Nickel Research Centre

Nickel News Roundup - Week 32

12th August, 2021 

Market Overview:

Despite some uncertainty regarding the crypto tax provision in the new American infrastructure bill, the digital asset market experienced another week of strong growth, bringing it to a three-month high.

  • Bitcoin reached highs of $46,740 on Wednesday, with current prices of $46,440 up 18% from last week
  • Ether experienced a third week of double-digit growth, crossing the $3,000 mark on the way to a weekly high of $3,269. Current Ether prices of $3,241 are up 20% since last Thursday 
  • Overall market capitalisation of digital assets crossed $1.9tn for the first time since mid-May, edging back towards the $2tn mark with a current value of $1.94tn
  • 97% of the top 100 assets by market capitalisation were green (or neutral in the case of stablecoins) this week
  • Total value locked in DeFi grew by over 10% to $92bn this week, spurred by Ether’s upward trajectory

Bullish momentum continued across digital assets this week, even as politicians in America failed to reach consensus on compromises for crypto taxation. Outside of the political arena, the mood was more buoyant; financial giants like JP Morgan, Fidelity, and Standard Chartered made more moves, large funding rounds led to the creation of more crypto “unicorns”, corporate adoption continued to increase, and Raoul Pal unambiguously stated that “Crypto IS macro now”.


What happened: JP Morgan launches in-house Bitcoin fund for HNW clients

How is this significant?
  • On Thursday, JP Morgan made their latest move towards a wider embrace of digital assets by quietly launching access to their own in-house Bitcoin fund for private banking clients
  • Created in conjunction with NYDIG, the passively-managed fund adds to third-party fund access which they granted to clients last month
  • According to sources speaking to CNBC, the fund is “nearly identical” to one NYDIG created for their Wall Street rivals Morgan Stanley, indicating a desire not to be left behind
  • Whilst access to third-party funds by Ospreay and Grayscale are available across all JP Morgan’s wealth management platforms, their in-house offering appears to be limited purely to private banking clients thus far

What happened: Coinbase reveals scale of hedge fund interest in digital assets as they report record Q2 earnings

How is this significant?
  • Coinbase’s Q2 reporting offered a greater insight into not just the scale of their operations, but their clientele as well; they named Elon Musk, Tesla, SpaceX, and “10 of the top 100 hedge funds by assets under management” as users of their platform
  • The news emerged at the same time as the publicly-listed American exchange reported record earnings; revenues of $2.2bn exceeded analyst forecasts of $1.85bn, and adjusted earnings before taxes and other deductions came in at $1.15bn, ahead of previous $854m estimates
  • Monthly transacting users rose 44% from Q1 to 8.8m, and net profit for the quarter was $1.6bn; up 4,900% from the previous year, according to CNBC
  • Earnings per share for Coinbase ($3.45) far exceeded Wall Street estimates ($2.82), with Barrons noting that “trading volume and transaction revenue continued to build”
  • Another point of interest to note is that for the first time since the exchange’s founding, Ether overtook Bitcoin by overall trading volume, 26% to 24%
  • CEO Brian Armstrong in an earnings call outlined plans to streamline their listing procedures, wishing to list every legal crypto asset in the interests of becoming “the Amazon of assets”

What happened: Ethereum undergoes successful EIP1559 upgrade

How is this significant?
  • Ethereum, the second-largest digital asset by market cap (and world’s leading smart contract platform) successfully rolled out its “London” hard fork, implementing network upgrades from EIP1559
  • Part of the transition to a full proof-of-stake consensus mechanism, EIP changes the way that transaction fees are calculated, allowing users to “tip” miners fees in excess of the network average for faster transactions, but “burning” the rest of the transaction fee
  • This burning of transaction fees results in removal of Ether from circulating supply, and could theoretically even lead to a deflationary supply with enough network usage (which would be facilitated by greater scaling when the proof-of-stake upgrade is complete)
  • During some periods of high network usage over the last week, supply has indeed moved into deflationary issuance; for instance on the 10th of August, 945 Ether was burned vs 528 Ether mined
  • Real-time statistics on Ethereum fee burns can be monitored on; at the time of writing, over 28,000 Ether has been removed from the total supply within a week of the upgrade launching

What happened: Bitcoin growth over last decade surges further beyond gold

How is this significant?
  • raft of new statistics published this week showcased Bitcoin’s positive performance compared to its oft-cited traditional asset counterpart; gold
  • One Bitcoin can now buy approximately 600 grams of gold, or 21 ounces
  • Whilst gold’s long-term investment value has often been cited as a strength of the asset, its 10-year return has actually flipped negative now; one Troy Ounce of gold traded for $1,830 in August 2011, compared to $1,729 now
  • Over the last decade, this equals a 5.8% loss from holding gold, without taking inflation or changes in the currency supply into account
  • The XAU/USD pair has lost over 10% since the beginning of the year, whilst at the time of writing Bitcoin was trading more than 50% up year-to-date

What happened: Digital asset stocks gain value as bullish momentum returns to market

How is this significant?
  • The recent return of growth to digital assets has filtered through to crypto-asset-adjacent business too, with several publicly-listed companies experiencing a surge in share value
  • Stocks in MicroStrategy, the world’s largest corporate Bitcoin holder, hit recent lows of $474 on July 20th, the same day as Bitcoin’s most recent bottom. Since then, MSTR value has risen above $750
  • Mining companies have also benefited from the shift in market momentum; RIOT blockchain shares have increased by over 60% in the same timeframe, and Marathon (MARA) digital holdings’ shares have increased by 80% since July 20th
  • London-listed Argo Blockchain reported a 180% increase in revenues in the first half of the year

What happened: More digital asset companies achieve “unicorn” status after funding rounds

How is this significant?

What happened: Digital asset ETF applications continue

How is this significant?
  • VanEck, one of the first companies to file for a Bitcoin ETF in 2017, has re-entered the fray, filing a prospectus with the SEC on Monday for an actively-managed fund based on exposure to Bitcoin futures and other investment vehicles
  • Gabor Gurbacs, VanEck’s director of digital assets strategy told industry publication Coindesk "VanEck was first to file for a bitcoin futures ETF in 2017. We are committed to bring to market a bitcoin ETF. Futures markets have matured significantly since 2017"
  • This submission could be directly inspired by SEC chairman Gary Gensler, who noted at the recent Aspen Securities Forum that he personally favoured exposure via futures contracts, saying “I anticipate that there will be filings with regard to exchange-traded funds (ETFs) under the Investment Company Act... I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded Bitcoin futures”
  • Invesco also filed for an actively-managed fund based on futures exposure, making them another one of more than a dozen ETF applicants so far
  • In Europe, French asset manager Melanion Capital received EU approval to launch an ETF tracking 30 companies with high revenue exposure to Bitcoin

What happened: Standard Chartered provides crypto exposure to Irish institutional investors

How is this significant?
  • Standard Chartered are increasing their digital asset footprint, by providing Irish institutional investors with access to their Zodia Custody crypto brokerage
  • Established as a joint-venture between the bank and wealth managers Northern Trust in December, Zodia will provide clients with custody services for Bitcoin and Ether, with Litecoin, XRP, and Bitcoin Cash to follow at a later date
  • Reports in the Irish Independent newspaper noted that “Both Standard Chartered and Northern Trust have invested heavily in blockchain services in recent years”, and would be specifically targeting institutional investors with Zodia Custody

What happened: Raoul Pal: “Crypto IS macro now”

How is this significant?
  • Noted macro investor and Real Vision founder Raoul Pal spoke in favour of digital assets several times this week, believing that they have proved their legitimacy enough to be regarded as part of the macroeconomic picture
  • In a podcast interview with industry publication Coindesk, Pal said “The most macro thing that’s happening is this technology, all of this is hitting [the] adoption phase at the same time. My job as a macro guy is to look for the strongest, most powerful trends, and invest in them… I think this is bigger than anyone really realises right now”
  • Pal noted that adoption is a key metric to gauge potential, and digital assets are growing twice as fast as the internet was at the same stage in its development; “this is the fastest-growing adoption of all technology in recorded human history”
  • Pal also indicated that there’s been a wider shift in perception amongst leading investors, relating that “Alan Howard, one of the most famous macro investors of all time, a good friend of mine… I speak to Alan weekly. We haven’t spoken about traditional macro since... June last year? The only conversation we have is about crypto”
  • He also gave specific stress in the interview to the rise of Ethereum, calling it “the world’s greatest trade”, noting growth at twice the speed of Bitcoin, a tokenomics upgrade with EIP1559, and a far wider variety of applications

What happened: Fidelity purchases stake in Bitcoin mining companies

How is this significant?
  • According to reporting in Forbes this week, asset manager Fidelity have paid $20m for a 7.4% ownership stake in Bitcoin miners Marathon Digital
  • Interestingly, this makes Fidelity just one of several major institutions to own a portion of Marathon, alongside Vanguard (7.6%), BlackRock (1.6%), and Susquehanna (2.7%)
  • Marathon shares are up over 600% year-to-date, buoyed by the growth of Bitcoin and institutional investment in the sector
  • The purchase was spread across four separate Fidelity index funds, with a total market capitalisation of $170bn
  • Forbes wrote that this is far from an anomaly in the space; “The recent purchase exemplifies a growing trend among institutions and individual investors of gaining exposure to the crypto industry through traditional equity or debt securities”

What happened: More big brands and IPs enter the NFT space

How is this significant?
  • NFTs saw more adoption this week, with several major brands announcing entries as well as high usage metrics
  • The Bundesliga became the latest major sporting property to move into NFTs, partnering with American collectibles company Topps
  • ESPN reported that Lionel Messi, arguably the world’s greatest-ever footballer, will launch his own collection
  • British fashion brand Burberry have launched a collection in a blockchain-based game, a few weeks after Dolce & Gabbana moved into non-fungibles
  • NFT marketplace Opensea has been the highest source of transaction value on the Ethereum network, resulting in almost twice as much Ether burned on Opensea than on leading decentralised exchange Uniswap

What happened: America’s fifth-largest bank plans digital asset investment services

How is this significant?
  • PNC Bank, one of the largest financial institutions in the United States, is in the process of providing crypto investment services to clients, in conjunction with Coinbase
  • In their Q2 shareholders letter, Coinbase reported that “In recent months, we have formed partnerships with industry leaders including Elon Musk, PNC Bank, SpaceX, Tesla, Third Point LLC, and WisdomTree Investments”
  • Sources speaking to industry publication Coindesk said that PNC will unveil “a crypto jawn in the coming quarters… The service would give the Pennsylvania-based national bank more seamless access to cryptocurrency investments for its clients”
  • Although PNC didn’t return requests for comment, a previous job posting of theirs did make plans for future digital asset integration clear, stating “The role will work on scaling operations for our Cryptocurrency investment capability as well as managing all operational aspects pertaining to new Cryptocurrency initiatives”
  • In other banking-related news, USDC stablecoin issuers Circle announced on Monday that they plan to become “a National Digital Currency Bank”
  • Circle believes that blockchain creates better banking, writing “Circle intends to become a full-reserve national commercial bank, operating under the supervision and risk management requirements of the Federal Reserve, U.S. Treasury, OCC, and the FDIC. We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system”

What happened: Venmo increases crypto capabilities

How is this significant?
  • Venmo, a unit of PayPal, followed their parent company’s recent moves to increase digital asset accessibility this week
  • Their new “Cash Back to Crypto” feature will allow Venmo credit card holders to instantly convert their cashback rewards into the digital assets offered for purchase on their app’ Bitcoin, Ether, Litecoin, and Bitcoin Cash
  • Unlike crypto purchases on their platform, these cashback conversions will not include a transaction fee
  • Darrell Esch, SVP of Venmo, said in a press release “The introduction of the Cash Back to Crypto feature for the Venmo Credit Card offers customers a new way to start exploring the world of crypto, using their cash back earned each month to automatically and seamlessly purchase one of four cryptocurrencies on Venmo… We're excited to bring this new level of feature interconnectivity on the Venmo platform, linking our Venmo Credit Card and crypto experiences”

What happened: AMC cinema chain announces plans to accept Bitcoin as payment

How is this significant?
  • American cinema chain AMC (owners of the British chain Odeon) announced that by the end of the year they will allow customers to purchase tickets and concessions using Bitcoin
  • CEO Adam Aron noted that the company has been exploring the technology for some time, and is investigating "how else AMC can participate in this new burgeoning cryptocurrency universe"
  • Aron told reporters on a conference call that “I've had to learn more in the past six months about blockchain and cryptocurrency than I learned about it in the entire decade before that… This increased knowledge has given me the confidence to tell you all today that AMC is hereby formally announcing... that by year's end we will have the information technology systems in place to accept Bitcoin”

What happened: Ether held on centralised exchanges drops to 3-year low

How is this significant?
  • More Ether is now being held in privately-owned wallets rather than on digital asset exchanges than at any stage since the last bull run
  • As of Tuesday, only 9.4% of Ether is held on centralised exchanges, the lowest levels since February 2018
  • This metric is compelling for several reasons; firstly, moving funds off of exchanges is often interpreted as behaviour signalling intent to hold for the long term, rather than selling (and thus driving price down)
  • Secondly, Ether held outside of exchanges is indicative of the rise of DeFi (decentralised finance), with blockchain analysis company OKlink noting at least 5.7% of Ether has been “wrapped” into ERC-20 WETH tokens for ease of transactions and smart contract executions on DeFi protocols
  • Additionally, around 5% of all Ether (around 6.5m tokens) is already locked into staking contracts in anticipation of the network transition to proof-of-stake with Ethereum 2.0
What happened: UBS joins blockchain-based repurchase agreement platform

How is this significant?
  • Swiss bank UBS joined a blockchain-based repurchase agreement (or “repo”) platform this week
  • With the presence of UBS, platform creators Broadridge now have 20 of the world’s 24 primary repo dealers using the blockchain-based service, transacting $6tn in daily volume whilst aiming to reduce the cost of repo activity through smart contract implementation 
  • Vijay Mayadas, President of Capital Markets at Broadridge noted the potential of the technology, saying “In the first weeks since launch, DLR has executed $35B in average daily volume—a testament to the success of the platform, which we expect to continue to grow as additional clients join the platform. We are excited to welcome UBS onto the platform and to continue to bring significant benefits in the form of enhanced liquidity, reduction of risk and operational efficiencies to our clients and the industry”

What happened: Coinbase increases purchase and cash-out options

How is this significant?
  • On Thursday, Coinbase announced that they were expanding the platforms that customers can use to purchase digital assets, or cash them out
  • They have now integrated Google Pay and Apple Pay, two of the largest mobile payment methods globally
  • Both methods will be subject to a 3.99% fee, in line with purchases made using debit cards
  • Customers will be able to instantly cash out up to $100,000, via Real Time Payments technology
  • Apple Pay is already live on their app, with Google Pay slated to launch in autumn
In the same blog, Coinbase announced the addition of Visa and Mastercard purchase support in more than 20 countries
News Roundups