meanwhile filed this week for an ETF offering a basket of companies with high Bitcoin exposure or involvement—the list of 22 companies includes Coinbase, PayPal, payments processors Block (formerly Square), and Silvergate

 

What happened: Facebook sells Diem assets to Silvergate Bank

 

How is this significant?

• Facebook finally wound down its involvement with their Diem (formerly Libra) stablecoin project this week, selling the project’s assets to federally-licensed digital asset bank Silvergate
• After being announced in 2019 as Libra, the project had difficulty actually releasing a stablecoin due to intense regulatory scrutiny and monopoly concerns in the US
• Stuart Levey, the US chief executive of Diem Networks released a statement saying “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead… As a result, the best path forward was to sell the Diem Group’s assets, as we have done today to Silvergate”
• Silvergate confirmed the deal includes “proprietary software elements critical to running a regulatory-compliant stablecoin network”, indicating that they aim to release it where Facebook failed

 

What happened: NYDIG releases paycheque via Bitcoin functionality

 

How is this significant?

• Institutional Bitcoin company NYDIG released a service this week allowing companies and institutions to pay their employees in Bitcoin if they so choose
• The “Bitcoin Savings Plan” program allows employees to convert some of their paycheque into Bitcoin, custodied by NYDIG
• This program has been adopted by several existing NYDIG partners at launch, and appears to be inspired by a recent survey which found 36% of employees under the age of 30 were interested in converting part of their salary to Bitcoin, and 1 in 3 employees would favour employers who offer a Bitcoin option over those that don’t

Market Overview:

Digital assets experienced large losses this week, echoing wider macroeconomic declines and uncertainty affecting global markets and on-risk assets.

• Investor concerns over major global issues including US-Russia tensions over Ukraine, and the outcome of Jerome Powell’s Wednesday media briefing on economic policy (and especially interest rates) after the FOMC meeting
• Bitcoin experienced a steep decline from Thursday onwards, falling from a weekly high of $43,410, to $33,180 on Monday—its lowest price in 7 months
• This price point represented more than a 50% fall from November’s record high around $69,000
• Bitcoin did show some signs of recovery after Monday, rising more than $5,000 to $38,430 on Wednesday, before retracing slightly after Jerome Powell’s speech
• Bitcoin is currently valued at $36,180, representing a 13.8% weekly decline
• Ether again matched Bitcoin’s trend, but with additional declines; dropping from a weekly high of $3,253 to a low of $2,183—its worst performance since late July 2021
• Ether recovered to $2,654 on Wednesday, and its current price of $2,407 is a 23% weekly decline on last week
• Total market capitalisation fell sharply as the majority of altcoins suffered greater percentage losses than Bitcoin and Ethereum. Overall value dropped below $1.5tn on Monday before recovering some losses to $1.71tn on Wednesday, pulling back to a current level of $1.63tn
• Total value locked in DeFi dropped to $92.4bn, according to industry analytics platform DeFi Pulse

 

Digital asset markets faced large sell-offs this week, with many analysts citing the same macroeconomic concerns and tensions that led to similar momentum in traditional markets. However, a sea of red didn’t stop many significant institutions from continuing to chart a course to the brave new world of crypto assets; BlackRock filed for an ETF based on blockchain exposure, Jane Street Capital spoke about rising institutional interest, VC funding continued to grow, and tech giants including Twitter, Meta, and YouTube all expressed enthusiasm for crypto assets and their wider integration.

 

What happened: BlackRock files to launch blockchain ETF

 

How is this significant?

• Despite negative price action across the market this week, the world’s largest asset manager still seems optimistic about the potential for digital assets, submitting an SEC filing for a blockchain and tech ETF
• Companies featured within the iShares Blockchain and Tech ETF would be those involved in the “development, innovation, and utilization of blockchain and crypto technologies”
• The move follows indications from Salim Ramji, BlackRock’s global head of ETFs, late last year that a crypto asset themed ETF was in the works
• Perhaps with an eye to the SEC’s recent rejections of spot-based ETFs, the planned fund will not directly purchase digital assets; instead 80% of the fund’s value will be allocated towards stocks of companies with the appropriate digital asset exposure, with the remaining 20% in “futures, options, swap contracts, cash and cash equivalents”
• In other ETF news, Valkyrie filed this week to launch a Bitcoin mining ETF, which will invest 80% of its assets into securities of firms that derive at least 50% of their profits from Bitcoin mining

 

What happened: Microsoft CEO Satya Nadella calls metaverse the “next wave of the internet”

 

How is this significant?

• In an earnings call on Tuesday, Satya Nadella spoke at length about the company’s belief in the economic potential of the metaverse—a belief backing their recent $69bn acquisition of gaming studio Activision Blizzard
• Nadella believes that metaverse presences can however have a variety of applications beyond gaming; “as the digital and physical worlds come together, we are seeing real enterprise metaverse usage, from smart factories to smart buildings to smart cities”
• He identifies the metaverse—and the platform-level infrastructure underpinning it—as key to the future development of our digital lives, telling a caller that it “is essentially the next wave of the Internet, right? Just like the first wave of the Internet allowed everybody to build a website, I think the next wave of the Internet will be a more open world where people can build their own metaverse world”

 

What happened: Biden administration to release government digital asset strategy

 

How is this significant?

• According to reports this week, the Biden administration may release a government-wide digital asset strategy as soon as next month
• The move would put the White House front and centre of legislative attempts to define and divide up responsibilities for dealing with the new asset class, potentially reducing the lack of clarity that has hampered adoption in the United States
• Sources told Bloomberg that “Senior administration officials have held multiple meetings on the plan, which is being drafted as an executive order”
• The directive is believed to be concerned with the challenges posed by digital assets, carving out specific roles for government agencies, and ensuring that the US remains competitive as digital asset adoption continues to grow globally
• In other news from Capitol Hill, this week also featured a House Hearing on the energy use of Bitcoin mining, which was characterised by analysts as “constructive”, and featured acknowledgements of decreased carbon emissions in the industry, and its role as a catalyst in renewable energy adoption, due to its potential to make energy usage and integration directly profitable

 

What happened: Jane Street identifies digital asset trading as “clear growth area”

 

How is this significant?

• Jane Street Capital, one of the world’s largest trading firms and market makers, has become the latest Wall Street firm to embrace the rise of digital assets, through the provision of market-making services to traditional trading platforms like RobinHood, as well as DeFi teams
• Mina Nguyen, the firm’s head of institutional strategy, told Bloomberg this week that the recent market slide hasn’t deterred interest from institutional investors, especially if increased US regulatory clarity allows them to extend their positions; “In terms of demand, we’re seeing inquiries from a breadth of institutions. Asset managers, endowments, and private wealth institutions do not want to be caught off guard”
• Additionally, the idea of direct exposure is increasingly appealing to a variety of institutions; she told Bloomberg “Sovereign wealth funds are asking questions” on the matter
• Turner Batty, creator of the company’s crypto trading desk notes that it has been a “clear growth area” for the past 16 months, and that the company now employs more people for digital asset trading than ever before

 

What happened: Bank of America calls Digital Dollar “inevitable” in three to seven years

 

How is this significant?

• Bank of America released a report on Monday predicting the United States following in the steps of other nations to develop and release a Digital Dollar CBDC by 2025-2030
• An American CBDC was identified as “an inevitable evolution of today’s electronic currencies”, and BofA predicted continued growth of digital currencies issued by private entities in the meantime
• Strategists Alkesh Shah and Andrew Moss wrote “We expect stablecoin adoption and use for payments to increase significantly over the next several years as financial institutions explore digital asset custody and trading solutions and as payments companies incorporate blockchain technology into their platforms”
• The BofA report follows one from the Federal Reserve itself earlier this week, in a move the Fed described as important to ensuring continued US Dollar dominance
• This report marks the Federal Reserve’s biggest step yet into the field of digital assets, one which they characterise as “a highly significant innovation in American money”
• The Federal Reserve has now kicked off a four month public consultation period, seeking input from a variety of economic stakeholders

 

What happened: FTX.US reaches $8bn valuation on $400m Series A

 

How is this significant?

• The US subsidiary of popular digital asset exchange FTX (operating as a separate entity due to US regulatory requirements on asset listings and trading mechanisms) achieved a valuation of $8bn after their first funding round concluded this week
• Participants in the $400m Series A raise included contributions from various heavy hitters, including Paradigm, Temasek, the Ontario Teachers’ Pension Plan Board, SoftBank Vision Fund 2, and Lightspeed Venture Partners
• The funding will be used “to further grow its user base, bolster its derivatives efforts, and launch new business lines”, alongside “strategic investments and acquisitions in key verticals and expand its network of partnerships”

 

What happened: NFT News: Beatles, Twitter, YouTube, and record volumes

 

How is this significant?

• Despite significant moves downside in wider digital asset trading, the NFT market showcased surprising strength this week, perhaps indicating an evolving role for this particular subset of digital assets
• Leading NFT marketplace Opensea set a new record for monthly volumes with almost a week of January left to go, registering more than $3.2bn in trades
• Julien Lennon, son of John, announced a digital auction of Beatles memorabilia as NFTs, making them perhaps the most significant cultural entity thus far to feature in official NFT issuance
• The Financial Times reported that Facebook’s parent company Meta is looking into the creation and deployment of its own NFT platform
• Twitter published a job posting for “Senior Product Manager, Crypto” to “help teams across Twitter build features that are supercharged by crypto”, directly after the company released an NFT verification service allowing users to link their profiles to blockchain wallets
• YouTube CEO Susan Wojcicki also confirmed that the content platform is investigating NFTs to drive more engagement, marking the first official direct involvement in digital asset creation by parent company Alphabet Inc.
• In her annual letter to creators, she declared “We’re always focused on expanding the YouTube ecosystem to help creators capitalise on emerging technologies, including things like NFTs, while continuing to strengthen and enhance the experiences creators and fans have on YouTube”
• In an analyst note this week, investment bank Jefferies forecast an $80bn value for the NFT market by 2025

 

What happened: Dragonfly Capital Partners files for new $500m digital asset VC fund

 

How is this significant?

• Venture Capital firm Dragonfly became the latest in the field to earmark large amounts of funding for digital assets, with a filing for its Dragonfly Ventures III Feeder fund revealing a target raise of $500m
• This follows in the wake of other large VC digital asset funds, such as Paradigm’s $2.5bn fund, FTX Ventures’ $2bn launch fund, multiple funds by a16z, and heavy investment from the likes of Sequoia
• Dragonfly Capital have been involved in digital asset funding for several years, growing from $100m AUM at launch in 2018, to over $2bn AUM now

 

What happened: Cathie Woods’ ARK Invest makes bold $1m Bitcoin by 2030 prediction

 

How is this significant?

• According to ARK Invest’s new Big Ideas Outlook report, released on Tuesday, the firm headed by investment guru Cathie Wood believes Bitcoin could reach a price of $1 million per coin within the decade
• Numerous factors were cited as possible catalysts for such growth, including the potential adoption as legal tender by more countries, and technological improvements like the recent Taproot upgrade and Lightning Network as means to improve the asset’s scalability and transaction speeds
• Analysts noted that “bitcoin’s cumulative transfer volume increased by 463% in 2021”, and the network’s annual settlement volume “surpassed Visa’s annual payments volume” with more than $13tn in value settled last year
• ARK analyst Yassine Elmandjra also said that environmental concerns around Bitcoin are overblown, and its decentralised nature provides a compelling value proposition; “Our research suggests that Bitcoin has the potential to transform monetary history by providing financial freedom and empowerment in a fair, global, and distributed way”
• This hypothesis is an almost linear extension of one by Woods last year, when she predicted that one Bitcoin could hit $500,000 by 2026

 

What happened: Grayscale identifies 25 digital assets for potential addition to funds

 

How is this significant?

• Leading Bitcoin fund provider Grayscale revealed in a tweet this week that they are investigating and reviewing 25 new digital assets for addition to future investment products
• Grayscale identifies the move as part of their mission to “introduce investors to the diversity in this space”, showcasing the continued growth and evolution of the digital asset sector
• Some notable trends being explored by Grayscale according to new assets under consideration are:
  • Third-generation blockchains (generally-characterised by Ethereum-compatible smart contract at lower transaction costs and higher transaction speed than Ethereum itself) such as Fantom, Elrond, Holo, and Oasis
  • NFT, blockchain gaming, and/or metaverse projects, such as Enjin, Gala, Axie, and The Sandbox
  • Decentralised Finance (DeFi) protocols, such as Bancor, Convex, and Stacks

 

What happened: MicroStrategy confirms “buy and hold” Bitcoin approach

 

How is this significant?

• MicroStrategy, the world’s largest corporate Bitcoin holder, appears unfazed by the leading digital asset’s recent slide in value, according to CFO Phong Le
• Speaking to the Wall Street Journal this week, he said the company will likely expand rather than reduce their position with the asset; “Our strategy with Bitcoin has been to buy and hold, so to the extent we have excess cash flows or we find other ways to raise money, we continue to put it into Bitcoin”
• He confirmed the company will continue to buy Bitcoin, although he didn’t disclose whether they plan to buy more than they did last year
• Despite the recent fall in value, Brent Thill, senior analyst at Jefferies LLC calculates that the company has still gained around $750m on their overall Bitcoin investments at current price points

Market Overview:

Digital assets traded in a tight range this week, declining slightly from Sunday onwards.

• Bitcoin traded predominantly between $42,000 and $43,400, with weekly highs and lows outside the range of $44,240 and $41,250 respectively
• Bitcoin is currently priced at $41,950, down around 4.2% from last week
• Ether performed in a similar fashion, with additional downside movement; dropping from a weekly high of $3,389 to a low of $3,056
• Ether is currently priced at $3,129; a 6.6% weekly decline
• Total market capitalisation declined slightly from last week’s snapshot to $2.09tn, dropping just below $2tn to a current value of $1.98tn
• Total value locked in DeFi dropped to $92.4bn, according to industry analytics platform DeFi Pulse

 

Digital asset markets experienced a fallow week in terms of performance, but another bumper crop of news and adoption. Some of the biggest brands in the world—Walmart, Microsoft, and Mastercard—all featured, whilst elsewhere there were acquisitions of banks and derivatives exchanges, new venture funds worth billions, and even the creation of new energy-efficient hardware that could mitigate one of the key complaints about Bitcoin.

 

What happened: Trademark filings reveal increased digital asset consideration by Walmart

 

How is this significant?

• Walmart, one of the largest retailers in the world, appears to be developing its own digital assets and NFTs in recognition of forecast metaverse growth, according to US Patent Office filings that emerged this week
• CNBC were the first to report on the trademark filings, one of which pertains to “providing a digital currency and a digital token of value for use by members on an online community via a global computer network”
• Trademark attorney Josh Gerben told CNBC that the filings appeared to have much consideration behind them surrounding all aspects of digital assets; “There’s a lot of language in these, which shows that there’s a lot of planning going on behind the scenes about how they’re going to address cryptocurrency, how they’re going to address the metaverse and the virtual world that appears to be coming or that’s already here”
• Several of the trademarks relate specifically to virtual goods and shopping inside a virtual space within the metaverse
• When asked for comment, a Walmart representative stated “Walmart is continuously exploring how emerging technologies may shape future shopping experiences”

 

What happened: Microsoft invests nearly $70bn in metaverse push

 

How is this significant?

• One of the world’s largest tech companies bought one of the world’s largest video game developers this week, as Microsoft agreed a deal to acquire Activision Blizzard for $68.7bn with a stated goal of metaverse development
• The video games industry is widely regarded as being at the vanguard of metaverse development, due to existing capabilities of gathering groups in virtual spaces and transacting in digital goods
• Microsoft Chairman and CEO Satya Nadella said that “Gaming is the most dynamic and exciting category in entertainment across all platforms today, and will play a key role in the development of metaverse platforms” and described the acquisition as providing them with “the building blocks of the metaverse”
• The move follows another major gaming industry acquisition last week, when Grand Theft Auto parent company Take-Two Interactive bought mobile games specialists Zynga for $12.7bn, with Take-Two CEO Strauss Zelnick citing “Web3 opportunities” as a benefit of the companies combining expertise
• The Take-Two acquisition had the short-lived title of largest gaming industry acquisition ever, before Microsoft’s deal this week more than quintupled the record

 

What happened: BNY foresees digital assets as a “source of meaningful revenue” by 2023

 

How is this significant?

• In an interview this week BNY Mellon’s Chief Financial Officer Emily Portney believes digital assets could begin providing “meaningful” revenue to America’s oldest bank by next year
• Recognising a collaboration with fintech unicorn Fireblocks as “foundational to everything we’re going to do” in the realms of digital assets, she sees BNY Mellon “leading the charge” on bringing crypto assets into traditional banking infrastructure
• Portney forecasts more regulatory clarity in the United States within the first half of this year, which would allow banking institutions to become more proactive with crypto
• A key aspect of future growth, according to Portney, is overcoming the SEC’s reluctance to approve any spot-based ETFs; “There are proposals in front of the Securities and Exchange Commission that haven’t yet been approved on whether ETFs can actually hold digital assets directly versus futures”

 

What happened: Paradigm leads $110m Series B round for Bahraini digital asset exchange

 

How is this significant?

• Paradigm, creators of the world’s largest digital asset VC fund, co-led a $110m funding round for Bahrain-based digital asset exchange Rain Financial
• The round successfully concluded on Tuesday, and was co-led by established Silicon Valley VC Kleiner Perkins
• Other backers included Global Founders Capital, Cadenza Ventures, and JIMCO
• Rain Financial was the first officially licensed digital asset exchange in the Gulf region, and aims to use the funding to double its workforce this year, and increase its presence in the wider MENA region, alongside subsidiaries in Turkey and Pakistan
• Despite much wealth, the region has lagged behind others in digital asset adoption, but backers hope the funding will help increase investment interest in the region; Paradigm’s Casey Caruso said in a press release that “We believe Rain [Financial] is a crucial piece of the puzzle for bringing the Middle East deeper into the new crypto economy”

 

What happened: Intel develops energy-efficient Bitcoin mining chip

 

How is this significant?

• Computer hardware manufacturers Intel is reportedly about to launch an energy-efficient upgrade to current Bitcoin mining options, according to industry press reports this week
• Dubbed the “Bonanza Mine” chip, it’s described as “ultra-low-voltage energy-efficient Bitcoin mining ASIC”—characteristics which directly address one of the key public concerns about Bitcoin; the carbon footprint of its mining process
• Intel General Manager Raja Koduri described blockchain as “something we are working on” in a December interview, building on previous decisions not to limit mining-specific performance of hardware like rivals Nvidia have done

 

What happened: Digital asset exchange agrees deal to purchase German private bank

 

How is this significant?

• BXM Operations, the parent company of digital asset exchange BitMex, released a press statement this week confirming an agreement to acquire Munich-based Bankhaus von der Heydt
• Founded in 1754, Bankhaus von der Heydt is one of the oldest and most prestigious private banks in Germany—and one of the first to integrate custody of digital assets
• BXM CEO Alexander Höptner sees the regulated entity as a gateway into wider trading opportunities across the German-speaking region; a “goal of establishing a one-stop shop for regulated crypto products in Germany, Austria, and Switzerland, and thus becoming a strong player in Europe”
• Terms of the deal were not publicly disclosed, and remains subject to approval by German regulators

 

What happened: American Bankers Association aims to grow crypto accessibility with NYDIG

 

How is this significant?

• In a blog post this week, Rob Nichols, president of the American Bankers Association (ABA), confirmed that an increasing number of American banks are seeking to provide Bitcoin and digital asset access amidst growing consumer interest
• The ABA invested in NYDIG last month in order to improve their digital asset capabilities, having recognised 2021 as “the year that cryptocurrency went mainstream”
• Nichols believes that digital assets present an opportunity too important for the industry to ignore, writing “even with mixed opinions on the value of cryptocurrency as an asset class or as a basis for a product set, ABA believes strongly that banks should have access to the tools, partners and regulatory frameworks that allow them to meet their customers’ needs. NYDIG offers a solution that accomplishes just that, and ABA is proud and excited to support their efforts and take this sensible step into the crypto business on behalf of our member banks across the country”

 

What happened: Mastercard partners with Coinbase on upcoming NFT marketplace

 

How is this significant?

• Mastercard announced this week that they have partnered with Coinbase for their upcoming NFT marketplace—a move which includes several aspects designed to make NFTs easier to transact and more accessible
• Unlike existing NFT marketplaces, users will be able to buy the tokens without having to use digital assets as payment; Mastercard’s existing payment infrastructure will be integrated, allowing people to purchase directly with cash
• Eliminating the need to not only pay with crypto assets, but hold them in your wallet (for example to pay the network gas fees required to mint them initially) simplifies the process for potential first-time NFT buyers
• Furthermore, NFTs will be classified as “digital goods” by the two companies, opening up a broader audience to purchase them, in comparison to a more investment-aligned “digital asset” classification
• Mastercard noted that the “collaboration is part of Mastercard’s broader work to support the crypto ecosystem with new tools for crypto wallets and cybersecurity protections”
• In other NFT news this week, Soros Fund Management, Sequoia China, and the Winklevoss brothers contributed to a new funding round for Animoca Brands, doubling the metaverse-builder’s valuation to $5bn
• Coinbase also featured in the news outside of the NFT space this week, acquiring regulated futures exchange FairX, signalling the first step in creating their own derivatives marketplace

 

What happened: Former CFTC chair joins digital asset firm as policy advisor

 

How is this significant?

• Christopher Giancarlo, former chair of the US Commodity Futures Trading Commission, joined crypto asset investment firm Coinfund this week as their new policy advisor
• Giancarlo headed the CFTC for five years, and was known for maintaining a generally positive stance towards digital assets throughout his tenure
• Commenting on his appointment, Giancarlo said he wants to “help this new asset class achieve mainstream adoption”

 

What happened: FTX launches $2bn digital asset VC fund

 

How is this significant?

• A press release on Monday confirmed the creation of FTX Ventures; a $2bn digital asset investment fund by leading digital asset exchange FTX
• The $2bn in funding puts it second in size behind Paradigm’s record-breaking $2.5bn fund created in November
• According to the release, the fund will operate in the emerging blockchain-driven Web3 world, with “a broad investment mandate across social, gaming, fintech, software, and healthcare”
• The fund is led by Amy Wu, formerly of top VC Lightspeed Venture Partners
• Speaking after her appointment, Wu commented “I am super excited about the future of the open internet, crypto, and I think we’re still early right now in terms of blockchain adoption… I’m excited about how this industry will shape up in the future and FTX’s role in that”
• In other VC news this week, com revealed the expansion of their venture fund from $200m to $500m, and generalist investors Blossom Capital closed a $432m round for the creation of a new fund—at least one third of which is earmarked for Series A investments in the digital asset space
• Blossom Capital’s managing partner Alex Lim said “Our focus is to invest early. It’s not just a bubble. There are markets being created here”

Market Overview:

Digital assets continued last week’s decline into the weekend, before recovering on the basis of statements by Federal Reserve chairman Jerome Powell.

• Bitcoin fell to lows not seen since September, briefly dropping below $40,000 on Sunday; but large spot buying volume at that price point and increased market confidence due to CPI data helped to reverse momentum and erase the majority of last week’s losses
• Bitcoin’s weekly low was $39,820, rising to a weekly high of $43,920 on Wednesday after the release of US inflation figures
• Bitcoin is currently priced at $43,730, up about 1.2% from last week
• Ether’s movements mirrored Bitcoin, dropping below $3,000 for a weekly low of $2,962 on Sunday, before strong demand at those levels drove prices back up, peaking at $3,383 on Wednesday
• Ether is currently priced at $3,353; a 1.9% weekly decline
• Total market capitalisation rose slightly from last week’s snapshot to $2.09tn, recovering from levels below $1.87tn during Sunday’s market nadir
• Total value locked in DeFi declined to $95.3bn, according to industry analytics platform DeFi Pulse

 

Market pessimism turned to optimism on Wednesday, as US inflation news was perceived positively by industry analysts. Along with Jerome Powell, several other individuals made headlines in the industry this week; billionaire investor Bill Miller declared himself a “Bitcoin Bull” with half his net worth in digital assets, Binance CEO Changpeng Zhao was recognised as the 11th-richest person in the world, ex-Andreessen Horowitz partner Katie Haun was featured in the FT for her new crypto VC funds, and custodians Bitcoin Suisse announced the hire of Barclays’ head of wealth management.

 

What happened: Jerome Powell clarifies Federal Reserve stance on digital assets

 

How is this significant?

• Speaking at the Senate Banking Committee meeting on Tuesday, Federal Reserve Chairman Jerome Powell made several statements that were enthusiastically received by analysts of the digital asset industry
• In response to a question from noted congressional digital asset advocate Pat Toomey, Powell said he saw no restrictions to privately-issued stablecoins existing alongside federally-issued stablecoins, such as the proposed Digital Dollar CBDC
• He also confirmed the Federal Reserve will publish a report on digital assets “in the coming weeks”, giving further acknowledgement to their increased profile in the financial space
• The report will likely prove more consultative than definitive, as Powell noted “it’s more going to be an exercise in asking questions and seeking answers from the public”
• On Wednesday, Consumer Price Index (CPI) data for the United States was released, and although inflation rose to the highest levels in nearly 40 years, it proved to be in line with predictions, rather than exceeding them
• This led to a recovery for Bitcoin and other major digital assets as analysts commented “What we’re seeing today is not ‘yay, inflation hedge’ and all that, it’s risk assets are in again… because we don’t think that Powell is going to raise rates as much as the market has been discounting because inflation was in line with expectations and not worse”

 

What happened: Macro investor Bill Miller has half of personal fortune in Bitcoin

 

How is this significant?

• Renowned macro investor and hedge fund billionaire Bill Miller, in an interview with Wealthtrack this week, revealed that he has moved 50% of his personal wealth into Bitcoin
• Previously, he introduced Bitcoin into his corporate portfolios through his flagship Miller Opportunity Trust fund, but the 50% allocation in his personal net worth far exceeds the fund’s more conservative allocation
• In the interview, he explained the move, citing increased adoption and institutional presence; “My reasoning was there are a lot more people using it now. There’s a lot more money going into it in the venture capital world”
• He noted that in the last 10 years, gold has decreased in value, whereas Bitcoin is the best-performing asset of the last decade
• Miller also praised the tokenomic design of the leading digital asset, saying “It comes down to the very basic level of supply and demand… Bitcoin is the only economic entity where the supply is unaffected by the demand”
• He revealed that he no longer classifies himself as a “Bitcoin observer”, and now describes himself as a “Bitcoin bull”
• Further explaining the investment appeal of Bitcoin, he stated “I think the average investor has to ask his or herself what do you have in your portfolio that has this kind of track record… is very, very underpenetrated, can provide a service of insurance against financial catastrophe… and can go up 10 times or 50 times?”
• Miller also disclosed that he first purchased Bitcoin in 2014, at around $200, buying up to $500, before stopping his accumulation until early 2021 in the $30,000 range

 

What happened: PayPal investigates creation of proprietary stablecoin

 

How is this significant?

• Reporting by Bloomberg this week revealed work on a proprietary stablecoin by the payment processor
• Following the discovery of a hidden “PayPal Coin” logo within the PayPal app, the company’s senior vice president of crypto and digital, Jose Fernandez da Ponte, told Bloomberg in a statement that “We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators”
• If they develop their own coin, it would mark the first legitimate digital asset developed by a major corporation intended for consumer usage
• Speaking on a podcast recently, Fernandez da Ponte revealed that the company has “not yet seen a stablecoin out there that is purpose-built for payments”
• PayPal was one of the first major corporations to embrace digital assets, arguably helping to kickstart the move into a bull market late in 2020 when they first allowed customers to buy and sell digital assets through their app

 

What happened: Binance CEO Changpeng Zhao named 11th-richest person in the world

 

How is this significant?

• Changpeng “CZ” Zhao, CEO of the world’s largest digital asset exchange, had his wealth estimated in the Bloomberg Billionaires Index for the first time; and the results were indicative of the growing appeal of digital assets
• The list published on Monday ranks Zhao as the 11th-richest person in the world, with an estimated fortune of $96.5bn; making him the only person from the finance industry to crack the top 35
• With Binance making revenues from trading fees, Zhao’s fortune goes some way towards demonstrating the massive growth in digital asset interest over the last year
• He also ranks as the wealthiest Canadian citizen, wealthiest Asian (ahead of the likes of Mukesh Ambani, Jack Ma, and Li Ka-Shing in the top 50), and largest annual increase in wealth (beating Ken Griffin and Jeff Bezos into second and third place respectively)
• Worth noting is that Bloomberg’s calculations exclude all of Zhao’s digital asset holdings, which if included could propel him even further up the rankings. Bloomberg notes that “Zhao’s fortune could be significantly larger, as the wealth estimate doesn’t take into account his personal crypto holdings, which include Bitcoin and his firm’s own token. Binance Coin, now called BNB, surged roughly 1,300% last year”

 

What happened: Barclays’ Wealth Management CEO moves to Bitcoin Suisse leadership role

 

How is this significant?

• On Friday, Bitcoin Suisse announced the appointment of their next CEO; the leader of Barclays Plc’s U.K. Wealth Management & Investments business, Dirk Klee
• Klee will step into the role from April onwards, replacing former Credit Suisse banker Arthur Vavloyan
• Bitcoin Suisse currently custodies more than $7.6bn worth of digital assets, and is one of the first major companies in the space, founded in 2013
• The change in leadership comes after founder Niklas Nikolajsen stepped back as chairman at the start of the year, leaving on a high after bullish forecasts estimated a doubling of net income in 2021
• Klee believes in further growth for the industry, stating “In the coming years, the growth of crypto-financial services will continue to accelerate in Europe and globally. We anticipate key shifts in regulation, client expectations, and technology… In the coming years, a once-in-a-lifetime opportunity awaits Bitcoin Suisse, our clients, investors, and employees”

 

What happened: Citadel Securities funding raise hints at potential digital asset moves

 

How is this significant?

• Market maker Citadel Securities announced a $22bn valuation this week, after $1.15bn worth of investment from digital asset-focused VCs Sequoia and Paradigm
• Paradigm made the news late last year with their new $2.5bn crypto investment fund; the world’s largest VC fund for the digital asset industry, whilst Sequoia allocated 25% of their 2021 investments towards digital asset companies
• Paradigm noted in a statement announcing the deal that they would work with Citadel Securities in the digital asset field; “partnering with the Citadel Securities team as they extend their technology and expertise to even more markets and asset classes, including crypto”
• The move could indicate a gradual conversion of former public crypto-sceptic Ken Griffin, CEO of Citadel
• James Angel, professor of finance at Georgetown University, believed that Citadel’s experience in traditional markets could give them an edge—and influence—compared to the competition; “Citadel Securities already has a good Washington presence. They’ve hired a lot of former government officials, they know what they’re doing in Washington and by moving into crypto they can actually use their regulatory expertise to stay out of trouble and actually make money in the crypto space”
• Bloomberg analysts predict a busy year ahead for digital asset industry lobbyists, as the asset class has grown too big to ignore

 

What happened: Arab Bank Switzerland offers DeFi products to customers

 

How is this significant?

• The Swiss affiliate of Arab Bank PLC is taking advantage of the country’s progressive digital asset policies, extending previous digital asset offerings to include DeFi exposure
• Customers of Arab Bank Switzerland now have the opportunity to invest in 10 major DeFi tokens, including Aave, Chainlink, and Polygon
• The bank’s digital assets director Romain Braud told industry publication the move was catalysed by a desire to get ahead of an impending trend; “The idea for now is just for our clients to buy, sell and hold some of the most prominent DeFi tokens… But we do believe traditional financial institutions will be replaced in the near future by these protocols, and we want to be part of this change. So, naturally in the future, we want to go deeper into these kinds of decentralized services”

 

What happened: WisdomTree re-files Bitcoin spot ETF, adds exposure to existing funds

 

How is this significant?

• Following the recent rejection of their Bitcoin spot ETF application, issuers WisdomTree have refiled, believing the market will prove its maturity sooner or later
• They filed for up to 5% Bitcoin futures exposure in their Managed Futures Strategy Fund last year, of which they added 1.5% this week
• In an interview with industry publication Coindesk, the company’s global Chief Invesment Officer Jeremy Schartz explained the move, saying “Our view was that Bitcoin is serving a role similar to gold and why people buy gold in commodities strategies… Right now, we are not going short on Bitcoin futures. We think there is more risk [in shorting] given the volatility”

 

What happened: Katie Haun to set up $900m crypto investment funds after a16z departure

 

How is this significant?

• Former Andreessen Horowitz (a16z) General Partner Katie Kaun is seeking a total of $900m for two digital asset investment funds, according to an article this week in the Financial Times
• $300m is earmarked for an early investment fund targeting industry startups, whilst the remaining $600m will be allocated towards more mature digital asset companies and tokens, according to sources speaking to the FT
• Named KRH, Haun’s VC includes several a16z alumni, and has already participated in the recent $300m raise by NFT marketplace Opensea

 

What happened: NASDAQ-listed blockchain company offers first Bitcoin dividend

 

How is this significant?

• BTCS, a blockchain-focused firm listed on the NASDAQ, announced on Wednesday that its investors will have the option between receiving their share dividends in US dollars or Bitcoin, in an industry first
• Focused on portfolio analysis and the administration of staking services, BTCS made the move to align with the interests of their customers and shareholders
• The Bitcoin dividend—dubbed the “Bividend” by BTCS—will be payable in March, but the market reacted positively to the news, with BTCS shares rising from $4.04 on Thursday to $7.13 on Wednesday

 

What happened: JP Morgan analysts predict increased crypto asset adoption in 2022

 

How is this significant?

• According to a research note published this week, JP Morgan foresees continued growth in adoption for digital assets this year, although only a small minority (5%) of clients foresee a landmark $100,000 Bitcoin price in 2022’
• Equity research analyst Kenneth B. Worthington believes institutional presence in the space will continue to grow throughout the year, writing “We see likelihood for greater acceptance of cryptocurrency markets by mainstream investors and companies in 2022 with increasing relevance to financial markets”
• Worthington also praised Bitcoin for being “particularly well-designed as a modern store of value”, and noted that its historic volatility hasn’t stopped it from growing in value
• The report also looked beyond Bitcoin, saying that potential existed in other chains and protocols, particularly if technological advances are realised allowing them to efficiently transact and communicate with each other; if so, 2022 could be “the year of the blockchain bridge (driving greater interoperability of various chains) or the year of financial tokenization”

Market Overview:

Digital assets had a steady start to the year, with Bitcoin and Ether trading in a relatively tight range before dropping heavily late on Wednesday.

• Bitcoin hit a weekly high of $48,450, and spent the majority of the week trading between $46,000 and $48,000, before hitting a low of $42,760 on Wednesday in a series of quick sell-offs
• The main reason posited for the steep sell-off were minutes from the Federal Reserve’s December meeting released on Wednesday, which indicated the possibility of interest rates being increased earlier than expected
• Another catalyst for the drop is believed to be a significant fall in Bitcoin’s hash rate due to political instability and resultant internet outages in Kazakhstan—one of the world’s leading Bitcoin miners
• With Kazakhstan-based miners and mining pools removed from network participation, hash rate dropped substantially, making it computationally easier to mine Bitcoins; and therefore cheaper for miners to sell them at a profit
• Bitcoin is currently priced at $43,040, down about 8.1% from last week
• Ether rose to a high of $3,876 on Tuesday, before dropping in tandem with Bitcoin to levels below $3,500, hitting a weekly low of $3,406
• Ether is currently priced at $3,420; a 7.3% weekly decline
• Total market capitalisation declined from weekly highs of $2.27tn to $2.07tn during the Wednesday drop
• Total value locked in DeFi remained steady, at $100.6bn, according to industry analytics platform DeFi Pulse

 

2022 started with relatively sedate trading activity, before big sells on Wednesday evening led to a marketwide dip. However, the activity outside of markets was positive; Goldman Sachs outlined a continued growth prediction for Bitcoin versus gold, MicroStrategy increased its Bitcoin holdings, Airbnb announced interest in digital asset integration, Opensea achieved a $13.3bn valuation, and Samsung, Square Enix, Mexico, and El Salvador featured in a diverse lineup of other newsmakers across various fields of the crypto asset spectrum.

 

What happened: Goldman Sachs analysts forecast $100,000 Bitcoin as store of value grows

 

How is this significant?

• According to a new research note published this week, Goldman Sachs analysts believe Bitcoin could hit a $100,000 price point over the next 5 years with a compound annualised return of up to 18%
• Zach Pandl, Goldman’s co-head of global FX and EM strategy, believes that Bitcoin is poised to win more of the “store of value” market share from gold, as institutional investors continue warming to digital assets, and Bitcoin’s value as a hedge against monetary policies continues to shine
• Pandl believes Bitcoin’s float-adjusted market capitalisation is around $700m, accounting for approximately 20% of the “store of value” market alongside gold (calculated as $2.6tn of gold available for investment). This share could grow to 50% of “store of value” investments within 5 years as gold has comparatively underperformed Bitcoin in recent years
• He also predicts that concerns over Bitcoin mining won’t prove a significant deterrent to institutional investors, despite media noise on the issue

 

What happened: SEC delays NYDIG Bitcoin spot ETF decision

 

How is this significant?

• Unlike recent Bitcoin spot ETF applications that were dismissed before their full consideration period had elapsed, the United States SEC chose to delay a final decision on an application from NYDIG until the 16th of March
• A division of Stone Ridge asset management, NYDIG has gained prominence over the last year and a half for brokering major Bitcoin purchases by firms like MassMutural and Liberty Mutual, as well as a record-equalling $1bn funding round from investors including Morgan Stanley
• Whether their links to established presences in the world of traditional finance are enough to allay the SEC’s previous justifications for spot ETF rejections remains to be seen
• In other SEC news, Corey Fraser was appointed by chairman Gary Gensler this week to a new senior advisory role to oversee “policymaking and interagency work relating to the oversight of crypto assets”

 

What happened: Miami mayor proposes “crypto compact” amongst US mayoral group

 

How is this significant?

• Miami mayor Francis Suarez, one of the leading digital asset advocates in the US political arena, made moves this week to encourage the adoption of Bitcoin and crypto assets amongst other mayors across America
• On Monday, Suarez took over as head of the US Conference of Mayors, the official non-partisan organisation of all major American cities
• In his new role, he pledged to encourage innovation and the adoption of a “crypto compact”
• Although detailed contents of the compact have not yet been publicly disclosed, Suarez did comment on its purpose, saying “I’m going to ask my friends, my brothers and sisters, the mayors of this country to sign on to a mayoral crypto compact, because we need to lead in the absence of leadership… We need to make sure that a generation of prosperity and innovation is not lost because of a lack of innovative spirit”

 

What happened: Samsung introduces NFT support in CES 2022 device showcase

 

How is this significant?

• Samsung—the world’s 5th-most valuable brand in last year’s Interbrand rankings—became the first major electronics retailer to announce native support for digital assets at this year’s Consumer Electronics Show (CES)
• The Korean electronics giant has committed to rolling out support for NFTs across their smart TVs from this year onwards, including marketplace capabilities as well as display options and metadata access
• According to statistics from 2017-2020, Samsung is the world’s most popular manufacturer of smart TVs, consistently maintaining about 1/3rd of overall market share—thereby potentially bringing this growing technology and asset class further mainstream
• In a press release, Samsung acknowledged the growing interest in the technology, saying “With demand for NFTs on the rise, the need for a solution to today’s fragmented viewing and purchasing landscape has never been greater… In 2022, Samsung is introducing the world’s first TV screen-based NFT explorer and marketplace aggregator, a groundbreaking platform that lets you browse, purchase, and display your favorite art—all in one place”

 

What happened: MicroStrategy adds to Bitcoin holdings during December dip

 

How is this significant?

• According to their latest regulatory filing, leading corporate Bitcoin holder MicroStrategy added more Bitcoin to their treasury last month “buying the dip” as Bitcoin’s price declined in December
• The filing states that they purchased an additional 1,900 Bitcoins between the 9th and 29th of December, bringing their overall holdings above 124,000 Bitcoins
• The document specified an average purchase price of $30,159 across their Bitcoin treasury, meaning an overall asset appreciation in excess of 50%
• MicroStrategy’s share price benefitted from their Bitcoin strategy in 2021, rising by 47%—a nearly direct mirror of Bitcoin’s own appreciation in that timeframe

 

What happened: NFT marketplace Opensea reaches $13.3bn valuation in latest funding round

 

How is this significant?

• On Tuesday, leading NFT marketplace Opensea announced it had secured $300m in new venture capital, bringing its current valuation to $13.3bn within four years of founding
• According to data from Pitchbook, companies in the NFT field secured $3bn in VC funding throughout 2021, equating to about 1/10th of total investments into digital assets
• Opensea said the funding would be used to grow its team, including doubling of headcount within its security and trust team
• The New York Times noted digital asset startups of all kinds now have enough appeal to poach staff from established tech giants; “Start-ups focused on cryptocurrencies and NFTs are recruiting droves of employees from big tech companies like Meta, Google and Amazon, luring them with the promise of working on new—and potentially lucrative—technologies”
• In other news related to the rise of NFTs as an investment prospect, Opensea experienced $3bn trading volume in December, and Metaversal—an investment fund focused on NFTs—secured $50m in Series A funding from investors including Franklin Templeton

 

What happened: Mexican Central Bank announces plans for CBDC by 2024

 

How is this significant?

• Mexico became the latest major economy to outline plans for CBDC development, forecasting a nationwide launch by 2024
• Banxico, as the central bank is known, stated that “These new technologies and next-generation payment infrastructure are extremely important”
• Although the Mexican government doesn’t currently allow banks to offer digital asset custody services, some major financial figures, like billionaire Ricardo Salinas Pliego, urge their adoption; he published a New Year’s message advising followers to minimise exposure to fiat currency, whilst hoping to accept Bitcoin in his Banco Azteca banks, after accepting it as payment across his Elektra retail chain in mid-December

 

What happened: Airbnb CEO notes demand for digital asset payment options

 

How is this significant?

• Brian Chesky, the CEO of Airbnb, tweeted this week, revealing that the most sought-after new feature for the company to integrate in 2022 was the use of crypto assets as a payment method
• He declared “We are looking into this”, after previously hinting at the possibility during a Fox Business interview in September 2021
• Coinbase CEO Brian Armstrong was previously Airbnb’s technical manager before leaving to start up the digital asset exchange, potentially providing Chesky with an easy route into digital asset payment processing or custody
• In their 2020 IPO prospectus, the company recognised digital assets as a key to remaining competitive going forward, writing “Our future success will also depend on our ability to adapt to emerging technologies such as tokenization, cryptocurrencies, new authentication technologies, such as biometrics, distributed ledger and blockchain technologies, artificial intelligence, virtual and augmented reality, and cloud technologies”
• Chesky noted that since 2013, Airbnb has processed over $336bn in payments for its range of properties, representing a huge potential utility for crypto assets

 

What happened: El Salvador advances plans to issue Bitcoin bonds

 

How is this significant?

• El Salvador, the first nation to officially recognise Bitcoin as legal tender, is enhancing the presence of the asset within their economic infrastructure, as they prepare legislation related to the issuance of Bitcoin bonds
• On Tuesday, Finance Minister Alejandro Zelaya announced that the government has prepared 20 separate bills to provide a legal framework for the bond issuance, with Zelaya saying in an interview on local television that they will provide “legal certainty” for anyone who purchases the bonds
• The inaugural bond aims to raise $1bn, with a coupon of 6.5%. Half the funds raised are earmarked for infrastructure development, whilst the other half will go towards Bitcoin purchases
• The country’s president Nayib Bukele also tweeted a series of Bitcoin predictions this week, including a forecast oversubscription of the Bitcoin bonds and commencement of infrastructure construction funded by their sale

 

What happened: Video game developer Square Enix announces plans to invest in NFT gaming

 

How is this significant?

• In a New Year’s letter outlining the company’s plans for 2022, Square Enix president Yosuke Matsuda announced the company’s interest in blockchain gaming and NFT asset integration
• Square Enix are one of the largest and most culturally-relevant video game developers in the world, best known for their popular Final Fantasy franchise of games
• In the letter, Matsuda wrote “Incorporating decentralized games into our portfolio in addition to centralized games will be a major strategic theme for us starting in 2022”
• He also recognised the increasing maturity of the technology, saying “blockchain games, which have emerged from their infancy and are at this very moment entering a growth phase, are built upon the premise of a token economy and therefore hold the potential to enable self-sustaining game growth. The driver that most enables such self-sustaining game growth is diversity, both in how people engage with interactive content like games, and in their motivations for doing so”
• Reaction online was mixed, with many gamers expressing reservations due to concerns over carbon footprint of the technology, or a long-running vendetta against the digital asset industry due to previous use of computer graphics cards in Bitcoin mining hardware
• Reaction in the markets however was much more positive; on the first day of trading after the letter was published, Square Enix experienced its largest increase in share price since August 2021
• Matsuda also disclosed that the company will keep an eye on “potentially issuing our own tokens in the future”, which could strengthen their position in the rising Metaverse space

Market Overview:

Digital assets fluctuated this week, as lower trading volumes during the holiday period led to both steep rises and drops.

• Bitcoin rose above $50,000 late on Wednesday, and spend the majority of the week trading above that figure, before a steep decline on Tuesday led to a weekly low under $47,000 on Wednesday
• Bitcoin’s weekly high for the last week of the year was $51,960, whilst the low was $46,770
• Bitcoin is currently priced at $46,890, down about 2.9% from last week
• Despite the recent weekly declines, Bitcoin still looks set to end the year up more than 50% from January 1st
• Ether spent the majority of the week above $4,000, hitting a high of $4,149, before declining in line with Bitcoin and hitting a low of $3,595
• Ether is currently priced at $3,701; a 5.8% weekly decline
• This represents more than a 5-fold growth for the leading smart contract platform in 2021, having started the year priced at $736
• Total market capitalisation declined slightly, to around $2.2tn, after a weekly high of $2.44tn
• This still equates to a 285% increase in overall digital asset market capitalisation during 2021, having started the year with a total value of $776bn
• Total value locked in DeFi remained steady, at 99.6bn, according to industry analytics platform DeFi Pulse; nearly a 4-fold increase from the $26bn TVL at the turn of the year

 

Widespread holidays between Christmas and New Year led to a relative dearth of news and developments this year, but some significant events did unfold despite the holiday mood. The SEC played Scrooge and denied two more Bitcoin spot ETF applications, but American lawmakers tried working towards a future with greater regulatory clarity. Year-end statistics revealed massive volume growth for all aspects of digital asset trading; Spot trading, futures, options, and even NFTs. The Metaverse concept continued to gain corporate backing, North American mining company Marathon made a massive hardware order that could significantly improve the carbon footprint of mining, and macro investor Raoul Pal revealed his theories concerning current—and future—market movements.

 

What happened: SEC reject more Bitcoin spot ETF applications

 

How is this significant?

• Last Wednesday, the SEC rejected two more spot Bitcoin ETF filings, from Valkyrie and Kryptoin
• The rejection came ahead of the 7th January final deadline for such a decision, leading some analysts to speculate it may be a move to re-affirm a committed stance against any digital asset ETFs based on physical holdings rather than derivative products
• Eric Balchunas, analyst at Bloomberg Intelligence called it a “Scrooge-jection” based on the pre-Christmas timing, and commented “The fact that the SEC is disapproving faster than they needed to—we were optimistic about futures, but we’re not confident in a 2022 approval”
• Future spot ETF filings include two in late January; one by Anthony Scaramucci’s SkyBridge, and another by Fidelity
• Despite the SEC’s stance against spot ETFs, Bloomberg noted that it’s been a bumper year for institutional digital asset exposure; “the number of crypto-tracking investment vehicles worldwide more than doubled to 80 from just 35 at the end of 2020, according to Bloomberg Intelligence data. Assets soared to $63 billion, compared to $24 billion at the start of the year”

 

What happened: Pro-Bitcoin senator proposes formation of crypto-specific regulatory body

 

How is this significant?

• Cynthia Lummis, a Republican Senator from Wyoming (and member of the Senate Banking Committee) is proposing the introduction of regulation and regulators specific to digital assets, rather than trying to shoehorn them into existing frameworks from long before the technology was even conceptualised
• According to a senior aide speaking to Bloomberg, the bill “would provide regulators with clear guidance on which assets belong to different asset classes, offer protections for consumers, regulate stablecoins, and create a new organization under the joint jurisdiction of the Commodity Futures Trading Commission and the Securities and Exchange Commission to oversee the digital asset market”
• This could potentially open up the route to much greater regulatory clarity in the US, where the SEC and CFTC are currently seen by some analysts as jostling for position over enforcement and control of the new asset class
• However, with congress narrowly balanced and enthusiasm for digital assets generally running along party lines, it remains to be seen whether or not Lummis’ ambitious bill will garner the necessary support to pass into law

 

What happened: Bitcoin and Ether futures trading volumes surpass $32tn in 2022

 

How is this significant?

• According to end-of-year data collated by industry publication TheBlock, 2021 saw a significant growth in futures trading volumes for the top two digital assets, from a cumulative $7tn in 2020, to over $32tn this year; a rise of over 330%
• 2021 also witnessed records in spot trading on exchanges; more than $14tn on centralised exchanges, and above the $1tn mark for the first time ever on decentralised exchanges
• TheBlock also revealed that NFTs surpassed $13bn in trading volume this year (including $100m from Sotheby’s alone), whilst combined trading volume for Bitcoin and Ether options increased by 443%, to around $387bn

 

What happened: ProShares files for Metaverse exposure ETF

 

How is this significant?

• ProShares—the company behind the first Bitcoin futures ETF—filed for another ETF linked to digital assets on Tuesday
• The proposed ProShares Metaverse Theme ETF seeks to gain exposure to companies and assets involved in the Metaverse; persistent digital worlds with assets and NFTs hosted on the blockchain
• The ETF prospectus says the product will track the “Solactive Metaverse Theme Index (SOMETAV), consisting of firms providing or using metaverse-related technologies, including data processing and metaverse devices”
• In recent months, numerous corporations have announced their involvement in (and support of) Metaverse projects, including Facebook, Nike, Adidas, and Under Armour
• PwC became the first of the “Big 4” accounting firms to stake a claim on the metaverse this week, buying a plot of land in the virtual environment created by digital asset company TheSandbox

 

What happened: Bitcoin mining firm Marathon makes record mining hardware order

 

How is this significant?

• Marathon Mining, one of the largest American Bitcoin miners, made a record order of mining hardware from producers Bitmain this week, in an effort to position themselves as “potentially the largest known miner in the world”
• The order of around 168,000 mining machines from Bitmain will ship from mid-2022 and be completed by early-2023, at a total cost of over $879m
• This order will allow Marathon to grow their mining capacity by more than 600%, according to CEO Fred Thiel
• The company currently has 31,000 miners and a capacity of 3.2 ExH/s, which will rise to 199,000 machines and 23.3 ExH/s upon completion of the order
• Thiel also noted that the mammoth order could help address concerns over the carbon footprint of Bitcoin mining; in a press release he cited “ample access to renewable power behind the meter with one of the largest renewable energy providers in North America” as an exciting component of their increased hash rate

 

What happened: Raoul Pal identifies year-end institutional selling as source of Bitcoin dip

 

How is this significant?

• Noted macro investor Raoul Pal spoke out about the recent dip in Bitcoin (and therefore the wider digital asset market), identifying institutional selling before the end of the tax year as a key possible driver of downward price action
• In an interview, he said he believes recent market declines are down to institutions (who purchased in the summer or earlier) selling in order to say “I believe in getting paid”
• Although there could be further selling from Asia (particularly as Chinese exchanges shut down customer accounts following government restrictions), he believed that Western institutions have completed the majority of their sells according to corporate calendars; “It looks like they’re done because the market has been chopping around for the past week, which was the traditional last week of everybody squaring their books”
• Despite this calendar-driven theory, Pal remains optimistic on the long-term potential of digital assets, saying he believes institutional interest will increase next years as institutions deepen their understanding digital assets’ adoption and functionalities “and therefore what that implies in market cap”
• This view was backed up on CNBC by Genesis Trading’s Noelle Atchinson, who noted that institutional growth still appears to be in its early phase “The institutional growth over the past 12 months has been astonishing, and we’re seeing strong signs of that accelerating through next year both through direct investment and through investment in crypto market infrastructure companies themselves”

Market Overview:

Digital assets experienced a relatively quiet week ahead of the festive season, trading within relatively tight ranges.

• Bitcoin experienced a weekend slump that dropped it below $47,000 (and briefly below $46,000), but recovered on Tuesday and spent the majority of the week trading between $47,250 and $49,000
• Bitcoin is currently priced at $48,330, down about 1% from last week
• Ether continued to trade below $4,000 for the majority of the week, briefly hitting a low of $3,720 over the weekend, but recovered above $4,000 for a stretch on Tuesday
• Ether is currently priced at $3,931; a 2.6% decline
• Total market capitalisation grew slightly, to around $2.28tn
• Total value locked in DeFi grew by over $3bn this week to $99.8bn, according to industry analytics platform DeFi Pulse

 

Digital assets had a calm week after some notable turbulence in the weeks prior. In the USA, financial bodies continue to request more regulatory clarity, as year-end statistics reveal record growth in both investment funds and venture capital involvement. JP Morgan, Siemens, Deutsche Telekom, Sequoia Capital, and a $744bn AUM Singaporean sovereign wealth fund all featured in the news this week, proving the expanding and enduring appeal of this asset class.

 

What happened: American credit unions seek federal approval to hold digital assets

 

How is this significant?

• The National Credit Union Association (NCUA) published a letter last week stating that federally-insured credit unions can collaborate with third-party crypto asset service providers to hold digital assets for clients
• This news was recognised as providing some clarity for the field; according to Lance Noggle, senior director of advocacy for payments and cybersecurity at the Credit Union National Association “It’ll help credit unions that have been kicking the tires move ahead and have a bit of a road map of what the regulator will expect”
• Additionally, representatives from various industry groups told Bloomberg that American credit unions seek to go a step further and hold digital assets themselves, without the involvement of third parties
• One told Bloomberg that their industry could “start to shrivel” if they aren’t able to offer services available from banks, such as the growing trend of digital asset services
• Ann Kossachev, vice president of regulatory affairs for the National Association of Federally-Insured Credit Unions also told Bloomberg that they are specifically seeking federal permission to directly offer digital asset custody services

 

What happened: Crypto-tracking investment vehicles more than double in 2021

 

How is this significant?

• According to Bloomberg Intelligence data, crypto asset funds had a bumper year, reflecting the growth in the market and the rising involvement of institutional investors
• They currently identify 80 crypto-tracking investment vehicles, compared to just 35 at the end of 2020
• The value of associated assets grew to $63bn, up from $24bn in early January
• Inflation was cited as one of the major drivers for the growth of such investment vehicles, with widespread currency devaluation occurring globally in the face of the coronavirus epidemic
• Leah Wald, chief executive of crypto asset manager Valkyrie Investments told Bloomberg that institutional investors were also a key pillar of growth for the asset class; “Globally, it’s obviously a phenomenon that’s starting to take off… If you look at inflows on a volume perspective, not only has it been steady even with the price corrections that Bitcoin is notoriously famous for, but you’re seeing a lot of institutions jump in”
• The first Bitcoin futures ETF in October was identified as a key watershed for traditional investors, but Bloomberg Intelligence ETF analyst James Seyffart believes current American regulatory caution leaves lots of untapped potential; “I can’t help but think that the assets in this space would be even larger if we had more efficient structures, like spot ETFs, in the U.S”

 

What happened: Sequoia Capital embraces digital asset investment

 

How is this significant?

• Venture firm Sequoia Capital allocated 25% of its total investments to startups in and around the crypto asset ecosystem, according to Sequoia partners speaking to Bloomberg this week
• As one of the most respected names in venture capital, Sequoia’s growing interest in digital assets is indicative of a wider shift in the VC landscape. Sequoia partner Shaun Maguire told Bloomberg “The conviction on crypto has only increased since I joined Sequoia and it basically broke through over the last year”
• Additionally, he believes that once investors understand digital assets, they become staunchly convinced of their potential, speaking about a “one way ratchet” of interest
• Sequoia partner Michelle Bailhe noted relevance for digital assets and blockchain technology across a variety of industries; “I’m definitely a true believer in the technology and the potential… It’s already in fintech and consumer applications, and it’s seeping into enterprise and health care”
• Maguire also revealed that the VC giant has spent the last 18 months building a “policy team” in Washington to help “favourably shape legislation”—a team that he claims is speaking to regulators on a daily basis
• Sequoia also revamped their fund structure this year to remove maximum caps towards crypto asset allocations, creating the possibility of dedicated industry-specific funds in future, as pioneered by rivals Andreessen Horowitz (a16z)

 

What happened: Digital asset firms nearly quadruple previous VC funding record in 2021

 

How is this significant?

• 2021 was the year in which big VCs like the aforementioned Sequioa and Andreessen Horowitz started to really back digital asset startups; investing around $30bn this year in digital asset firms or those providing crypto-based services (such as Revolut and Robinhood), compared to the previous record of $8bn in 2018
• In fact, according to Pitchbook data, the digital asset industry secured more VC funding this year than in all previous years of existence combined
• Spencer Bogart of industry VC Blockchain Capital LLC believes the sector has matured and evolved enough now to attract the deep pockets of traditional VC firms; “We’ve moved beyond just digital gold. We’ve got financial services, art, gaming as a subcategory of NFTs, Web 3.0, decentralized social media, play-to-earn — all of that made investors think, We don’t have enough exposure”
• Key deals this year from the digital asset industry included FTX exchange raising $1bn on a $18bn Series B valuation, NYDIG securing $1bn in funding earlier this month, and blockchain gaming developer Forte closing a $725m round in November

 

What happened: MicroStrategy considers lending out Bitcoins to generate yield

 

How is this significant?

• MicroStrategy, the leading corporate Bitcoin holder in the world, may lend out some of their 122,000 Bitcoins to generate passive income or finance the purchase of additional Bitcoins, according to CEO Michael Saylor
• In an investor call, he revealed “there may be opportunities to either put a mortgage against it and generate long-term debt under favorable circumstances, which we could leverage up against the Bitcoin, or we think that we could lend it to a trustworthy counterparty… That could become a good source of income for us, or we could develop it with some kind of interesting applications”
• Whilst decentralised finance (DeFi) has grown massively on the smart contract blockchain Ethereum this year, Bitcoin’s technological architecture has made native DeFi opportunities more difficult to come by, alongside a lack of support in traditional finance, as Saylor said “I think that we’re still a little bit too soon to say whether there’s a good Bitcoin-backed bond market, but I look forward to exploring that in the future”
• Betting big on Bitcoin has been beneficial to MicroStrategy’s bottom line; their share value is up around 180% year-to-date, around three times Bitcoin’s current approximate 60% year-to-date growth

 

What happened: Singapore sovereign wealth fund invests in blockchain analytics startup

 

How is this significant?

• This week, blockchain analytics firm Nansen AI secured $75m of investment from sources including the Singaporean sovereign wealth fund GIC, as well as tiger Global, a16z, and SCB 10X
• Nansen CEO Alex Svanevik plans to use the new funds to grow the company’s team via acquisitions; “The next 12-18 months will be a phase of consolidation in the industry. Some great teams will join forces, some acquisitions will take place. I’d like Nansen to be well-positioned for that with a strong war chest”
• The involvement of a Singaporean sovereign wealth fund was particularly notable in the intelligence company’s raise, as the city-state recently announced intentions to position itself as a global hub for the crypto asset industry

 

What happened: Kraken exchange makes acquisition, creates $65m startup investment fund

 

How is this significant?

• American digital asset exchange Kraken (the fourth-largest exchange globally by volume) released several announcements this week, seeking to expand their suite of services both internally and externally
• In a press release, they announced the acquisition of crypto staking platform Staked for “an undisclosed sum in one of the largest crypto industry acquisitions to date”
• This will allow Kraken to expand the range of DeFi and yield-generating services they offer, as CEO Jesse Powell identified a move towards “a holistic crypto platform with a diverse range of products that serves the needs of retail, professional, and institutional clients”
• Additionally, the company launched the first investment fund of Kraken Ventures, following the conclusion of a $65m raise
• Kraken Ventures will seek to target early-stage companies in the digital asset space, offering investments between $500,000 and $2m
• In a press release, Kraken Ventures stated “Our long-term view on investing, and the possibility to leverage Kraken’s experience in building a truly global, scalable platform, definitely contributed to the overwhelming interest we received from investors”

 

What happened: Deutsche Telekom invests in smart contract platform Polkadot

 

How is this significant?

• German telecommunications and technology giant Deutsche Telekom announced on Tuesday that they will participate in the smart contract platform Polkadot as a validator, purchasing a “significant” amount of the protocol’s DOT token to participate
• The company’s blockchain lead, Dr Andreas Dittrich, said the company recognises digital assets as viable businesses, and had to “basically put our money where our mouth is to support our infrastructure case… The main difference now is that this is not a VC or innovation budget anymore; we are doing this from our business unit. So this really has become a business case for us”
• Dittrich identified possible areas of interest from their involvement in the new protocol, saying “I think the opportunities that Polkadot provides for enterprise use cases are really interesting… even the good old supply-chain use case could make a lot of sense on Polkadot, and I know that big industry consortia are definitely eyeing that ecosystem”
• Polkadot is currently the 11th-largest digital asset by market cap, and was created by Ethereum co-founder Gavin Wood as an Ethereum-compatible smart contract platform running on a proof-of-stake consensus mechanism, addressing many of Ethereum’s scaling issues

 

What happened: JP Morgan develops blockchain project for Siemens

 

How is this significant?

• JP Morgan’s blockchain division Onyx revealed a collaboration with Siemens this week, concerning the development of a blockchain-based payment infrastructure for the tech company
• This makes Siemens the first “anchor client” of Onyx—the first publicly announced in “a pipeline of clients” according to Onyx’s global head of coin systems, Naveen Mallela
• The project will allow for the automation of payments and transfers between Siemens’ own accounts, beginning with US dollars before integrating Euros next year

Market Overview:

Digital assets continued their recent correction this week, as uncertainties regarding Wednesday’s FOMC meeting loomed over financial markets.

• Bitcoin briefly breached $50,000 on several occasions this week, but couldn’t sustain above those levels, mainly trading in a range between $47,000 and $49,500
• Bitcoin currently trades at $48,770, down 1% from last week
• Ether dropped below $4,000, falling further than Bitcoin after outperforming it last week
• Ether declined steadily throughout the week, twice bouncing off lows around $3,690, before recovering to a current value of $4,029
• Total market capitalisation remains above last week’s flash crash, but declined to around $2.25tn
• Total value locked in DeFi declined in line with the rest of the market, to $96.6bn according to industry analytics platform DeFi Pulse

 

Digital assets experienced another tough week in terms of price performance, with uncertainty surrounding Wednesday’s FOMC meeting in the United States keeping markets on edge. American lawmakers sounded a more critical note on stablecoins than the previous week’s digital asset hearing, but this week also witnessed a record-equalling funding round for a digital asset company, Germany’s largest banking group declaring interest in crypto services for clients, Nike joining Adidas in the NFT and Metaverse space, and both SoftBank and a UAE sovereign wealth fund declaring their bullishness on this new asset class.

 

What happened: Morgan Stanley-backed NYDIG raises record $1bn in funding round

 

How is this significant?

• Institutional Bitcoin brokers NYDIG announced a record-equalling $1bn funding round this week, giving the company an overall valuation of $7bn
• The funding round equalled digital asset exchange FTX’s $1bn Series B raise earlier this year
• Morgan Stanley participated in the Westcap-led funding round, which also included investments from MassMutual, FIS, and Bessemer Venture Partners
• NYDIG’s current corporate clients include the private wealth divisions of major American banks Wells Fargo, JPMorgan Chase, and Morgan Stanley, as well as large insurance firms like MassMutual and Liberty Mutual
• Founded as a subsidiary of Stone Ridge Asset Management, NYDIG will use the funding for increased client onboarding and further development of their Bitcoin platform
• NYDIG’s Patrick Sells told Bloomberg he expects over 1,000 banks and financial firms to use their institutional Bitcoin services by the end of 2022

 

What happened: Sparkasse group of German banks discloses plans to offer crypto services

 

How is this significant?

• On Wednesday, news emerged in the German press that the largest group of public banks in Germany—known as Sparkasse—is planning a pilot scheme allowing customers to directly hold and invest in digital assets through their bank accounts
• The Sparkasse group currently holds over $1tn in assets across than more than 50 million bank accounts in Germany
• According to reports, many banks are eager to add these services for customers: “A corresponding pilot project should start first with individual savings banks. In the end, each of the around 370 institutes independently decides whether to introduce crypto trading or not. This is a consequence of the regional principle of the savings banks. However, it was said that the banks were already showing interest”
• Due to the trust and breadth of the Sparkassen banks, integration into their infrastructure could widely increase access to digital assets within Europe’s largest economy

 

What happened: US Congress holds hearing on stablecoins

 

How is this significant?

• Following on from last week’s session with executives from digital asset exchanges and firms, the Senate Banking Committee this week held a hearing on stablecoins, with a notable partisan split in the narratives
• Whilst Republican politicians looked towards the potential benefits of stablecoin usage, their Democrat counterparts were more likely to raise concerns over issuance methodologies or possible challenges to the US dollar
• Leading Republican digital asset advocate Pat Toomey of Pennsylvania proposed that “to promote innovation in the rapidly evolving global digital economy”, stablecoin issuers should “have the ability to choose from three different regulatory models, including operating under a bank charter”

 

What happened: Bank of England recommends “cautious and prudent” digital asset approach

 

How is this significant?

• The Bank of England’s Financial Policy Committee advocated a cautious approach to digital assets this week, noting that they have experienced rapid growth, but still lack regulatory clarity
• Although the Committee noted that crypto assets are becoming more interconnected with established financial infrastructure, their financial stability report for December recommended a “cautious and prudent approach” until a specific regulatory framework has been devised
• On Monday, BoE deputy governor Jon Cunliffe urged patience for the new asset class, saying in a press conference that “It takes time to develop regulatory standards… We’ll need to make sure we have regulation in place before it becomes a problem”

 

What happened: Coinbase launches range of yield-bearing DeFi products (outside of USA)

 

How is this significant?

• Publicly-listed American digital asset exchange Coinbase announced the launch of DeFi products allowing customers to earn yield on their digital assets in over 70 territories—but US customers remain excluded as the SEC hasn’t yet produced any clear guidelines for crypto assets
• Coinbase customers will be able to deposit the algorithmically-secured stablecoin DAI, earning between 2.8% and 5.4% APY
• The offering is notably different from their proposed Coinbase Lend product, which was cancelled before launch after SEC objections. Instead of lending their assets directly to Coinbase, they will be lent to popular DeFi protocol Compound, providing a more variable APY, but freeing Coinbase from suspicions of controlling the return and offering securities

 

What happened: Nike acquires NFT fashion firm in wider metaverse push

 

How is this significant?

• Nike Inc. followed the recent lead of their rival Adidas when it was announced this week that they acquired NFT fashion brand RTFKT in order to bolster their metaverse presence
• Terms of the acquisition were not disclosed, but Nike CEO sounded a bullish note on the importance of a persistent digital presence; “This acquisition is another step that accelerates Nike’s digital transformation… Our plan is to invest in the RTFKT brand, serve and grow their innovative and creative community and extend Nike’s digital footprint and capabilities”
• In late October, Nike filed seven applications with the US patent office, seeking to protect their brand and “downloadable virtual goods” in the metaverse space

 

What happened: Polygon makes $500m acquisition in Ethereum scaling push

 

How is this significant?

• Ethereum blockchain scaling solution Polygon made another major move towards promoting the mainstream adoption of the world’s leading smart contract platform with a half-billion dollar acquisition
• The move to acquire the Mir blockchain protocol (and its developer Predicate Labs), bolsters Polygon’s expertise in the field of zero-knowledge rollups, which effectively reduce transaction pressure and costs on the Ethereum blockchain by collating and compressing much of the data involved in transactions
• Polygon have committed $1bn to improving Ethereum’s scaling capabilities, and according to Bloomberg the new acquisition will be deployed alongside previous strategic purchases, “Mir will be integrated into the Polygon ecosystem under its new name, Polygon Zero, alongside existing solutions including Polygon PoS, Polygon Hermez and Polygon Miden”

 

What happened: S&P Dow Jones to launch tokenised crypto funds

 

How is this significant?

• On Wednesday it was reported that S&P Dow Jones partnered with digital asset firm Securitize to launch tokenised funds tracking S&P crypto indices
• The two funds tracked will be S&P’s Cryptocurrency Large Cap Ex-MegaCap Index, and the Kensho New Economies Composite Index
• Both funds will charge 0.5% management fees, with the former giving accredited investors exposure to 30 different digital assets
• In a press release, Securitize Capital’s Wilfred Daye said they were built for convenience with institutional investors in mind; “The new tokenized funds provide investors exposure to a diverse blend of cryptocurrencies and emerging technologies… In particular, they are a new, efficient option for family offices, institutions and accredited investors looking for exposure to promising cryptocurrencies”

 

What happened: $5bn SoftBank fund reveals 10% digital asset exposure

 

How is this significant?

• In a webcast last Wednesday, SoftBank’s Latin America fund MD Paulo Passoni announced that the $5bn fund held $500m of digital asset exposure, and that it is currently the most compelling investment opportunity for the company
• Whilst acknowledging that the digital asset market does have “some froth” and token overvaluation, he nevertheless stated “I do believe it’s the most relevant thing going on around the globe right now”
• Passoni noted SoftBank’s recent push into digital assets; “There’s an old saying in investing—follow the talent—and the most talented people around the globe are going into crypto-related projects… I’d say we’re running a crypto school for our team here, because we sense that there’s a big discrepancy in knowledge—even within our team”
• SoftBank isn’t the only major Japanese financial institution to identify and back the potential of digital assets; their former subsidiary SBI Holdings has also been on a major crypto investment drive this year, including a recent joint venture with Switzerland’s SIX digital asset exchange

 

What happened: Hedge fund billionaire Robert Citrone joins high-profile Bitcoin investors

 

How is this significant?

• Noted hedge fund manager Robert Citrone, co-founder of Discovery Capital Management became the latest major money manager to move into Bitcoin, following the likes of Alan Howard, Paul Tudor Jones, Steven Cohen, and Ray Dalio
• At an event this week, Citrone told investors that he sold Bitcoin at $45,000 earlier this year after an initial purchase at $15,000, before buying back at around $30,000 following the major market dip in July
• Even with Bitcoin’s recent drop from a new all-time high in November, Citrone has still gained more than 50% on his most recent Bitcoin investment within less than half a year

 

What happened: UAE sovereign wealth fund investing into “crypto ecosystem”

 

How is this significant?

• Khaldoon Al Mubarak, CEO of the United Arab Emirates Mubadala sovereign wealth fund, gave an interview to CNBC this week where he declared himself fundamentally bullish on digital assets
• Mubadala is one of the largest sovereign wealth funds in the world, with a current $243bn in assets under management
• Al Mubarak told CNBC “This is a business [the digital asset industry] that had $200 billion worth of value two years ago, and is $2.5 trillion value today and growing. So while many people are skeptics, I do not fall in that category”
• He didn’t provide details on specific investments, but confirmed Mubadala was betting on the “ecosystem” around crypto assets; “From our perspective, I think we look at the ecosystem around crypto. And I think we are investing in that ecosystem. That could be that’s in the block-chain technology, energy usage, etc”