Nickel Research Centre

Nickel News Roundup - Week 52

24th December, 2020

Market Overview:

Digital assets experienced some volatility this week, with new all-time highs being achieved at the weekend before traders took profit and briefly pushed the price of Bitcoin below $22,000. It then settled above $23,000, well above the historic $20,000 resistance level.

  • Bitcoin experienced some volatility this week, briefly dropping below $22,000 after reaching a new all-time high of $24,210. This drop was in line with equity market falls in response to uncertainty about new COVID-19 developments in the UK, but Bitcoin recovered with news of a new stimulus bill in the United States. At the time of writing, Bitcoin is priced at $23,200
  • Ethereum declined compared to last week, dipping to a low of $560, before recovering to a current value of $583
  • XRP fell 55% to $0.26 in the wake of the SEC’s lawsuit against Ripple
  • The overall cryptocurrency market cap declined slightly, registering a current value of $626bn, predominantly driven by dips in the altcoin market as Bitcoin price remained steady
  • The DeFi sector reached another new Total Value Locked all-time high, as industry source DeFi Pulse has now monitored enough usage of Bitcoin in decentralised finance to categorise it separately. Non-Bitcoin DeFi value was measured at $14bn this week, whilst Bitcoin implemented in DeFi applications had a value of $3.4bn, for a combined value of $17.4bn

After achieving a string of new all-time highs throughout the weekend, there was a minor correction as profit-taking occurred. The dip was short-lived amidst numerous news items regarding further institutional investment moving into digital assets, and momentum soon turned bullish again, with Bitcoin recovering above $23,000 heading into the festive period. 

What happened: More news emerges about Coinbase IPO

How is this significant?

What happenedSEC announces plans to sue Ripple leadership over unlicensed securities sales

How is this significant?
  • XRP, the subject of the lawsuit brought by the SEC, is currently the 4th-largest cryptocurrency by market cap
  • As well as Ripple (the company behind the XRP coin), CEO Brad Garlinghouse and co-founder Christian Larsen were also named in the suit, with the SEC alleging a lack of “adequate disclosures about XRP and Ripple's business and other important long-standing protections that are fundamental to our robust public market system”
  • This marks the first time the SEC has pursued a major and established cryptocurrency (Ripple has been trading for over 7 years), and may signal a wider official acceptance of cryptocurrencies as a significant part of the financial ecosystem 
  • Garlinghouse reacted by accusing US regulators of stifling innovation in a last act before a new administration arrives, whilst Ripple board member Yoshitaka Kitao noted that Japan’s financial watchdog had already ruled against XRP being deemed a security 
  • As co-owner of Moneygram, Ripple’s main focus has been in international remittances and interbank transfers, areas which may conflict with the development of official CBDCs

What happened: Jefferies Investment reduces gold exposure in favour of Bitcoin

How is this significant?
  • Gold has historically acted as a hedging asset during uncertain financial times, deriving value from its scarcity; but Bitcoin and its guaranteed scarcity is increasingly viewed as a viable alternative to gold
  • Christopher Wood, global head of equity strategy at Jefferies investment, has decided to reduce gold exposure for the first time in years, in favour of introducing a 5% Bitcoin allocation into their long-only global portfolio for US dollar-denominated pension funds 
  • He also plans to increase exposure to cryptocurrency in the event of corrections, writing in his weekly investor note that “If there is a big drawdown in bitcoin from the current level, after the historic breakout above the $20,000 level, the intention will be to add to this position"

What happened: Microstrategy’s latest Bitcoin purchase moves them ahead of the US government in Bitcoin holdings

How is this significant?

What happened: Jack Dorsey’s Square offers customers Bitcoin back on Cash App purchases

How is this significant?
  • Square CEO (and twitter co-founder) Jack Dorsey has long been one of the most high-profile Bitcoin advocates, and is now moving to give his customers more Bitcoin exposure through Square’s Cash App 
  • Cash App had previously offered cash back on purchases, but this is the first time they’ve offered to return value to customers via cryptocurrency, and follows recent news of BlockFi partnering with Visa to do likewise on credit cards
  • Cash App’s competitors PayPal recently made moves into the cryptocurrency sphere, and this may be an attempt to prevent them from pulling ahead in the retail consciousness
  • According to Square’s Q3 2020 Investor letter, “Cash App generated $1.63 billion of bitcoin revenue and $32 million of bitcoin gross profit during the third quarter of 2020, up approximately 11x and 15x year over year”
  • Square have been active in the wider cryptocurrency space as well, awarding 5 grants to blockchain developers this month alone, the latest being worth $100,000

What happened: Tuvalu announces world’s first national digital ledger

How is this significant?
  • The small island nation of Tuvalu doesn’t have an existing electronic banking infrastructure, but may become the first nation-state to operate on a completely paperless basis
  • They have chosen the Bitcoin SV fork for this task
  • As a nation affected by climate change, Tuvalu are advocating for a digitisation of records, with Simon Kofe, Minister for Justice, Communication, and Foreign Affairs noting that “we are optimistic that blockchain technology will provide a key platform for unlocking new opportunities and securing a greater future for Tuvalu”
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