Nickel Research Centre

Nickel News Roundup - Week 39

29th September, 2022

Market Overview:

Digital assets traded in a relatively narrow range, with the exception of significant upside and downside volatility around a Jerome Powell speech on Tuesday.

  • Bitcoin traded primarily between $18,600 and $19,250, with a weekly low of $18,420 on Thursday, and a high of $20,330 on Tuesday
  • This high correlated with the build-up to Jerome Powell’s participation in a panel discussion on decentralised finance, but a market-wide sell-off following the panel’s conclusion led to a drop from $20,100 to $19,000 within an hour and a half of trading
  • Market volatility is of course not limited to digital assets at the moment, with established sovereign currencies like the Pound Sterling experiencing major fluctuations
  • Bitcoin’s current price of $19,380 represents a 2.3% weekly increase 
  • Ether recovered from last week’s post-upgrade “sell the news” trading, closely following Bitcoin’s chart patterns
  • Ether was mainly priced between $1,280 and $1,330 throughout the week, with a low of $1,260 on Thursday and a high of $1,386 before Powell’s relatively uninspiring speech on Tuesday
  • Ether’s current price of $1,323 represents a 3.4% recovery after last week’s steep drop
  • Overall market capitalisation appreciated by around $25bn to a current total of $940bn 
  • Total value locked in DeFi grew around $2bn to $27.3bn according to industry monitor DeFi Pulse

Digital assets experienced a week of overall growth, despite widespread turmoil in other markets. This week saw a bumper crop of venture capital news, with investment rounds and new VC funds ranging from eight to ten figures. Elsewhere, FTX (and CEO Sam Bankman-Fried) increased their influence in the sector with a major acquisition, leading banks DBS and Revolut deepened their involvement with digital assets, Federal Reserve chairman Jerome Powell anticipated future growth for DeFi (and voiced a resultant desire for improved regulations), Walmart entered the metaverse, and Christie’s revealed their own NFT platform.

What happened:FTX wins auction for Voyager assets

How is this significant?
  • US billionaire Sam Bankman-Fried’s FTX digital asset exchange emerged as the victor in a bidding war for the assets of bankrupted lender Voyager on Monday
  • Last week FTX were identified as a key bidder alongside digital asset exchange Binance, but the winning bid of around $1.4bn was magnitudes higher than the approximately-$50m bids reported last week in the Wall Street Journal
  • The FT reported the $1.4bn figure as “comprising of the fair market value of all Voyager cryptocurrency at a to-be-determined date in the future”, approximately $100m above Monday’s $1.3bn valuation for the digital assets
  • Voyager hailed the bid as one that “maximises value and minimises the remaining duration of the company’s restructuring”
  • In an interview with Bloomberg, Bankman-Fried categorised FTX’s “mandate” as “do ‘okay’ deals, that we feel ‘okay’ with from a corporate perspective, and do what we can to back up the ecosystem, protect customers, and in the case of the Voyager deal, give customers back their assets as quickly a possible”

What happened: Contagion latest—Resignations mount as CEOs seek peace

How is this significant?
  • Following the successful bid for Voyager’s assets, FTX made the news this week as a potential bidder for the industry’s other major bankrupted lender, Celsius
  • Those with knowledge of the matter told Bloomberg that FTX CEO Sam Bankman-Fried is considering the move alongside a new $1bn raise, further adding to his image as “the John Pierpont Morgan of crypto”, rescuing distressed firms as JP Morgan did during the Banking Crisis of 1907
  • News of the FTX interest caused the value of Celsius’ proprietary CEL token to jump by almost 10%, before cooling off
  • Elsewhere in the industry, the week was marked by a slew of high-profile resignations across digital asset firms
  • Celsius CEO Alex Mashinsky was perhaps the most-directly impacted by the crypto contagion crisis, with Celsius disclosing a deficit of nearly $1.2bn in their bankruptcy filing
  • Mashinsky tendered his resignation on Monday, citing his presence as “an increasing distraction” in ongoing bankruptcy proceedings
  • CFO (and JP Morgan veteran) Chris Ferraro succeeds Mashinsky as interim CEO
  • Brett Harrison stepped down as president of FTX’s US subsidiary, moving into an advisory role as the company shifts their American headquarters from Chicago to crypto-friendly Miami
  • Jesse Powell, the outspoken CEO of digital asset exchange Kraken moved into the role of chairman “to spend more time on the company’s products and broader industry advocacy”
  • Developer Do Kwon, founder of the failed and contagion-catalysing Terra Luna blockchain ecosystem, is now an internationally-wanted fugitive, after Interpol issued a red notice for his arrest, following reports from South Korean prosecutors that he wasn’t cooperating with any investigations
  • Do Kwon meanwhile maintains his stance that he is “making zero effort to hide” after South Korean authorities moved to freeze tens of millions in digital assets

What happened: Jerome Powell requests better digital asset regulations

How is this significant?
  • Speaking at a DeFi panel discussion hosted by the Banque du France on Tuesday, Federal Reserve chairman Jerome Powell maintained a cautious stance towards decentralised finance, whilst acknowledging its potential for continued growth
  • Powell criticised perceived “structural issues in the DeFi ecosystem” whilst acknowledging that “from a financial stability standpoint”, DeFi hasn’t yet grown to levels that adversely impact traditional finance and traditional banking
  • However, he foresees recovery and growth within DeFi, and thus cited a “real need for more appropriate regulation, so that as DeFi expands and starts to touch more retail customers and that sort of thing, so that appropriate regulation is in place”
  • Powell also revealed ongoing development of a US central bank digital currency (CBDC), saying “we’re doing work and building public confidence in our analysis and in our ultimate conclusions”, and stressing a desire for built-in identity verification

What happened: DBS widens digital asset trading capabilities

How is this significant?
  • Top Singapore bank DBS extended access to its members-only DBS digital exchange (DDex), capitalising on strong volume growth this year
  • On Friday, the bank announced that wealth clients and accredited investors now have access to digital asset trading via their Digibank app
  • Previously, access to the DBS digital exchange was strictly limited to “corporate and institutional investors, family offices and clients of DBS Private Bank and DBS Treasures Private Client only”
  • The expansion instantaneously provides access to an extra 100,000 clients in Singapore alone, with more across the rest of Asia
  • Customers will be able to directly trade a select group of established digital assets, including Bitcoin, Ether, XRP, and Bitcoin Cash
  • Sim S. Lim, DBS Group Executive of Wealth Management stated that consumer demand drove the move; “As a trusted partner that helps our clients to grow and protect their wealth, we believe in staying ahead of the curve and providing access to the solutions they seek. Broadening access to DDEx is yet another step in our efforts to provide sophisticated investors looking to dip their toes in cryptocurrencies”

What happened: VC news—Digital asset veterans launch new $1.25bn fund

How is this significant?
  • There were lots of raises and developments in the digital asset VC space this week, despite the continuing crypto winter conditions
  • Pantera Capital founder Don Morehead revealed at a conference in Singapore that the firm is launching its second blockchain fund, seeking to close investments with $1.25bn next May
  • The fund will invest in both equity and directly in tokens
  • They also want to increase ownership share in existing investments; Morehead explained this is a result of their long-term bias for the industry “We want to provide liquidity for people that are kind of giving up because we’re still very bullish for the next 10 or 20 years”
  • New trading-focused Layer-1 blockchain Sei announced a new $50m ecosystem fund to attract developers onto their platform
  • Sei co-founder Jeff Feng thinks that crypto proved itself as a legitimate asset class during the 2020-2021 bullrun, leaving it “super de-risked” from an adoption and capital perspective compared to the 2017 bull run
  • Feng told TechCrunch; “It’s a generational time to build. When you think about crypto from a risk-reward perspective. If you look back to 2017 or 2018, it was really risky. There weren’t real applications or a lot of capital, it was a much bigger swing in the dark”
  • Strike, a payment provider built on the “Lightning Network” Bitcoin scaling solution raised $80m from investors—including several universities—to increase integration of Lightning Network Bitcoin payments amongst merchants and e-commerce partners
  • Microsoft venture fund M12 led a $20m raise for smart contract development firm Space and Time, following on from a $10m seed raise in July
  • Bitcoin mining hardware billionaire Jihan Wu confirmed the creation of a “$250m fund to buy distressed assets from Bitcoin miners”, with $50m coming from Wu’s Bitdeer Technologies, and $200m from outside investors including VC funds, family offices, and alternative investment firms
  • Bitdeer seeks to take advantage of miners who over-invested or over-leveraged during the last bull market; CEO Matt Kong told Bloomberg “We can buy the cheaper machines and run them in our existing facilities with stable and cost-effective power purchase agreements. You’ll have the cash flow”
  • Japanese advertising firm Hakuhodo set up a joint venture with local digital asset entrepreneur Sota Watanabe to create an incubator for Web3 businesses
  • FTX and Jump Crypto co-led a $20m strategic funding round for Coral, an NFT wallet developer building on the Solana blockchain
  • Cryptographic security firm MPCH Labs closed a $40m Series A funding round led by Liberty City Ventures
  • Alameda Research, Jump Crypto, and Target Global co-led a $37m Series B funding round for automated trading and machine learning platform 3 Commas
  • 3 Commas previous funding round was a $3m Series A in November 2020, reflecting significant growth over the last two years
  • Blockchain interconnectivity startup HyperLane raised $18.5m in seed funding from investors including Variant, Kraken Ventures, Galaxy Digital, and USDC stablecoin developers Circle

What happened: Revolut secures full FCA approval for UK crypto services

How is this significant?
  • Following on from their recent European crypto services licence approval, leading e-bank Revolut secured full Financial Conduct Authority (FCA) approval for the provision of crypto services in the UK
  • Revolut had previously relied on temporary permissions to conduct their digital asset business in the UK, but the London-based firm now joins 37 other permanently-registered digital asset firms
  • After securing EEA approval in anticipation of the EU’s Markets in Crypto Assets (MiCA) regulations, Revolut is now also positioned strongly on the other side of the Brexit market divide

What happened: Walmart launches metaverse presence

How is this significant?
  • Walmart became by far the largest American retailer to establish an official metaverse presence this week, targeting “the next generation” of shoppers
  • The retail giant has built immersive experiences on the popular youth-facing Roblox metaverse platform, including virtual music festivals
  • Virtual Reality experiences for Gen Z are a key area of focus for Walmart, who will also offer virtual merchandise (“verch”) for users’ online avatars, matching physical merchandise available in Walmart stores
  • Walmart CMO William White said that “moving the needle from a brand favorability [standpoint] with younger audiences” is a key consideration, and that the company is treating Roblox as a testing ground before branching out into other metaverse platforms catering to other audiences
  • The company have been working on a metaverse presence for a while, filing numerous metaverse-related trademarks back in January this year

What happened: Christie’s announces Ethereum-based NFT art platform

How is this significant?
  • On Tuesday, auction house Christie’s announced Christies 3.0; a fully on-chain NFT art platform
  • Though Christie’s has sold numerous NFTs at auction previously, this represents the first time that the entire infrastructure of the auction process runs on blockchain technology
  • Christie’s 3.0 was developed in conjunction with several partners; “blockchain data firm Chainalysis, NFT minting platform Manifold and metaverse builder Spatial”
  • Nicole Sales Giles, Christie’s director of digital art sales, stated “By incorporating regulatory tools, such as anti-money laundering and sales tax, we have built an inclusive solution where both veteran and new NFT collectors can feel secure in transacting with Christie’s 3.0”
  • The 255-year old auction house was at the vanguard of NFTs’ entry into the public consciousness, auctioning of digital artist Beeple’s “Everydays” work for over $69m
  • Additionally, Christie’s launched an “A to Z of NFTs” glossary for potential digital art collectors, including examples from past sales at the auction house
News Roundups