Nickel Research Centre

Nickel News Roundup - Week 12

25th March, 2021

Market Overview:


The digital assets market retreated from all time highs this week.

  • Bitcoin reached a weekly of $60,116, and re-tested the $60,000 mark after retracing early in the week. However, the price fell below $54,000 on Tuesday, before a brief market rally after Tesla’s news on Wednesday drove it above $57,000 again. Bearish momentum soon returned, with Bitcoin falling to a current value of $52,840. Bitcoin’s market cap dropped below $1tn
  • Ethereum had a weekly high of $1,865, before falling in tandem with Bitcoin on Monday, dropping to $1,660, rebounding to $1,740, and then experiencing a further dip in line with Bitcoin, to a low of $1,566 and a current value of $1,604
  • The weekend once again saw the overall market cap of digital assets reach a new all-time high of $1.85tn on Saturday, before the dip led to a current value of $1.65tn
  • The decline in Ether’s price led to a decreased value locked in decentralised applications; a total of $50.8bn across Bitcoin and Ethereum

Digital assets achieved a new record in overall market cap, before pulling back. Meanwhile, Fidelity filed to launch a Bitcoin ETF, there were reports of a race for exposure to the Korean trading market, Deutsche Bank published new research lauding the impact of network effects on Bitcoin’s value, and listed companies ranging from Tesla in America to Meitu in Hong Kong all declared long-term confidence in the value of this asset class. 

News:


What happened: Digital asset ETFs gather pace globally


How is this significant?

  • News emerged on Wednesday that Fidelity investments ($4.9tn assets under management) have filed for an ETF, called the Wise Origin Bitcoin Trust, offering direct exposure to Bitcoin according to the price in Fidelity’s Bitcoin Index PR
  • In Brazil, the Securities & Exchange Commission approve two separate digital asset ETFs this week
  • One of the ETFs is based purely on Bitcoin, whilst the other involves Bitcoin and five other digital assets, replicating the Nasdaq Crypto Index (NCI), which is rebalanced quarterly
  • The NCI-linked ETF will be offered to customers of two major Brazilian banks, Itaú and BTG Pactual, according to reporting in Brazil Journal 
  • This approval makes Brazil the second country after Canada to grant crypto asset ETFs, whilst in the United States, Anthony Scaramucci’s hedge fund SkyBridge Capital became the latest institution to file an application for an ETF with the SEC
  • In conjunction with First Trust Advisors, they have filed for the “First Trust SkyBridge Bitcoin ETF Trust”, intending to trade on the NYSE Arca exchange
  • Scaramucci’s SkyBridge Capital currently holds approximately $600m in Bitcoin, and in an interview this week he encouraged more corporate adoption of the asset, saying increased printing of the US dollar is “a silent tax on American savers… A responsible CFO or responsible treasurer will have to think about other assets to hold as a potential store of value for their companies”

What happened: Fidelity Institutional head believes most wealth managers are still in crypto “education mode”


How is this significant?

  • Mike Durbin, the head of Fidelity Institutional, spoke to Reuters this week about digital asset adoption by institutional investors
  • Fidelity were one of the first mainstream investment firms to offer digital asset custodianship for corporations, back in the crypto winter of 2018, and on Wednesday filed to launch a Bitcoin ETF
  • Whilst he said that many wealth managers have become savvy and technologically-adept in order to interact with digital assets, he also acknowledged “They know what they are doing, and more importantly their end investor base also knows what they are doing - but the vast majority are still in the education mode”
  • He also believes that crypto assets are positioned well to take advantage of appetite for alternative investments, claiming; “I think that the growth rate of bitcoin or digital assets will follow in the wake of broader alternative investments. There’s still work to be done there to help advisors understand portfolio construction with these kinds of expressions”

What happened: New Deutsche Bank research paper declares Bitcoin “too important to ignore”


How is this significant?

  • Deutsche Bank published a new research paper this week in the second part of its “The Future of Payments” series, focused on Bitcoin
  • In light of Bitcoin’s recent ascent above a $1tn market cap, Deutsche Bank declare it “too important to ignore”
  • According to their research, Bitcoin “is here to stay”, although they note that compared to more traditional assets, liquidity is low; citing 2020 trading volume equal to 150% of Bitcoins in circulation, compared to Apple’s trading volume of 270% of shares in circulation
  • Deutsche Bank position the Tinkerbell Effect (the economic theory that “the more people believe in something, the more likely it is to happen”) as a possible driver of Bitcoin’s valuation
  • However, they also recognise that it is more than a speculative asset, quoting Google’s Executive Chairman Eric Schmidt; “It is not a speculative investment even though it is being used as such by other people. As Bitcoin network grows, the value of Bitcoin grows. As people move into Bitcoin for payments and receipts, they stop using US Dollars, Euros and Chinese Yuan, which in the long term devalues these currencies”
  • The report says that Bitcoin is currently viewed as a strong and legitimate store of value, writing “Bitcoin is now another treasury-management tool. Recently, a few publicly traded companies have started converting cash in their treasuries into Bitcoin as an alternative store-of-value. For example, in August 2020, MicroStrategy, a business analytics company, converted $425 million worth of cash in its treasury to Bitcoin”
  • Deutsche believe that in the long term, Bitcoin’s borderless nature will be a key value proposition, writing that “Bitcoin’s current valuation is pricing in a shift toward cross-border digital currencies; the hypothesis is that Bitcoin, as the leader, will benefit from network effects and become an important means of payment in the future”

What happened: Tesla enables Bitcoin as purchase option, outlines company’s financial policy on Bitcoin holdings


How is this significant?


What happened: Host of major financial institutions linked to purchase of leading Korean crypto asset exchange


How is this significant?

  • According to the business section of Korean newspaper The Korea Times, several global institutions are currently considering the acquisition of Bithumb, South Korea’s largest digital asset exchange
  • Korean regulations currently only allow citizens wishing to trade in crypto assets to trade on Korea-based exchanges—which could make an ownership stake in major local exchanges crucial to any businesses looking for exposure to a market responsible for 9% of global digital asset trading volume
  • The Korea Times article cites major companies as potential bidders for Bithumb, including Deutsche Bank, JP Morgan, and Morgan Stanley—although the latter has denied interest since the report was first published
  • Other potential buyers cited in the article included local tech giant Naver, VISA, an affiliate of the Chicago Mercantile Exchange, and leading crypto asset exchange Binance
  • The purchase in question relates to the 10% stake held by majority shareholder, Korean tech company Vidente, before securing the controlling stake through purchase of additional shares

What happened: Institutional Managers are currently holding record amounts of digital assets


How is this significant?

  • According to a weekly report of inflows by digital asset company CoinShares, institutional investment in digital assets is at record levels
  • Last week saw a total of $57bn in net inflows to crypto asset investment products, a weekly increase of $99m
  • Except for XRP, all the major digital assets monitored by CoinShares had positive net inflows
  • The report also found that demand is increasing in Europe and Canada, with recent Canadian adoption of digital asset ETFs cited as a key driver of demand there

What happened: Miami mayor reiterates plans to make city a digital assets hub, as city becomes first to have a major stadium sponsored by a blockchain company


How is this significant?

  • In an interview with the New York Times this week, Miami mayor Francis Suarez repeated his wishes to make Miami a “hub” for digital assets, saying that “Miami will always strive to be ahead of the curve. Expanding the financial freedom of Miamians is the first step towards our modern economy”
  • Suarez also said he was currently in the process of “refashioning” the city’s image from one of “fun in the sun” to being a serious centre for innovation
  • As part of these efforts, Suarez convinced organisers of the Bitcoin 2021 conference to move the event from Los Angeles to Miami, with hosts at the MANA Wynwood convention centre noting it was part of the “vision to make Miami a global tech hub”
  • In other Miami-based digital asset news, the city’s Miami Heat basketball team have become the first major American sports team to ink a stadium sponsorship deal with a digital assets company, the crypto exchange FTX. The naming rights deal will earn the county $90m over 19 years, according to a press release by Miami-Dade county

What happened: Federal Reserve chairman Jerome Powell believes Bitcoin is “a substitute for gold”


How is this significant?

  • During a webinar sponsored by the Bank for International Settlements, Fed chairman Jerome Powell spoke out against Bitcoin’s capacity to serve as a currency due to perceived volatility, saying that “It is essentially a substitute for gold rather than the dollar”
  • Powell is keen to stress the need for new regulatory frameworks when it comes to digital currencies like stablecoins, claiming that the Fed is in “go-slow” mode regarding a digital dollar, claiming “we don’t need to rush this project—we don’t need to be first to market”
  • It is however not a subject that the Federal Reserve is ignoring, as Powell attests “There is a tremendous amount of thinking going on, on how we can capture the potential benefits while also managing those potential risks”

What happened: Blockchain.com raises $300m on a valuation of more than $5bn


How is this significant?

  • On Wednesday, the Wall Street Journal reported that crypto asset exchange and custodian Blockchain.com has achieved a $5.2bn valuation after securing $300m in a funding raise led by DST Global Ventures, Lightspeed Venture Partners, and VY Capital
  • This represents more than a 70% increase in valuation, compared to a February raise of $120m led by Google Ventures that saw Blockchain.com valued at $3bn
  • Significantly, the Journal reports that this is the third-largest raise in digital asset history, after mining hardware producer Bitmain raised $400m in 2018 and BlockFi raised $350m last year
  • The article cites this raise as an evidence that “highlights venture capital’s growing willingness to jump back” into the digital asset space
  • The WSJ also reports that “Between debt and equity, the company has raised $1.5 billion since its inception in 2011, according to Chief Executive Peter Smith”

What happened: Non-Fungible Tokens continue to see adoption amongst institutions and investors


How is this significant?


What happened: CNBC host Jim Kramer says gold has let him down, unlike Bitcoin


How is this significant?

  • In an interview on Monday with Morgan Creek Digital partner (and vocal Bitcoin bull) Anthony Pompliano, CNBC’s Mad Money host (and co-founder of TheStreet.com) Jim Kramer spoke about his growing enthusiasm for digital assets compared to gold
  • Kramer said that “I have, for years, said that you should have gold… but gold let me down. Gold is subject to too many vicissitudes. It’s subject to mining issues. It’s frankly subject to failing in many cases”
  • As a result of the comparative performance between the asset classes, Kramer is halving his position in gold, amending a decades-long policy and saying “If they listen to me, they’re going to drop half their gold. I’ve been saying 10% in gold since 1983. And now I say 5% in gold, 5% in bitcoin”
  • Kramer also said that “corporate treasurers should put a percentage of their corporate cash into Bitcoin”

What happened: Boston Fed and MIT work together to create digital dollar prototypes


How is this significant?

  • A report from Bloomberg on Monday stated that researchers from the Boston Federal Reserve and the Massachusetts Institute of Technology could unveil a prototype for a digital dollar as early as this summer
  • The teams have been working together since August last year, and now the Boston Fed’s project lead James Cunha says the team will unveil “at least two platforms capable of moving, storing, and settling digital dollar transactions”
  • In line with Jerome Powell’s “go-slow” attitude towards digital currencies, Cunha stresses that rather than advocating for a specific approach, they intend to demonstrate proofs of concept and possibilities, adding “We think it’s important that we not wait for the policy debate because then we’ll be a year or so behind”

What happened: Coinbase open to listing CBDCs in future (if they comply with listing criteria)


How is this significant?

  • In a public question-and-answer session hosted on the website Reddit, Coinbase CEO Brian Armstrong answered numerous questions sound Coinbase’s upcoming public listing and their future plans
  • In a video response to a question about full integration of crypto payments across the internet, Armstrong touched on stablecoins and Central Bank Digital Currencies, saying “I think central bank digital currencies are going to be really big as well and pretty much every major government out there is starting to think about how they’re going to build them. We are cryptocurrency agnostic, so we will support and cryptocurrency, including CBDC and stablecoins and decentralized ones like DAI as long as they meet our listing standards”
  • As the largest US-based crypto asset exchange, such a move could potentially extend the reach of CBDCs far beyond their borders

What happened: Bitcoin popularity grows in Turkey amidst fears of currency devaluation


How is this significant?


What happened: Crypto mining grows in value and accessibility


How is this significant?

  • According to a report from financial research firm FundStrat, one of the biggest winners of the increase in digital assets has been the institutional crypto mining industry
  • Share values of listed crypto mining companies have actually outperformed Bitcoin since it reached $20,000, as the infrastructure behind digital assets has grown in value alongside the assets themselves
  • The report notes that “Because miners play such a critical role in ensuring the Bitcoin network functions properly, investors have sought opportunities to gain exposure to mining companies”
  • They however also note that the infrastructure likely won’t hold value as well as the assets during future market downturns; “Mining company equities may serve as a high-beta play on Bitcoin… when the market enters a bear cycle, we would expect mining equities to have greater downside volatility than Bitcoin”
  • Japanese company SBI Holdings announced this week that they are opening up their mining pool services to both institutions and individuals, giving them access to the world’s 11th-largest mining pool

What happened: Asian institutional investment in digital assets increases


How is this significant?

  • Chinese tech company Meitu purchased $50m worth of Bitcoin and Ether on Thursday, on top of previous purchases this month
  • In total, Meitu have made $90m worth of investments into digital assets this month
  • This makes Meitu the first listed Chinese company to make large investments into digital assets, leading some to dub them “the Microstrategy of Asia”
  • Meitu’s board takes a long-term view on the potential value appreciation of crypto assets, saying in a note to investors that “The Board believes that the blockchain industry is still in its early stage, analogous to the mobile internet industry in circa 2005. Against this backdrop, the Board believes cryptocurrencies have ample room for appreciation in value”
2021-03-24 20:00 News Roundups