Nickel Research Centre

Nickel News Roundup - Week 45

11th November, 2021 

Market Overview:

Digital assets surpassed a landmark $3tn in market capitalisation for the first time this week, spurred by new all-time highs for Bitcoin and Ethereum, before concerns about Evergrande defaulting led to a pullback with profit-taking and cascading liquidations

  • Bitcoin experienced flat trading activity for the first half of the week, before strong growth in light of continued inflation concerns in the second half of the week led to it surpassing $67,000 and $68,000 for the first time
  • Bitcoin briefly touched exactly $69,000 on Binance on Wednesday, with industry aggregator Coinmarketcap recognising a new official all-time high of $68,740
  • Late on Wednesday, most of these gains were erased though with news of Evergrande’s default creating sell-offs across most financial markets
  • Bitcoin is currently priced at $64,900; a 3.8% weekly growth
  • Ethereum also reached several new milestones, this week, exceeding $4,700 and $4,800, with a new record high of $4,860
  • Ether is currently trading at $4,666, up 2.2% on one week ago
  • Overall market capitalisation reached a record value of $3tn, equating to an almost four-fold increase year-to-date
  • Even after the Evergrande-triggered pullback, overall market capitalisation remains above last week’s record highs, at a current $2.84tn
  • Total value locked in DeFi reflected the market’s bullish performance, growing more than $7bn to a new record value of $114.3bn, according to industry analytics platform DeFi Pulse

Digital assets experienced a record week, with both Bitcoin and Ether leading from the front with new all-time highs, before a late dip catalysed by Evergrande news in traditional markets. Bitcoin’s power as an inflation-hedging “digital gold” was apparent this week, but the appeal of digital assets went far beyond Bitcoin alone. Multiple major economies outlined more information about CBDC efforts, Morgan Stanley highlighted the value of stablecoins, several of the world’s largest game developers announced plans to leverage NFTs, and mining infrastructure saw big deals and rising share prices as crypto assets continue to gain adoption.


What happened: Neuberger Berman applies for physical Bitcoin ETF

How is this significant?
  • As part of their new joint venture with digital asset lender BlockFi, investment managers Neuberger Berman filed an application with the SEC this week for a new Bitcoin ETF
  • Following an enthusiastic market response to several recently-launched Bitcoin futures ETFs, Neuberger Berman ($402bn AUM) is now attempting to leverage their new partnership into a potentially-lucrative Bitcoin spot ETF to address rising investor demand
  • According to participants at Bloomberg’s Financial Innovation Summit on Thursday, spot ETFs with physical Bitcoin holdings could see “trillions” of investor inflows. MicroStrategy CEO Michael Saylor spoke at the summit, noting “once these spot ETFs roll, I think you’ll see billions, then tens of billions, then hundreds of billions, then trillions of dollars flow into them”
  • However, Bloomberg Intelligence analyst Eric Balchunas foresees the SEC maintaining a conservative stance towards authorising any physical Bitcoin ETFs, despite the success of such products in Canada; “Until Gensler shows some evolution mentally, this thing is on ice with the other 20 or so of them… I don’t think the SEC can be pressured.”

What happened: Incoming New York City mayor outlines municipal support for digital assets

How is this significant?

What happened: People’s Bank of China announced 1/10th of population has trialled CBDC

How is this significant?
  • The People’s Bank of China (PBOC) announced the latest figures on Digital Yuan usage this week, indicating the breadth of trial adoption before its official launch
  • The PBOC said that $9.7bn e-CNY have been transacted in trials across a dozen regions of China, with 150 million individual transactions taking place
  • Additionally, they cited 140m individuals with Digital Yuan accounts—equivalent to approximately 1/10th of the country’s 1.44 billion population—varying from wallets created with just a phone number, to wallets opened at bank counters
  • Furthermore, the PBOC also announced 10 million corporate accounts had been created for e-CNY transactions, helping to test the upcoming CBDC at greater scale

What happened: More countries consult on CBDCs

How is this significant?
  • Alongside China’s e-CNY and Nigeria’s recent e-NAira, several other major economies outlined CBDC plans in greater detail this week, including Singapore and the UK
  • A week after announcing plans to position itself as a global digital asset hub, Ravi Menon (chief of the Monetary Authority of Singapore) announced “Project Orchid”; a joint examination with private sector partners on the infrastructural and technological requirements for a retail Digital Dollar, adjacent to existing wholesale CBDC development
  • On Tuesday, the Bank of England announced a Digital Pound consultation, beginning in 2022
  • Whatever the results of the consultation however, a British CBDC is likely to lag behind other global efforts, as the Bank stated; “If the results of this ‘development’ phase conclude that the case for CBDC is made, and that it is operationally and technologically robust, then the earliest date for launch of a U.K. CBDC would be in the second half of the decade”
  • Meanwhile, European Central Bank executives announced this week that any European digital currencies are “likely” to become legal tender in their jurisdictions, with Executive Board member Fabio Panetta explaining “It would be quite awkward not to have legal-tender status for an additional instrument issued by a central bank”

What happened: Major game developers back integration of digital assets

How is this significant?
  • Electronic Arts (EA), one of the largest developers in the video game industry this week announced that integration of digital assets—in the form of NFTs—will be “an important part of the future of the industry”
  • Industry publication PC Gamer noted that recent job postings from EA include references to blockchain and NFTs, indicating a desire by the publisher to begin integrating digital gaming assets into their titles
  • Another major game studio, Ubisoft, also recently announced their intention to integrate NFTs, allowing gamers to participate in the new blockchain-enabled “play to earn” model; CEO Yves Guillemot said NFTs “will enable more players to actually earn content, own content, and we think it's going to grow the industry quite a lot”
  • The video game industry is larger than the North American film and music industries combined, estimated to generate $176bn in revenues this yeah, and over $250bn by 2025
  • Japanese developer Square Enix—creators of the popular Final Fantasy gaming franchise—also released plans for a “robust entry into blockchain games”, after a trial series of NFT cards swiftly sold out
  • Additionally, developers of the popular online community platform Discord teased integration of Web3 and Ethereum technology this week, potentially introducing digital assets to a new audience amongst its 350 million registered users
  • Blockchain game developer Mythical Games secured $150m in Series C funding this week, led by Andreessen Horowitz (a16z). This raise puts the company’s current valuation at $1.25bn

What happened: Morgan Stanley predicts banking implementation of stablecoins

How is this significant?
  • In a report this week, Morgan Stanley’s chief digital asset strategist Sheena Shah identified the likelihood of banks attempting to generate returns from the rising pool of stablecoins in the digital asset space
  • The total market capitalisation of stablecoins has grown from $20bn one year ago, to nearly $138bn now, as more new protocols and investors enter the space
  • Shah noted the ability of DeFi protocols to offer up to 5% interest on stablecoin deposits, dwarfing traditional fiat returns in the banking industry (where some countries currently charge interest for holding large deposits)
  • Shah noted that banks could benefit from the issuance and usage of stablecoins; “It could also lead to new sources of revenues for the banks if they are able to charge for the minting and burning of stablecoins, which is part of our bull case investment thesis on Silvergate [a federally-insured bank servicing the digital asset industry]”

What happened: Institutional inflows continue to set records

How is this significant?
  • According to a new weekly flows report from industry firm Coinshares, the current total year-to-date digital asset inflows from crypto asset managers have reached $8.9bn
  • With nearly two months of the year remaining, this figure already exceeds the entire 2020 inflows of $6.7bn
  • Bitcoin currently accounts for around $6.4bn of the YTD inflows, followed by just over $1bn for Ethereum
  • Particularly noteworthy is the recent momentum; $2.8bn of the total Bitcoin inflows have come over the last 8 weeks, spurred by ETF approval, inflation concerns, and bullish market sentiment

What happened: NFT Metaverse developer Enjin launches $100m adoption fund

How is this significant?
  • Following Facebook’s recent focus on the “Metaverse”, several digital asset companies with an NFT focus have gained more attention from investors, due to non-fungible tokens playing a key role in the integration of persistent content across multiple different virtual environments
  • One of the most established companies in the space, Enjin, is now leveraging this increased awareness with a $100m fund aimed at increasing adoption and development of their metaverse solutions
  • The fund will allow Enjin to participate in seed investments and Series A funding rounds of companies pledging to utilise Enjin’s technology stack and upcoming NFT-centric blockchain, Efinity
  • As well as metaverse projects, companies in the gaming and DApp (decentralised app) field also stand to benefit from funding

What happened: UAE technology firm purchases $650m of mining hardware

How is this significant?
  • The United Arab Emirates could climb up the global ranks of Bitcoin miners, as Emirati company Phoenix Technology Consultants signed an agreement with hardware manufacturer Bitmain this week to purchase $650m of mining devices
  • This constitutes one of the largest orders of digital asset miners ever, as announced by CEO Munaf Ali at the World Digital Mining Summit in Dubai
  • Additionally, Phoenix will order another $2bn worth of equipment in Q3 of 2022, giving them a capacity of 1.4GW
  • In other industry news, shares of mining companies Riot Blockchain, Northern Data, and Hive Blockchain all posted healthy growth as Bitcoin and Ether climbed to record highs

What happened: Ex-Citi CEO predicts increased crypto trading offerings from banks

How is this significant?
  • Speaking at the Singapore Fintech Festival, former Citigroup CEO Vikram Pandit revealed that he expects a significant increase in crypto asset trading from the banking sector
  • He believes that within “one to three years, every large bank and/or securities firm is going to actively think about shouldn’t I also be trading and selling cryptocurrency assets?
  • Pandit was an early supporter of Coinbase, investing $75m into the company back in 2015, 6 years before their IPO
  • He also voiced his support for CBDC development, praising the efficiency when compared to “cumbersome” legacy systems; “My big hope is that central banks around the world understand the benefit of a central bank digital currency, and move on to accept, adopt them”

What happened: Institutional exchange Bakkt expands asset offering

How is this significant?
  • Bakkt, a publicly-listed (via SPAC) insitutional digital asset exchange announced this week that they are adding Ether to their offering, alongside Bitcoin
  • Bakkt note that together, these two assets represent over half of the total industry market capitalisation
  • In a press release, CEO Gavin Michael said “At Bakkt, providing flexible opportunities for users to enjoy their digital assets is a top consideration, and adding Ethereum brings a popular and growing cryptocurrency to our roster”
  • In late October, Bakkt was revealed as a partner to Mastercard for increased integration of digital assets by Mastercard’s banking clients
  • Mastercard leveraged this partnership quickly, announcing the launch of a series of crypto-linked debit, credit, and prepaid card products in the Asia Pacific region, allowing users to instantly convert digital asset holdings into fiat for payment

What happened: Square generates $1.8bn of Bitcoin revenue in Q3

How is this significant?
  • Square, the payments app founded by Jack Dorsey, generated $1.82bn of Bitcoin revenue and $42m of gross profit in Q3, up 115% and 29% year-on-year, according to their latest shareholder letter
  • Due to a low mark-up on sales, this profit was equivalent to only about 2% of revenues
  • Gross profit actually declined in the third quarter, due to “the relative stability of Bitcoin”, and Square noted it could fluctuate in future reporting periods as Bitcoin’s price (and investor interest) also rises and falls
  • On their Q3 conference call, Square also revealed that they were going to announce more details on their Bitcoin mining operation, named TBD, on the 19th of November 

What happened: Jefferies strategist recommends increased Bitcoin allocation to replace gold

How is this significant?
  • Christopher Wood, chief equity strategist of $440bn AUM investment bank Jefferies, announced a portfolio rebalancing strategy in favour of Bitcoin in his last weekly letter, marking the first change in Bitcoin allocation since December 2020
  • Wood recommends increased Bitcoin exposure by 5%, to 10% of total allocations, removing 5% of allocation from gold exposure
  • In his letter, he notes the outperformance of Bitcoin versus gold since the pandemic, stating “The arrival of the Bitcoin ETF (exchange traded fund) in America, and the growing mainstream acceptance of crypto, means that it is timely to make a further adjustment to the global portfolio for US-dollar denominated pensions funds… In this respect, the performance of gold this year remains hugely disappointing given how negative rates are in America”
  • Wood declared himself “fundamentally bullish” on crypto assets and blockchain, saying that banks need to embrace the change, rather than resist it; they “should be focused on the technology to see how to try and profit from it rather than to wait and be disrupted by it”
  • Although Wood doesn’t view Ethereum as a store-of-value asset, and thus won’t add it to the fund’s portfolio, he believes it will outperform Bitcoin “in the coming months”

What happened: e-Bank Revolut recruiting to build digital asset exchange

How is this significant?
  • According to a job posting on Linkedin, leading online bank Revolut is hiring a Tech Lead to spearhead the development of their own digital asset exchange
  • The company already allows users to buy and sell digital assets through their app, but appear to be looking for more sophistication, as the successful candidate will have experience in building order-matching engines with limit orders, elevating the new offering above their current system which only offers market sells and buys
  • It has been widely speculated in the industry press that Revolut are currently developing their own token (akin to Binance’s BNB coin), which could carry more value if a more sophisticated trading interface increases trading volume on Revolut’s crypto platform
News Roundups