Nickel News Roundup - Week 52

24th December, 2020

Market Overview:

• 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

What happened: More news emerges about Coinbase IPO

• Coinbase’s IPO represents the first major public listing by a cryptocurrency company in America. Since news broke about Coinbase’s plans late last week, several key new pieces of information have emerged
• Coinbase have selected Goldman Sachs to lead their IPO, marking another direct involvement with cryptocurrency for them, having previously invested into blockchain companies Circle and Bitgo
• After Coinbase confirmed their intention to go public, Messari Research released their valuation of Coinbase, taking various metrics such as trading volume, debit cards, and custody into account, arriving at a perceived value of $28bn
• Despite a lack of any specific details on the IPO, cryptocurrency exchange FTX began trading of tokenised pre-IPO Coinbase Futures tokens for speculators, registering over $2m in trading volume within the first 12 hours, and seeing the value of the pre-IPO Futures trading at over $230. The contracts will convert to the share price of Coinbase at the end of their first public day of trading, allowing traders to buy now in the hopes of a higher value when the IPO launches 

What happened: SEC announces plans to sue Ripple leadership over unlicensed securities sales

• 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

• 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

• Microstrategy have been at the forefront of institutional investment into cryptocurrency, and have continued accumulating during the recent bullish market momentum
• CEO Michael Saylor tweeted that they purchased an additional 29,646 Bitcoin this week, at a cost of $650m
• Their latest Bitcoin acquisition took Microstrategy beyond $1bn in purchases for 2020
• The purchase was funded by the sale of $650m worth of senior bonds, exceeding their original goal of $400m, and takes the holding to 70,470 Bitcoins, ahead of the United States government at 69,420

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

• 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

• 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”