Nickel Research Centre

Nickel News Roundup - Week 17

28th April, 2022 

Market Overview:

Digital assets declined slightly this week, amidst wider global market anxieties leading to sell-offs of on-risk assets.

  • Bitcoin hit a weekly high of $42,870 on Thursday, but experienced sell pressure thereafter as global markets exhibited concerns related to escalating conflict in Ukraine, and possible supply-chain issues caused by increased Covid measures in China
  • Bitcoin spent the majority of the week trading between $38,500 and $40,000, with a weekly low of $38,050
  • Current Bitcoin prices of $38,940 equate to a 5% weekly decline
  • Ether performed similarly, reaching a high of $3,172 on Thursday, before weekly lows of $2,792 on Tuesday
  • Ether’s current value of $2,858 represents a 6.3% weekly decline
  • Total market capitalisation declined slightly to $1.79tn
  • Total value locked in DeFi also lost some value, dropping from $77bn to $75.6bn, according to industry analytics platform DeFi Pulse

Digital assets experienced a drop in line with other risk-on assets as global macroeconomic conditions grew more complicated this week. The asset class continues to experience dynamic developments though; Fidelity integrated digital assets into US retirement savings plans, German financial giant Commerzbank revealed an intention to deal with crypto custody and trading, the Central African Republic became the second nation to adopt Bitcoin as legal tender, VC deals continued to flood in, visionary director and producer Ridley Scott signed on to help tell the tale of Ethereum, and Fort Worth became the first city in America to officially mine Bitcoin.


What happened: Fidelity enables US savers to invest Bitcoin in retirement funds

How is this significant?
  • US investment giant Fidelity this week announced that in the next few weeks, American customers investing into retirement savings plans—also known as 401(k) plans—will be able to allocate a portion of their savings into Bitcoin
  • Fidelity is currently one of the largest providers of pensions products in the United States, working with around 23,000 corporate clients
  • Their new workplace Digital Asset Accounts will be integrated into Fidelity’s existing online 401(k) management platform, and allow employers to direct up to 20% of retirement savings into digital assets
  • Fidelity’s head of retirement products David Gray confirmed that the company will begin by offering Bitcoin exposure, but that the platform can (and likely will) be configured to include other digital assets in future
  • Gray told Bloomberg “We view this as the beginning, not the end. We are preparing for the next generation of investors and what they might want from their retirement plan—we should expect that that will be different from the generation before them”
  • He also confirmed that the company disagreed with recent US Labor Department guidance that the perceived volatility of digital assets could make them unsuitable for inclusion in pensions products
  • Fidelity confirmed the innovation was driven by client demand; MicroStrategy CEO Michael Saylor quickly confirmed the company would offer their employees access to the new 401(k) plans
  • In other Fidelity news, the company launched two new exchange products linked to the digital asset industry. The Fidelity Metaverse ETF (ticker FMET) and the Fidelity Crypto Industry and Digital Payments ETF (FDIG) both began trading on Thursday, offering institutional investors more (indirect) exposure to the industry

What happened: German finance giant Commerzbank applies for crypto custody licence

How is this significant?
  • Commerzbank, one of the largest banking institutions in Europe’s largest economy, confirmed this week that they have applied for a license to custody digital assets
  • Senior spokesperson Bernd Reh announced “we are pursuing our own digital asset strategy and are also planning our own offerings for our customers in the coming years. We have applied for a licence from the [regulators] BaFin for the safekeeping of crypto assets. The future offer is initially aimed at institutional customers”
  • This licence would grant Commerzbank the ability to offer digital asset exchange and trading services, as well providing protection and custody
  • Mikkel Morch, head of a digital asset hedge fund in Germany, identified Commerzbank’s move as “the beginnings of a race within the traditional banking field to gain a competitive edge by being the first entity in its local market to offer crypto services… demand is so high across the whole spectrum of banking clients that it compels entities that were previously hostile to crypto to completely change course”

What happened: KKR, Sequoia, and Ivy League endowments back $650m crypto VC fund

How is this significant?
  • Dragonfly Capital successfully concluded raising capital for a new digital asset VC fund worth $650m
  • This is their third fund focused on the asset class, up from previous fund values of $100m and $250m respectively and exceeds their initial funding goal of $500m
  • Investors in the oversubscribed round included investment powerhouses like KKR and fellow VC Sequoia China, but also numerous (unnamed) Ivy League university endowments and a “Southeast Asian state-owned investment firm”
  • Dragonfly CEO Haseeb Qureshi believes the amount of funding pouring into crypto-focused VCs is a sign of the industry’s growing legitimacy—to such an extent that digital assets are now influencing traditional business models and structures
  • “[They] are scrambling to figure out how to retool themselves and start understanding how this paradigm shift coming from the crypto industry will affect what they do and how they run their businesses… It’s really clear that the whole world now realises how important this industry is. After everything that happened in the past year, it’s no longer a question of whether crypto will be a thing”

What happened: Central African Republic declares Bitcoin legal tender

How is this significant?
  • According to AFP reports on Wednesday, the Central African Republic has become the second nation to recognise Bitcoin as legal tender, after El Salvador last year
  • President Faustin Archange Touader passed the measure into law after unanimous support in the legislature, affording Bitcoin the same legal status as the country’s CAF Franc
  • The Central African Republic has an economy traditionally heavily reliant on mining exports, but the president’s chief of staff Obed Namsio believed this development could help the nation open up new avenues for revenue
  • “The CAR is the first country in Africa to adopt bitcoin as legal tender… This move places the Central African Republic on the map of the world's boldest and most visionary countries”
  • Finance minister Herve Ndoba confirmed that legislators are now creating legal frameworks to regulate the use of digital assets; “There’s a common narrative that sub-Saharan African countries are often one step behind when it comes to adapting to new technology… This time, we can actually say that our country is one step ahead”

What happened: Ridley Scott signs on to produce film about the rise of Ethereum

How is this significant?
  • Award-winning director and producer Ridley Scott (whose 45-year career includes features such as Alien, Blade Runner, and Gladiator) was this week confirmed as a producer on an upcoming film about the founding of Ethereum
  • Based on the 2020 book “The Infinite Machine”, by journalist Camille Russo, the story “charts the rise of Ethereum, the second-biggest digital asset in the world, the growth of cryptocurrency, and the future of the internet as we know it”
  • Although there have been several fictionalised depictions of digital assets in film and television, this adaptation would mark the first motion picture based directly on journalistic research and known personae like Ethereum co-founder Vitalik Buterin

What happened: Anthony Scaramucci’s SkyBridge Capital increases focus on crypto assets

How is this significant?
  • SkyBridge Capital CEO (and former Trump press secretary) Anthony Scaramucci plans to pivot his company’s focus even harder towards digital assets, revealing the thinking behind that policy during the SALT conference this week
  • In a Bloomberg interview, he said “We feel so strongly about this opportunity that we’ve adapted and repositioned the firm to eventually be a leading cryptocurrency asset manager and adviser”
  • About half of SkyBridge’s current $3.5bn in assets under management are currently linked to digital assets, but Scaramucci believes an increased crypto focus could boost value to $10bn in the long term
  • Speaking on a panel, he said “We made a decision during the pandemic that we had to relitigate our entire portfolio. There’s a pre-pandemic world and a post-pandemic world, and a post-pandemic world has a lot more government deficits—it has a lot more uncertainty related to growth… For us, we think the cryptocurrency markets represent tremendous growth. It comes with volatility, certainly, but I think over the three to five years, we’d like that trajectory”

What happened: Blockchain analytics firm CertiK closes second funding round in two weeks

How is this significant?
  • Just two weeks after successfully concluding an oversubscribed $88m funding round, blockchain security specialists CertiK closed another round, this time to the tune of $60m, for a total $148m in April
  • This round was backed by SoftBank and Tiger Global, identified as an opportunity to leverage their connections to traditional companies who may wish to enter the Web3 and blockchain space
  • CEO Ronghui Gu said they were keen to stop hacks and exploits from making the news in future as the industry matures; “We really want to scale this business to all the players in the blockchain and Web 3 industries”

What happened: Ex-Jefferies executives announce institutional digital asset exchange

How is this significant?
  • Brandon Mulvihill and Anthony Mazzarese, formerly of Jefferies’ prime brokerage division, announced the founding of institutional crypto exchange Crossover Markets Group, alongside former Euronext chief technology officer Vlad Rysin
  • The three executives are currently involved in seed funding deals, but foresee a launch by late summer or early Autumn
  • In a press release, they identified a focus on low-latency trading as particularly crucial for institutional investors, and Mulvihill said “While the vast majority of traditional institutional clients are not yet in crypto, we believe this is rapidly changing… As the market matures, so should the technological advancements of the exchanges”
  • The move is indicative of recent trends featuring not only Wall Street institutions increasingly bolstering their crypto capabilities, but also high-profile talent moving from traditional finance into the rapidly-developing Web3 space

What happened: Fort Worth Texas becomes first US city to officially mine Bitcoin

How is this significant?
  • For the first time in the United States, a municipal government is officially mining Bitcoin, as Fort Worth takes advantage of legislative enthusiasm for digital assets in Texas
  • Bitcoin mining rigs will run right at the heart of the city’s legislature, inside Forth Worth city hall
  • Fort Worth mayor Mattie Parker believes the pilot project—featuring three Bitmain miners—will deliver additional value to the city beyond the addition of Bitcoin to the municipal balance sheet
  • “For Fort Worth, a lot of people don’t know who we are… We want to change that conversation, and we believe that tech innovation including cryptocurrency is the way we’re going to do that… we have to push ourselves differently, and we think cryptocurrency is a huge part of our future economy”
  • The pilot scheme will run in its current state for 6 months, before deciding whether to expand the mining rig with more hardware
  • Alex Brammer of Bitcoin mining pool Luxor Technologies, believes that Fort Worth’s decision could facilitate similar moves beyond its borders; “Mayor Parker is setting an example and effectively de-risking both bitcoin mining and bitcoin treasury strategies for every other mayor in the country, and I wouldn’t be surprised to see more announcements like this coming in the future”

What happened: 21Shares launches first combined Bitcoin/gold ETP

How is this significant?
  • Bitcoin has long been known as “digital gold” for its capacity to act as a store of value like the precious metal—but for the first time, customers will be able to invest in both analog and digital gold at the same time, thanks to a new ETP from 21Shares
  • The 21Shares ByteTree BOLD ETP aims to test the theory that gold will provide portfolio hedging capabilities, whilst Bitcoin delivers higher returns
  • Charlie Erith, CEO of ByteTree asset management, declared “Gold has historically delivered portfolio protection in inflationary environments, while Bitcoin is the digital equivalent of gold with growing adoption by investors as a distinct asset class and a core store of wealth… In a time of rising structural inflation and heightened geopolitical risk, we believe this can act as an important risk and return diversifier in a balanced portfolio”
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