Nickel Research Centre

Nickel News Roundup - Week 33

19th August, 2021 

Market Overview:

After several weeks of explosive growth, the digital asset market cooled down a bit this week, retracing slightly after hitting new highs on Monday.

  • Bitcoin briefly peaked above $48,000 for the first time since May on some trading platforms on Saturday, with Coinmarketcap recording an averaged 7-day high of $47,998
  • Despite a dip on Tuesday that briefly took the leading digital asset’s price to around $44,200, current prices of $44,500 represent only a modest decline from last week’s figures
  • Ether experienced a decline after three consecutive weeks of double-digit growth, reaching a weekly high of $3,329 before a brief dip under $3,000 en route to current values of $3,005
  • Overall market capitalisation crossed $2tn for the first time since May, before retracing to a current value of $1.91tn
  • 29 of the top 50 assets by market capitalisation performed positively over the week, despite the slight decline in market bellwether Bitcoin
  • Total value locked in DeFi remained steady, at around $91.5bn

The digital asset market hit several key milestones for the first time since mid-May this week, before retracing slightly. Fidelity revealed the scale of client interest in digital assets, whilst America’s largest retailer and second-largest mortgage provider also signalled intent to adopt the asset class as payment. Several other recent trends continued, including more ETF filings, more digital asset unicorns raising hundreds of millions in VC funding, more revenues for miners, and more interest and utilisation of NFTs.


What happened: Fidelity says “90% of clients” are asking about Bitcoin

How is this significant?
  • In a Boston Globe article this week, Fidelity outlined the scale of client interest in digital assets, and their plans for the sector
  • Christine Sandler, the firm’s head of sales and marketing, said that about 90% of clients had been asking about Bitcoin; adding that there was also an emerging interest in altcoins like Ethereum
  • Tom Jessop, head of Fidelity’s digital asset unit noted that global financial response to the coronavirus pandemic, before the entry of famed investors like Stanley Druckenmiller and Paul Tudor Jones “set the match to the bonfire” of institutional interest
  • Jessop said “You’re seeing the emergence of a real asset class… What really got people off the fence was the pandemic, because you’ve got this scarce asset class — there will only ever be 21 million bitcoin created — and an environment where our currency is being debased, and there’s a ton of money printing”

What happened: Second-largest American mortgage lender plans to accept Bitcoin

How is this significant?
  • Michigan-based United Wholesale Mortgage (UWM), the second-largest mortgage lender in the USA, announced plans this week to begin accepting digital assets as payment before the end of the year
  • CEO Mat Ishbia said in an earnings call on Monday that they wanted to gain an advantage on other mortgage lenders by being the first to market in embracing the new asset class; “We’re excited that hopefully we can actually execute on that before anyone in the country"
  • Although he acknowledged that it was not yet guaranteed as details are still being worked on, Ishbia was nonetheless optimistic of accepting a variety of digital assets, telling the Detroit Free Press: “I think we’re starting with Bitcoin, but we’re looking at Ethereum and others. We’re going to walk before we run, but at the same time, we are definitely a leader in technology and innovation and we are always trying to be the best and the leader in everything we do"
  • UWM closed a company-record $59.2bn in mortgages during Q2 2021, and currently employs around 9,000 people

What happened: Walmart recruiting for crypto asset project lead

How is this significant?
  • Walmart is one of the largest retailers on the planet with $559bn revenues and 1.5 million US employees in 2020
  • Now the retail giant has joined the likes of Amazon in recruiting for a digital asset expert to lead the adoption and integration of “digital currency and cryptocurrency” for the chain
  • The successful candidate will be responsible for developing a product roadmap, as well as serving as an internal and external expert on digital asset matters for the company
  • The job posting notes “As one of the largest retailers and e-commerce companies, Walmart enables broad set of payment options for its customers”, indicating that the new role could involve the direct integration of digital assets as payment by the retailer

What happened: Ethereum 2.0 staking contract grows to largest single holder of Ether

How is this significant?
  • As part of the upgrade process to the proof-of-stake Ethereum blockchain, Ether holders have been able to deposit 32 Ether to qualify as early stakers before the network fully transitions from Ethereum to Ethereum 2.0
  • Statistics about validator nodes staking Ether on the upcoming Ethereum 2.0 network have revealed that the staking contract is now the single largest holder of Ether on the blockchain
  • There are now over 211,000 qualifying validators, accounting for nearly 6% of the total Ether supply
  • This makes Ethereum 2.0 the third-largest proof-of-stake blockchain by market capitalisation (behind Cardano and Solana), despite Ethereum as a whole not having fully upgraded to proof-of-stake yet
  • Adding further pressure to Ether supply ahead of the Ethereum 2.0 launch are the recent EIP1559 that burn a majority of the network’s transaction fees; since the 5th of August over 60,000 Ether have been burned and removed from circulating supply

What happened: Social media platform TikTok partners with tokenised music platform

How is this significant?
  • This week, music industry magazine Rolling Stone reported that the first streaming platform to partner with popular social media platform TikTok is the blockchain-based Audius
  • The partnership will allow musicians with songs available on Audius to directly export them onto TikTok
  • Audius surpassed 5 million monthly active users last month, and currently features music from over 100,000 artistes
  • Revenue for TikTok’s parent company Bytedance more than doubled in 2020, to $34bn

What happened: Twitter picks lead developer for decentralised social media project

How is this significant?
  • Twitter co-founder Jack Dorsey is a vocal advocate of Bitcoin and decentralisation, to the extent of Twitter announcing the creation of a fully-decentralised social media project called BlueSky back in December 2019
  • This week, they announced the lead developer for BlueSky, Jay Graber who formerly worked on the privacy-focused Zcash coin
  • Dorsey noted that the company will now “move much faster” after noting on the initial announcement of BlueSky that “New technologies have emerged to make a decentralized approach more viable. Blockchain points to a series of decentralized solutions for open and durable hosting, governance, and even monetization”

What happened: More companies file for digital asset ETPs

How is this significant?
  • There were numerous applications for digital asset ETFs and ETPs, with an emerging trend of filing for products based on Bitcoin futures, after recent remarks by SEC chief Gary Gensler in support of the concept
  • Tech billionaire Mike Novogratz’s Galaxy Digital filed for the “Galaxy Bitcoin Strategy ETF” this week, seeking to create an actively-managed ETF based on Bitcoin futures contracts
  • This is the second ETF filing by Galaxy Digital this year, after they submitted an application for a directly-backed Bitcoin ETF in April
  • Valkyrie Digital also filed for a Bitcoin futures ETF, saying in their application that the fund “will seek to purchase a number of bitcoin futures contracts” rather than directly purchasing Bitcoin
  • In Europe, the ETC Group announced several directly-backed digital asset ETPs listing on the Vienna stock exchange, including a carbon-neutral Bitcoin ETP, an Ether ETP, and a Litecoin ETP
  • This follows the launch of similar ETPs by the ETC Group across several European exchanges, including Frankfurt, London, Zurich, Paris, and Amsterdam

What happened: Intel discloses holdings of Coinbase shares

How is this significant?
  • Computer chip producers Intel, one of the largest tech companies in the world, disclosed the ownership of Coinbase shares this week, becoming one of the first corporations to do so
  • Although the investment is a relatively modest holding of 3,014 shares, it nonetheless provides an example of an established corporate giant backing Coinbase’s potential on their own balance sheet
  • Intel went public in April, so Intel’s recent disclosures were the reporting period since the COIN ticker launched that they would have to announce such an investment
  • There is a possibility that Intel could have invested whilst shares were still trading on private markets, as their holding falls below the 5% threshold that would have required Coinbase to disclose before their listing

What happened: Digital assets experience first “merger” of companies and protocols

How is this significant?
  • In a first for digital assets, the Polygon network (currently ranked 18th in the sector by market capitalisation) announced a merger with Hermez, another blockchain protocol
  • As part of the $250m deal, all aspect of the Hermez chain, including team and tokens, will be absorbed by Polygon and operate under the new name of Polygon Hermez
  • The $250m was paid in the native tokens of the Polygon network, with company representatives noting the merger as part of a strategic focus on scaling technology
  • In a statement about the move, Polygon said “We believe this is in a way a historical moment since this will be (to the best of our knowledge) the first full-blown merger of two blockchain networks. Mergers and acquisitions in the traditional tech world are an everyday thing. In blockchains, however, they are a new and very interesting concept”

What happened: $400bn investment manager begins exposure to digital assets

How is this significant?
  • Reuters reported this week that asset managers Neuberger Berman ($402bn AUM) are moving into the digital asset space
  • SEC regulatory filings revealed that they have allowed their $164m Commodity Strategy fund to indirectly invest in crypto assets, through futures, trusts, and ETFs
  • This follows a March blog post in which the firm stated “From our perspective, the Bitcoin phenomenon is worth watching closely”
  • Speaking to Reuters, a company representative said digital asset exposure could be a key to diversification and hedging against inflation; “Accessing these markets through exchange traded instruments is a prudent way to gain exposure, which the portfolio management team will seek to do over the coming weeks and months”

What happened: Bitcoin miners reap benefits of decreased Chinese hashpower, and beat earnings estimates

How is this significant?
  • After Chinese regulations shut down a portion of its Bitcoin mining capabilities, the hashpower involved with that mining migrated overseas, resulting in greater decentralisation and benefits for miners elsewhere, including Europe and North America
  • London-listed Marathon Digital beat forecast earnings of 16 cents per share, reporting 21 cents per share this week, as Q2 revenue rose 220% from Q1
  • North American miners, including Riot Blockchain, Bitfarms, Hut, and Argo mined around 59% more Bitcoin in July than in previous months, thanks to reduced Chinese hashpower
  • Canada’s Bitfarms grew revenues by 396% year over year for Q2
  • As North American miners tend to have more direct access to clean energy than Chinese miners did (for example Inner Mongolia was almost exclusively coal-powered), this decentralisation can also shift the narrative of concerns over mining sustainability

What happened: Crypto taxation service Taxbit valued at $1.3bn after Series B funding

How is this significant?
  • Taxbit completed a $130m Series B raise this week, bringing the company’s valuation to $1.33bn; making them the latest digital asset unicorn
  • Taxbit’s tax reporting software and services are especially relevant now, after the recent US Infrastructure Bill included provisions for crypto taxation
  • The Series B raise brought the company’s total funding to $230m, capping a tripling of headcount to 100 employees since their last funding round in March
  • CEO Austin Woodward told Techcrunch “The digital asset space experienced a watershed moment during the pandemic, resulting in an accelerated push toward digital payments and alternative stores of value. The momentum of adoption across the digital economy is quickly becoming the new normal among the traditional financial institutions and disruptors”

What happened: Digital asset exchange Bitpanda achieves $4.1bn valuation

How is this significant?
  • Another digital asset unicorn was confirmed this week, as Austrian exchange Bitpanda reached a $4.1bn valuation following a $263m funding round, four months after their $170m Series B
  • The company has experienced strong growth over the last few years, opening offices in France, Italy, Spain and Turkey since 2020, growing to 3 million users and 500 employees
  • Current growth forecasts include six-fold year-over-year customer growth, and seven-fold revenue increase in 2021
  • The rising European exchange has been hiring aggressively to increase their growth, including C-suite hires from e-banks N26 and Revolut

What happened: First half of 2021 registers more digital asset VC investment than 2018-2020

How is this significant?
  • With all the news of new crypto unicorns over the last few weeks, it comes as no surprise that recent statistics reveal a substantial increase in recent Venture Capital investments for digital asset companies compared to previous years
  • A new report by KPMG reveals the exact scale of this increase, with the first half of 2021 accounting for more VC investment ($8.7bn) than the entire yearly totals of 2020 ($4.3bn), 2019 ($5bn), and 2018 ($7.2bn)
  • KPMG also noted that despite the larger total investment, it was achieved over fewer deals, indicating higher average raises as the space matures and becomes increasingly recognised by VCs
  • Perhaps most promisingly in terms of VCs, the report’s 30th June cutoff excluded the largest raise in digital asset history, FTX’s $900m raise in late July

What happened: NFT platform OpenSea experiences over $1.2bn in weekly sales

How is this significant?
  • Interest in non-fungible tokens (NFTs) continues to increase, driving record interest and volumes to the leading NFT marketplace, OpenSea
  • According to statistics by blockchain analysts Dappradar, OpenSea processed $1.22bn of transactions over the last 30 days; a 950% increase over the previous 30
  • Part of that increase can be aligned with the appreciation of Ether’s value over the same time period, as the vast majority of all OpenSea trades are transacted on Ethereum
  • Additionally, industry publication TheBlock reported that Google search results for the platform hit an all-time high on Tuesday, indicating increased interest not just from established crypto-enthusiasts, but more mainstream consumers as well 
What happened: IRS reportedly makes clearer delineations on “brokers” than US crypto tax bill

How is this significant?
  • In news that should be welcomed by digital asset businesses across the United States, Bloomberg reported this week that the Internal Revenue Service won’t pursue all entities that could currently be conceived as “brokers” under the vague language of the recent tax bill
  • Sources speaking to Bloomberg said that developers, miners, and hardware firms would likely be exempted, with further details forthcoming in the next week or two
  • Critics of the unamended form in which the bill passed believe there wasn’t enough clarity on exactly who was seen as a “broker” in the eyes of the law, which could have required miners, developers, and hardware manufacturers to undertake impossible KYC monitoring measures

What happened: Alibaba launches tokenised copyright-licensing marketplace

How is this significant?
  • Chinese internet giant Alibaba announced a new marketplace this week, utilising NFT technology to trade copyright licenses and intellectual property
  • Reported in Hong Kong’s South China Morning Post newspaper (owned by the Alibaba group), the “Blockchain Digital Copyright and Asset Trade” will allow creators across a variety of industries—including video games, music, and literature—to sell rights to their content via non-fungible tokens secured by the blockchain
  • The marketplace actually launched last week as a new category on Alibaba’s eBay-esque auction site, providing successful bidders with the ownership of the digitised assets, and the ability to view them through the popular Chinese WeChat platform
News Roundups