Nickel Research Centre

Nickel News Roundup - Week 52

29th December, 2023

Market Overview:

Digital assets closed out the year with strong performance, particularly in the altcoin space.
  • Bitcoin declined slightly this week, amidst year-end profit-taking and traders hedging in case spot Bitcoin ETFs will not be—as widely speculated—approved early next year
  • Bitcoin reached a peak of $44,370 on Friday, hitting a low of $41,860 on Tuesday
  • Despite this week’s dip, Bitcoin looks set to end 2023 as one of the year’s best trades according to Bloomberg, following a rise of around 160% since January first
  • Ethereum posted positive performance, growing from a Tuesday low of $2,199 to a weekly—and yearly—high of $2,436 on Wednesday
  • Overall digital asset market capitalisation remained steady at $1.67tn
  • Other major altcoins performed strongly this week; Binance’s BNB coin increased 18% in value, and Ethereum scaling project MATIC grew by 21%
  • According to industry monitoring site DeFi Llama, total value locked in DeFi remained grew by over $1bn to $53.7bn

Digital assets closed off 2023 positively, capping of a year of recovery with growth in their final week, including a new yearly high for Ether and strong performances by several altcoins. Year-end data showed strong performances by a variety of companies related to the digital asset industry, ETF developments (and predictions) continued rolling in, MicroStrategy strengthened their Bitcoin balance sheet further, the SEC admitted misrepresentations in a court case, and Turkey appointed a blockchain and digital assets professor to it central bank’s monetary policy committee.

What happened: Bitcoin miners lead crypto stock surge

How is this significant?

  • As the year closes, Bitcoin miners—and other businesses viewed as proxies for Bitcoin exposure—have enjoyed a banner year, thanks to the digital asset’s performance
  • Marathon Digital, one of the largest publicly-traded miners, posted year-to-date gains of over 800% at the time of writing
  • Riot Platforms, a rival mining firm, grew 400% in the same period after spending $291m on new mining rigs earlier this month
  • Other proxies such as shares in digital asset exchange Coinbase and corporate Bitcoin holders MicroStrategy displayed similar performance, growing 350% or more year-to-date
  • One key factor to note in all these performances is that the turn of the year almost exactly marked the deepest depths of crypto winter, following the fallout of FTX’s collapse in November 2022
  • Last week, Marathon acquired multiple mining sites in a $179m deal, as the company sought to increase operational efficiencies ahead of next year’s Bitcoin halving issuance reduction event
  • Brian Dobson, MD of equity research at investment bank Chardan told Bloomberg that increasing mining capacity ahead of the halving could be crucial; “Marathon Digital’s announcement of acquiring new sites last week could lead to stronger mining efficiency metrics. That’s what the investors are focused on”
  • In other Bitcoin mining news, data centre infrastructure firm Arkon Energy closed a $110m funding round to help fund expansion into Bitcoin mining and AI data services
  • Additionally, the CoinShares Blockchain Global Equity Index, a tracker of firms with crypto and blockchain exposure, stands at 29% growth for December; its best month on record

What happened: ARK divests Grayscale shares ahead of ETF decisions

How is this significant?

  • Cathie Wood’s ARK Next Generation Internet ETF this week completed a sell-off of their GBTC shares, Grayscale’s investment trust for Bitcoin exposure
  • They sold approximately 2.5 million shares on Wednesday, in a “shuffling of holdings”, allocating around $92m to a Bitcoin futures ETF ahead of expected spot Bitcoin ETF verdicts in January
  • Wood stressed that ARK are “as optimistic about Bitcoin as we ever have been”, but that due to regulatory and tax uncertainties, they decided to wait for GBTC’s NAV discount to narrow and temporarily move into other exposure vehicles ahead of spot ETF decisions “out of an abundance of caution”
  • She added that “We think the probabilities [of ETF approval] have gone up because the SEC has been highly engaged compared to what was happening before” but stressed that until decisions are published, they cannot be “100% certain”
  • ARK Next Generation Internet ETF has strongly outperformed the market thanks to the performance of Bitcoin proxies like GBTC and Coinbase shares; up 103% for the year, versus 55% growth for the Nasdaq 100 Index
  • In related news, Barry Silbert of parent company Digital Currency Group resigned as chairman of Grayscale this week, in a move which analysts deemed beneficial to the odds of Grayscale’s GBTC conversion request being approved
  • Silbert’s departure from Grayscale is viewed as a positive development because his Digital Currency Group is currently facing regulatory lawsuits regarding its Genesis unit’s collapse; the market reflected this view, as GBTC jumped 18%
  • Hayden Hughes, co-founder of social-trading platform Alpha Impact said “There are expectations building that after Silbert’s resignation, the SEC might allow other Grayscale products to be listed as ETFs, which is driving institutional demand in Grayscale Bitcoin Cash Trust”
  • The SEC told all current spot Bitcoin applicants that if they wish to make any amendments to their filings, the last opportunity to do so this year is the 29th of December
  • In other ETF news, Hong Kong announced it is ready to accept spot Bitcoin ETF applications
  • In a circular, the city’s central bank stated itself “prepared to accept applications for the authorization of other funds with exposure to virtual assets, including virtual asset spot exchange-traded funds (VA spot ETFs)”, allowing both in-kind and in-cash subscription and redemption; a key advantage versus the US, which is expected to favour in-cash filings for the time being

What happened: Former Binance CEO Changpeng Zhao gains $25bn on portfolio value

How is this significant?

  • Binance founder and former CEO Changpeng “CZ” Zhao has experienced some good fortune this year despitestepping down from the company and pleading guilty to US regulators—his wealth soared by $25bn, according to the Bloomberg Billionaires’ Index
  • Campbell Harvey, a finance professor at Duke University told Bloomberg that this shows the long term horizons of digital assets “Investment in crypto is not for the faint of heart; you need to be prepared for the spectacular ups and downs. There is a reason that these investors are billionaires, and it is not luck. They are not tempted to dump their holdings in down markets. They believe in the long-term opportunities this space offers”
  • This growth in personal net worth alone dwarfs the size of the $4.3bn fine imposed on Binance by US regulators, which clocked in at less than 1/5th of Zhao’s gains
  • The majority of this wealth was the result of Zhao’s controlling stake in Binance, which benefited from increased trading volumes despite losing overall market share
  • According to Bloomberg, Coinbase CEO Brian Armstrong’s fortune rose $5.8bn to $7.2bn, and the Gemini exchange co-founders the Winklevoss twins each gained $1.4bn

What happened: MicroStrategy acquires over $600m of Bitcoin for balance sheet

How is this significant?

  • Corporate Bitcoin champions MicroStrategy added further to their Bitcoin investments this last month, according to new SEC filings—and this acquisition was one of its largest to date
  • Between the end of November and Boxing Day, MicroStrategy bought 14,620 Bitcoins for $615.7m; an average price of $42,110
  • This brings MicroStrategy’s total Bitcoin holdings to 189,150, acquired at an average price of $31,168, with a total value around $8.06bn; an investment that is currently up around $2bn on paper

What happened: Erdogan appoints crypto professor to central bank rates setting board

How is this significant?

  • Turkish president Recep Tayyip Erdogan made a new appointment to the country’s central bank this week; professor Fatma Ozkul who teaches courses on crypto and blockchain
  • Ozkul was appointed to the bank’s rate-setting committee, a particularly significant role given the level of inflation within Turkey
  • This follows the recent election of central bank sceptic (and Bitcoin fan) Javier Milei as president of Argentina, which swiftly moved to recognise Bitcoin and other digital assets as a valid means of settling contracts
  • Of course, this is no guarantee of impending crypto-friendly central bank behaviour or policy; lest we forget, SEC chair Gary Gensler taught a blockchain course at MIT, before presiding over a hostile regulatory environment in the US
  • In other international news, Japanese brokerage group Monex acquired a majority stake in Canadian firm 3iQ “to boost its appeal to crypto-hungry institutional investors”, and South Korea announced that public officials will have to disclose their crypto holdings (alongside other property) as part of government transparency initiatives

What happened: SEC admits misrepresentation in crypto court case
How is this significant?

  • Following recent criticisms by a US federal judge, SEC officials admitted that they had made inaccurate statements in a lawsuit against crypto startup DEBTbox
  • The judge had asked the agency to provide evidence for statements and assertions it used to request and receive an asset freeze
  • Unsubstantiated claims included allegations that the company was moving funds overseas, which the judge called “false and misleading”
  • As the regulator had no evidence to back their assertion, they issued a response in which they claimed to have acted in good faith, but “fell short” of expectations regarding accurate and candid disclosure, admitting they failed to “make clear that certain representations were inferences from the facts… rather than directly supported factual assertions”
  • In other SEC news the regulators did however receive a welcome reprieve from the courts, as they were favoured in a summary judgement regarding their case against Terraform Labs, creators of the collapsed Terra Luna blockchain ecosystem
News Roundups