Nickel Research Centre

Nickel News Roundup - Week 14

8th April, 2021

Market Overview:

The digital assets market achieved a new milestone this week, surpassing a $2tn market cap for the first time, driven by strong Bitcoin and Ether price performance
  • Bitcoin surpassed the $60,000 mark again, reaching a peak of $60,240 on Friday, before gradually retracing to a current value of $57,180
  • Ethereum outperformed Bitcoin, reaching a new all-time high of $2,152, and spent the majority of the week above the $2,000 mark, with a current value of $2,024
  • Bitcoin has now spent 10 days in a row above a $1tn market cap for the first time in its history
  • For the first time ever this week, the top 100 coins and tokens on Coinmarketcap each had a market capitalisation of above $1bn (since retraced to the top 94 coins)
  • Early in the week, the total market capitalisation of digital assets also achieved a new record, surpassing $2tn—less than 3 months after first passing $1tn
  • Decentralised Finance applications experienced strong growth thanks to the appreciation of Ethereum in particular, with a total value locked across Ether and Bitcoin exceeding $60bn for the first time

The market cap of digital assets has more than doubled since the start of the year, surpassing the milestone $2tn figure as Ethereum soared to new record values. Meanwhile, institutions such as Morgan Stanley continue to increase their exposure to digital assets, Goldman Sachs’ CEO acknowledged a growth in client demand, central banks pushed forward with CBDC development, and American exchange Coinbase published record revenues and profits ahead of their public listing next week.


What happened: Morgan Stanley adds Bitcoin exposure to 12 funds

How is this significant?

  • According to SEC regulatory filings on Thursday, Morgan Stanley now allow a dozen of their investment funds to gain exposure to Bitcoin
  • This exposure can come in the form of either cash-settled futures, or the Grayscale Bitcoin Trust
  • The news follows on from several developments in recent weeks regarding Morgan Stanley increasing their presence in the digital asset space, such as the reopening of their crypto trading desk, and offering private wealth clients crypto exposure
  • The initial rollout will include 5 of Morgan Stanley’s fund families; Institutional Fund, Institutional Fund Trust, Europe Opportunity Fund, Insight Fund and Variable Insurance Fund
  • Each of these funds will, per the terms of the filing, be allowed to invest up to 25% of its assets in Bitcoin exposure
  • Additionally, Morgan Stanley recently posted a job listing to recruit a “cryptocurrency and blockchain lead analyst”

What happened: Q1 sees records levels of crypto asset flows

How is this significant?

  • quarterly analysis by digital asset company CoinShares revealed that flows into various crypto asset funds were at record levels for Q1 2021, with a strong rebound in the last week of March
  • According to CoinShares analysis, “digital asset investment products saw inflows of $106m last week, marking the end of a record quarter for inflows totalling $4.5bn, up 11% relative to Q4 2020”
  • Additionally, assets under management for both active and passive digital asset investment products reached record highs of $59bn at the end of the quarter
  • Inflows in the last week of the quarter were dominated by Bitcoin volume, accounting for $83m, with Ethereum inflows worth $20m—approximately in line with their relative market caps

What happened: Goldman Sachs CEO forecasts future digital asset regulation

How is this significant?

  • David Solomon, CEO of Goldman Sachs, spoke about digital assets in an interview on CNBC this week, touching on issues ranging from regulation to the company’s overall outlook on the asset class
  • Solomon spoke about widespread client demand for Bitcoin and digital assets, saying “We continue to think about digital currency and the digitization of money in a very proactive way, and in that context, we are engaged with our clients and we look at all this through the centricity of ‘what do our clients need?’ ”
  • He also acknowledged restrictions currently placed on financial institutions in terms of direct exposure by acting as a principal, currently limiting them to “facilitating custody positions”
  • Solomon believes as the digital asset space grows more and more accepted by mainstream investors, there will be greater regulatory clarity and institutional flexibility for the asset class, noting “I think there will be a big evolution. As to how this evolves in the coming years, we operate in the rules we have, I'm not gonna speculate on where the rules will go for regulated financial institutions but we're gonna continue to find ways to serve our clients as we move forward”

What happened: Coinbase confirms public listing date and publishes profitable Q1 performance

How is this significant?

  • On Thursday, it was announced that the SEC had granted Coinbase regulatory approval for their NASDAQ listing, and that it would take place on April 14th under the ticker “COIN”, marking the first major American crypto asset exchange to go public
  • Additionally, the company revealed their first quarter earnings on the same day, showcasing record revenues and profits from their position as one of the world’s largest digital asset exchanges
  • In Q1 2021, the company made between $730m and $800m in profit, based on approximately $1.8bn of revenue; more than its performance for the entirety of 2020
  • The company also revealed they have grown to more than 56 million verified users, approximately 6 million of whom are active monthly traders, and that their overall revenues in Q1 amounted to $335bn
  • These figures could be particularly compelling ahead of its upcoming share listing, as it contrasts with other startups such as Uber and DoorDash that still operate at large losses

What happened: Central banks in Europe and Asia advance CBDC plans

How is this significant?

  • Sweden’s Riksbank is at the forefront of European developments in the central bank digital currency space, benefitting both from a tech-savvy population accustomed to digital payments, and its position outside of the Eurozone
  • This week, Sweden completed the first phase of its CBDC pilot project, revealing the results of their study on the subject
  • Whilst acknowledging concerns about privacy and scalability, the report sounded a positive note overall on performance; “The solution tested in phase one of the e-krona pilot has met the performance requirements made in the public procurement. But this has taken place in a limited test environment and the new technology’s capacity to manage retail payments on a large scale needs to be investigated and tested further”
  • In Thailand, the central bank announced plans to test a retail digital baht next year, according to Reuters reports
  • Until June, the Thai central bank is accepting public feedback on the matter

What happened: Credit Suisse uses blockchain for expedited settlement of stock trades

How is this significant?

  • Credit Suisse are testing a blockchain service allowing them to settle stock trades much faster than possible through current systems 
  • Bringing stocks and shares closer to real-time settlement could help to prevent issues such as those observed recently in the GameStop trading frenzy, when brokers Robinhood came under widespread public condemnation (and congressional investigation) for actively halting the purchase of stocks and shares
  • Settlement of trades can take up to three days for clearinghouses under traditional systems, with Credit Suisse only able to complete trades on the same day if they were executed before 11am
  • Using blockchain technology provided by the digital asset company Paxos, Credit Suisse will be able to settle trades within two hours 
  • According to Emmanuel Aidoo, Credit Suisse’s head of digital assets markets; “These advancements will ultimately benefit the broader market as more firms join the platform… [it] will help unlock capital, increase liquidity and reduce risk over time.”

What happened: Binance records record crypto derivatives volume

How is this significant?

  • Binance Futures, the derivatives platform of the world’s largest digital asset exchange, is experiencing record growth and volume according to industry data aggregators
  • Open interest reached record levels of over $10bn on Saturday, equal to a year-on-year growth of almost 4,000%
  • According to data analytics firm Skew, Binance is currently the largest Bitcoin futures open interest provider in the world, contributing around 18% of the market total

What happened: “Kimchi Premium” returns to Korea

How is this significant?

  • The so-called “Kimchi Premium”—an industry term referring to South Korean traders paying more than global market averages because they are legally limited to trading on Korea-based exchanges—made a sizeable return this week as digital asset trading enthusiasm continues to grow in South Korea
  • According to industry data analysts CryptoQuant, this South Korean price discrepancy peaked at 18% this week; the highest level of deviation from global averages since February 2018
  • As South Korean trading represents a far lower proportion of global trading than it did several years ago, the return of the “Kimchi Premium” isn’t currently viewed with too much concern—although market data aggregator Coinmarketcap has removed prices from some Korean exchanges in its average price calculations, due to the levels of divergence 

What happened: Paul Tudor Jones confirms direct Bitcoin exposure

How is this significant?

  • Hedge fund billionaire Paul Tudor Jones was one of the first major voices from the financial world to speak out in favour of Bitcoin, announcing last May that he was moving 1% to 2% of his assets into Bitcoin
  • However, until Tudor Investment Corp’s annual ADV filing, it wasn’t certain exactly how he acquired his Bitcoin exposure
  • In the filings, it was revealed that his Tudor Family Fund II had acquired direct exposure to Bitcoin through custodians Coinbase and Bakkt
  • Additionally, the latest regulatory risk brochure of his hedge funds confirms plans for more digital asset exposure availability; including direct exposure: “Certain Clients are permitted to enter into cryptocurrency transactions as described in the relevant Offering Materials… [through] direct investment on a spot basis or indirect investment [in crypto derivatives]”

What happened: Grayscale announces plans for crypto asset ETF

How is this significant?

  • Grayscale, the world’s largest digital asset manager, confirmed their intention to list a Bitcoin ETF in a blog post this week
  • After withdrawing ETF applications under the previous US administration, they now believe that the market maturity and regulatory environment are correctly positioned to allow for trading of digital asset ETFs in America
  • Planning to adapt their existing Bitcoin Trust product into an ETF, they said “First and foremost we wish to make clear: we are 100% committed to converting GBTC into an ETF”
  • In other news, the growth of altcoins has led to changes within Grayscale’s investment products, as they added Chainlink’s LINK token to their Digital Large Cap Fund

What happened: Billionaire Mark Cuban discloses 30% Ethereum holdings

How is this significant?

  • In a podcast appearance this week, American billionaire (and vocal digital asset proponent) Mark Cuban outlined his portfolio holdings
  • Disclosing that he has “60 percent Bitcoin, 30 percent Ethereum and 10 percent the rest”, he went on to explain that whilst he holds Bitcoin as a store of value for its “digital gold” properties, he is bullish on the capabilities and flexibility of Ethereum
  • Citing decentralised finance, smart contracts, and widely-distributed governance, he compared Ethereum’s potential with the early days of the internet, saying “When the Internet started to happen, you started seeing all these applications that could disrupt things that happened in the analog world”

What happened: JP Morgan update Bitcoin price forecasts

How is this significant?

  • On Thursday, JP Morgan issued a note to clients regarding the future price potential of Bitcoin if (as they predict) its volatility continues to decline
  • Noting that lowered volatility boosts the asset’s appeal to institutional investors, they perceive potential for Bitcoin “crowding out gold” as a means of portfolio diversification
  • Using gold’s current price, the report wrote that “Mechanically, the Bitcoin price would have to rise [to] $130,000, to match the total private sector investment in gold”
  • JP Morgan are taking a conservative long-term view on the subject, writing “A convergence in volatilities between bitcoin and gold is unlikely to happen quickly and is likely a multi-year process. This implies that the above $130,000 theoretical bitcoin price target should be considered as a long-term target”

What happened: American professional sports formalise additional adoption of crypto assets

How is this significant?

  • Several major American sports teams (or “franchises”) have moved to deepen their involvement with digital assets, following on from the NBA recent developing a blockchain task force
  • On Tuesday, it was reported by Forbes that the NBA’s Sacramento Kings have become the first American professional sports team to offer their staff—including players—the option to have their salary paid in Bitcoin, thanks to owner (and digital asset enthusiast) Vivek Ranadivé
  • In baseball, the Oakland Athletics became the first MLB side to accept Bitcoin as payment for the season-long hire of a corporate suite at their stadium, with the Athletics announcing an intention to hold onto the Bitcoin rather than instantly convert to fiat
  • Collegiate sports also saw digital asset developments; although the NCAA firmly forbids student athletes from profiting off their likeness in order to preserve an amateur ethos, Luka Garza—men’s college basketball player of the year—moved to issue personalised NFTs as soon as his team were eliminated from the annual tournament
News Roundups