Nickel Research Centre

Nickel News Roundup - Week 30

29th July, 2021 

Market Overview:

The digital asset market experienced a bullish week, with Bitcoin’s biggest upward move in 6 weeks lifting the rest of the sector.

  • Bitcoin performed bullishly, including the largest single-day gain in 6 weeks (helped by a short squeeze and news of possible Amazon adoption), reaching a weekly high of $40,850. The current price of $39,880 represents a weekly gain of 24%
  • Ether had a similarly strong week, breaking through the $2,000 mark convincingly to reach current prices of $2,296 for a 14% weekly increase
  • The overall market capitalisation of digital assets was buoyed by positive performances across the board, crossing $1.55tn as only three of the top 100 digital assets (excluding stablecoins) exhibited negative price movement this week
  • The total value locked in the DeFi sector performed bullishly in line with Bitcoin and Ethereum, reaching $76.8bn

Digital assets had one of their best weeks in recent memory, with Bitcoin, Ether, and all major alts experiencing growth. Goldman Sachs and JP Morgan were amongst the major traditional finance institutions to increase their digital asset exposure and interest this week, whilst Amazon sent a signal that they are exploring the space with an eye towards the future. Elsewhere, there were more ETF filings, regulation-conscious moves from exchanges, several compelling surveys on investor adoption, and NFTs being utilised by cultural institutions ranging from the Hermitage Museum to Ashton Kutcher.


What happened: Amazon recruits for digital asset and blockchain expertise

How is this significant?
  • Amazon, one of the largest companies in the world, signalled an increasing interest in the digital asset space this week, when news emerged that they are recruiting for a “Digital Currency and Blockchain lead”
  • The job posting includes a desire for candidates to have familiarity not just with established digital assets, but emerging central bank digital currencies (CBDCs) as well
  • The role aims to establish a long-term vision for the company to work towards, with the posting clarifying that the successful candidate will develop “Amazon’s Digital Currency and Blockchain strategy and product roadmap”
  • When asked for a response by industry publication TheBlock, an Amazon spokesperson said the post was a means for Amazon to “explore” the crypto asset space; “We’re inspired by the innovation happening in the cryptocurrency space and are exploring what this could look like on Amazon. We believe the future will be built on new technologies that enable modern, fast, and inexpensive payments, and hope to bring that future to Amazon customers as soon as possible”

What happened: Goldman Sachs increases digital asset involvement

How is this significant?
  • Several significant pieces of news emerged this week regarding Goldman Sachs and their activity in the digital asset space, indicating that they are adding to their existing interests in the asset class
  • Firstly, it was revealed that Goldman is settling crypto-based ETPs for European hedge fund clients, echoing news last week regarding Bank of America doing the same
  • Secondly, the firm filed an application with the SEC for a new DeFi ETF product
  • The proposed Goldman Sachs Innovate DeFi and Blockchain Equity ETF may be a slight misnomer; rather than direct investment in DeFi companies or assets, it tracks the Solactive Decentralized Finance & Blockchain Index, which is mainly comprised of established tech companies like Nokia, Tencent, Facebook, Apple, and others
  • Although the contents of the ETF appear only peripherally linked to DeFi, the naming of the product could be seen as recognition of decentralised finance’s potential

What happened: JP Morgan offers retail wealth clients access to digital asset funds

How is this significant?
  • JP Morgan expanded the scope of its digital asset involvement this week, with reports that they now allow all their private wealth clients to invest in a range of crypto funds
  • Retail clients are also able to invest in the funds through brokerage accounts
  • In a recent Bloomberg interview, JP Morgan’s director of asset and wealth management, Mary Callahan Erdoes, said that they were being driven to provide more options to their clients for digital assets: “A lot of our clients say, ‘That’s an asset class, and I want to invest,’ and our job is to help them put their money where they want to invest”
  • Whilst the bank doesn’t directly trade or hold any digital assets for clients, they can now gain indirect exposure through funds for a selection of top digital assets, provided by Grayscale and Ospreay
  • This move means that a far larger group of JP Morgan clients than previously (including users of the Chase trading app) have access to crypto exposure

What happened: Stone Ridge Asset Management files for new Bitcoin fund

How is this significant?
  • Stone Ridge Asset Management ($10bn AUM) filed a new prospectus this week with the SEC, proposing the addition of Bitcoin to their open-end mutual fund through the Stone Ridge Bitcoin Strategy Fund
  • Stone Ridge are the parent company of institutional Bitcoin firm NYDIG, so the addition of Bitcoin investments outside of their subsidiary indicates a growing appreciation for the asset class by the alternative asset managers
  • According to the prospectus, Stone Ridge wishes to gain Bitcoin exposure primarily for capital appreciation, but will be doing so through derivatives and other indirect vehicles: “The Fund pursues its investment strategy primarily by investing in Bitcoin futures contracts and in pooled investment vehicles that invest directly or indirectly in Bitcoin (collectively, ‘Bitcoin-related investments’)”
  • As an alternative asset manager rather than a dedicated digital asset manager, Stone Ridge’s creation of a Bitcoin fund could indicate the increased enthusiasm for digital assets amongst institutional investors 

What happened: Tesla filings confirm company maintained Bitcoin holdings

How is this significant?
  • As indicated by Elon Musk’s appearance at the recent institutional Bitcoin conference, “The B Word”, Tesla haven’t sold off their Bitcoin holdings despite shifting market conditions
  • Tesla’s purchase of $1.5bn worth of Bitcoin in Q1 this year was seen by many as one of the strongest endorsements for digital assets from the corporate world. They subsequently sold 10% for $272m in order to prove the liquidity of the asset, but the latest filings confirm that was their last and only sale
  • The company currently holds $1.3bn of Bitcoin, making them one of the largest corporate investors into the asset
  • Because Bitcoin is considered an inventory asset, Tesla actually recorded a $23m impairment in the last quarter, measured by Bitcoin’s lowest price in that timeframe (when it dipped to $29,330 on June 22nd)

What happened: Major digital asset exchanges reduce maximum leverage

How is this significant?
  • This week, major exchanges FTX and Binance both announced a substantial reduction in the levels of leverage they would allow traders, in a move seen as an effort to improve regulatory compliance globally
  • Despite showcasing the data that “way less than a percent of volume comes from margin calls”, FTX CEO Sam Bankman-Fried announced the exchange would no longer enable high leverage
  • He also noted that the average leverage used by traders on the exchange was 2x, and that reduction of maximum leverage from 100x to 20x would thus have a minimal effect on their customers
  • Binance soon followed suit, with CEO Changpeng “CZ” Zhao announcing that “in the interest of consumer protection” the company had actually made the same reduction a week ago
  • Additionally, Binance ceased margin trading across a wide range of trading pairs involving Pounds Sterling, Euros, and Australian Dollars, with industry observers noting it as a pre-emptive move against possible regulatory backlash 

What happened: Venture Capitalists invested over $4bn into digital asset startups in Q2 

How is this significant?
  • Q2 experienced record levels of venture capital investment for digital asset companies, crossing the $4bn mark for the first time with a total of $4.38bn
  • In comparison, Q2 of 2020 witnessed a total $492m VC investment in the sector
  • The report by CB Insights noted large funding rounds of $440m for USDC stablecoin issuer Circle, $300m for custody firm Paxos, and $380m for hardware wallet manufacturer Ledger
  • However, the timeframe covered did not include the recent record raise by digital asset exchange FTX, which at $900m was more than twice the value of Q2’s largest VC investment

What happened: Global X becomes latest firm to apply for a Bitcoin ETF

How is this significant?
  • Another Bitcoin ETF application reached the SEC this week, bringing the number currently under review to more than a dozen
  • The submission by New York-based fund managers Global X disclosed they plan to act directly as the ETF’s custodians, and that (minus operational costs) it would reflect the price performance of Bitcoin, rather than following benchmarks or indexes
  • Global X propose a physically-backed ETF, writing that “In seeking to achieve its investment objective, the Trust will hold Bitcoin”
  • If granted, the Global X Bitcoin Trust would be traded on the CBOE BZX exchange

What happened: Hermitage Museum enters the non-fungible token space

How is this significant?
  • Russia’s State Hermitage Museum (the second-largest museum in the world) is the latest in a growing list of the art world to embrace the potential of NFT technology
  • On Monday, the museum announced the auction of limited-edition NFTs featuring the works of old masters like Da Vinci, Monet, and Van Gogh
  • Titled “Your token is kept in the Hermitage”, the collection of NFTs is being auctioned on the Binance NFT marketplace in August
  • Hermitage general director Mikhail Piotrovsky was enthusiastic about the potential of non-fungible tokens, saying that the auction is “an important stage in the development of the relationship between person and money, person and thing,” and that NFTs “make luxury more accessible, but are at the same time exceptional and exclusive.”

What happened: Survey finds a majority of family offices are seeking digital asset exposure

How is this significant?
  • Alongside the company’s moves on directly increasing digital asset exposure this week, Goldman Sachs also released a survey of family offices that revealed ongoing interest in digital assets
  • The survey, reported by Bloomberg, was taken by 150 family offices, two-thirds of which manage more than $1bn in assets 
  • Of those surveyed, 15% said they had already invested in digital assets, whilst a further 45% were interested in doing so 
  • According to the report, family offices were seeking allocations in crypto assets for a number of reasons, including “higher inflation, prolonged low rates and other macroeconomic developments following a year of unprecedented global monetary and fiscal stimulus”
  • Volatility was cited as the main area of concern for family office investment managers

What happened: DeFi firm Celsius invests $54m into green mining operation

How is this significant?
  • Celsius, a leading digital asset lender, confirmed this week that they had invested $54m into carbon-neutral Bitcoin miners Core Scientific
  • In a press release, the company said this investment is “part of $200 million commitment by Celsius to clean Bitcoin mining in North America”
  • The news came two days after Core Scientific announced plans to publicly list on the Nasdaq, via a merger with the BlackRock-backed XPDI, creating a new $4.3bn-valued company

What happened: Gallup poll finds 6% of Americans hold crypto assets

How is this significant?
  • American pollsters Gallup released their annual Investor Optimism poll this week, noting that Bitcoin is still early in the adoption cycle for most investors
  • However, the trend is definitely on an upward trajectory; a total of 6% of American investors responding to this year’s poll said they held Bitcoin, triple the amount as in 2018
  • Gallup noted that younger investors skewed significantly more strongly towards being Bitcoin holders; “ownership is up a more impressive 10 percentage points, to 13%, among investors aged 18 to 49”
  • Although ownership rates are far lower, at 3% amongst investors above 50, it’s worth noting that it has increased at the same speed as the overall metric, tripling since 2018
  • The poll also found similar enthusiasm across multiple investor demographics, stating “Bitcoin ownership is similar across investor asset levels: 8% of those with less than $100,000 invested and 6% of those with $100,000 or more invested currently own it”
  • Adversarial attitudes have dropped significantly as ownership has risen, with 24% fewer Americans saying they have no interest in ever buying Bitcoin compared with 2018 results

What happened: Celebrities recruit Ethereum founder for NFT-funded webseries

How is this significant?
  • Hollywood luminaries including Jane Fonda, Chris Rock, Ashton Kutcher, and Mila Kunis announced their participation this week in an animated webseries funded entirely by the sale of NFTs
  • Believing that token sales enable a content creation model beyond the scope of advertiser interests, Kutcher and Kunis wrote; “we believe that storytellers deserve an outlet where they can be valued and supported without having to bow to the machine of big media… So we’re tilting the model on its head and testing a new architecture using NFTs that can connect storytellers directly with their audience and essentially decentralize content production”
  • Interest appears to have been high; gas prices spiked as the sale for procedurally-generated NFTs opened, all 10,420 of which sold out within 40 minutes at a price of 0.35 ETH per NFT
  • One name amongst the cast stands out for their lack of Hollywood experience; Vitalik Buterin, the creator of Ethereum
  • There are currently over 1.1 million views on the video of Kutcher and Kunis introducing him as a cast member
  • Another key first of the series is that all the principal cast are paid directly in Ether instead of cash 
What happened: Kazakhstan moves to fill demand left by Chinese crypto crackdown

How is this significant?
  • China’s recent crackdown on crypto assets had an effect not just on market performance, but market infrastructure as well, with a large drop in hashpower as Chinese miners shut down
  • Soon after the news, Kazakh miners saw their share of hashpower rise significantly, estimated at around 7% of the global total
  • This week, it was reported that local banks in Kazakhstan will give “their clients the opportunity to officially and openly work with cryptocurrency”, integrating directly with registered digital asset exchanges
  • In order to trade on exchanges, Kazakhs would need to have an account with one of the registered banks involved in this pilot scheme, which the government is using to assess benefits and risks of deeper blockchain and crypto asset integration
News Roundups