Nickel Research Centre

Nickel News Roundup - Week 52

30th December, 2021 

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 $46,960, down about 2.6% 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 $3,707; a 5.5% 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?

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”
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