Nickel Research Centre

Nickel News Roundup - Week 24

17th June, 2021 

Market Overview:

Digital assets showed signs of resurgence this week

  • Positive momentum returned to Bitcoin this week, driven by good news from Tesla and moves towards adoption from nation states
  • Bitcoin grew from below $37,000 to over $41,000, spending a couple of days in the $40,000 area before retracing slightly to current prices of $39,200—a 6% weekly growth
  • Ethereum failed to match Bitcoin’s momentum, experiencing some downside volatility leading to current prices around $2,444—a 3% weekly decline
  • The overall market capitalisation of digital assets grew in line with Bitcoin, reaching $1.76tn on Tuesday before retracing 
  • The total value locked in the DeFi sector remained steady, exhibiting slight growth to $70.5bn

Bitcoin returned to growth this week, although the majority of other digital assets failed to match its momentum. This week saw more regulatory support for digital assets, more major banks expanding their crypto offerings, and more adoption from both pension and hedge funds. Billionaire Paul Tudor Jones backed a 5% Bitcoin portfolio allocation whilst fellow hedge fund titans Stanley Druckenmiller and Alan Howard made significant investments into digital asset companies—and as always, there was plenty of news from the world of NFTs and CBDCs.


What happened: Coinbase adds digital assets to American pension funds

How is this significant?
  • Coinbase moved into American pension funds—in the form of 401(k)s—this week, partnering with pensions provider ForUsAll
  • Employees at companies with ForUsAll 401(k) plans will be able to invest up to 5% of their pensions into digital assets under the plan
  • ForUsAll currently holds over $1.7bn in retirement fund assets
  • The Wall Street Journal reported that ForUsAll’s “embrace of crypto comes at a time of heightened mainstream interest in digital currencies”
  • Trading and custody of the crypto assets will be carried out by Coinbase’s institutional arm, as per the terms of their partnership 

What happened: 98% of hedge fund CFOs expect crypto allocations by 2026

How is this significant?
  • According to reporting in the Financial Times this week, hedge fund managers are keenly aware of digital assets’ rising appeal—with the vast majority of them planning to seek digital asset exposure
  • This sentiment comes from a global survey of 100 hedge fund CFOs (managing an average $7.2bn in assets) by Intertrust, which found that they expected to hold 7.2% of their funds’ assets in crypto within 5 years
  • 17% of respondents expected to seek even more exposure, dedicating over 10% of their investments to digital assets
  • North American fund managers were the most enthusiastic geographically, estimating an average 10.6% allocation in 5 years’ time
  • The FT reported that “If replicated across the sector, that could equate to a total of about $312bn of assets in cryptos, based on data group Preqin’s forecast for the total size of the hedge fund industry”
  • According to David Miller, executive director of investment managers Quilter Cheviot, “hedge funds are well aware not only of the risks but also the long-term potential”
  • The FT named prominent hedge fund managers Paul Tudor Jones, Alan Howard, and Anthony Scaramucci as key backers of the investment case for digital assets

What happened: State Street bank launches digital asset division

How is this significant?
  • State Street, the second-oldest bank in America and manager of $40tn in assets, announced plans this week to launch “a new division dedicated to digital finance”
  • In a press release announcing the creation of State Street Digital, CEO Ron O’ Hanley said that “The financial industry is transforming to a digital economy, and we see digital assets as one of the most significant forces impacting our industry over the next five years”
  • State Street aims to become “a multi-asset platform” with this development; the press release stated that the new division “will build on State Street’s current digital capabilities and will expand to include crypto, central bank digital currency, blockchain, and tokenization”
  • This marks the latest of several moves into digital assets for State Street, including the creation of a digital asset trading platform, and acting as custodian to VanEck’s proposed Bitcoin ETF
  • O’ Hanley sees digital assets as a crucial part of State Street’s offering going forward, saying “Digital assets are quickly becoming integrated into the existing framework of financial services, and it is critical we have the tools in place to provide our clients with solutions for both their traditional investment needs as well as their increased digital needs”

What happened: MicroStrategy forms Bitcoin-holding subsidiary, plans $1bn stock sale for additional Bitcoin purchases

How is this significant?
  • Prominent Bitcoin evangelist and MicroStrategy CEO Michael Saylor announced intentions this week to further increase his company’s Bitcoin exposure 
  • Having just completed a $500m sale of convertible senior notes to fund additional Bitcoin purchases, the company revealed plans to sell $1bn of stock in order to fund further Bitcoin acquisition
  • In SEC filings for the stock sale, the company described Bitcoin holdings as “a key part” of their strategy, alongside their primary function as a software producer
  • MicroStrategy’s Bitcoin treasury is now being held in a newly-developed subsidiary, MacroStrategy LLC, with current reserves of 92,079 Bitcoins making them one of the largest private holders in the world

What happened: Alan Howard making “huge moves” into digital assets

How is this significant?
  • Alan Howard, the founder of hedge fund Brevan Howard, has been involved in the digital asset space since founding Elwood, a crypto-focused software business made “to enable institutions such as neobanks, fintechs, and asset managers to access and trade crypto assets across exchanges and liquidity providers”
  • Alongside Elwood, Howard has interests in numerous other digital asset companies; industry publication TheBlock reporting “at least nine” investments into within companies within the digital asset space
  • The FT also noted Howard’s investments in crypto start-ups, with his latest coming as part of a $230m funding round for DeFi organisation BitDAO

What happened: Fidelity executive sounds bullish note for Bitcoin

How is this significant?
  • Jurrien Timmer, Fidelity Investments’ global head of macro, spoke in favour of Bitcoin recovery this week, tweeting that he believed “the bottom is in” and deemed it unlikely Bitcoin would slip below recent lows in the near future
  • Timmer based his forecast on correlations between Bitcoin’s price movements, and those of the GS Retail Favourites basket, noting nearly identical charts that should result in upside potential for Bitcoin
  • Back in March, Fidelity published a report supporting Bitcoin’s potential, with Timmer noting that Bitcoin, by design, is a finite asset, with both a unique supply and a unique demand dimension, and as its network increases, bitcoin’s value and durability could increase even faster. In my view, some investors may wish to consider bitcoin, alongside other alternatives, as one component of the bond side of a 60/40 stock/bond portfolio”

What happened: Goldman Sachs to offer their clients Ether derivatives

How is this significant?
  • Goldman Sachs will offer Ether derivative products to clients within the coming months, increasing investment exposure for the second-largest digital asset
  • Matthew McDermott, Goldman’s head of digital assets, said in an interview with Bloomberg news that they were experiencing sustained demands from clients for more exposure to the asset class; “Institutional adoption will continue... Despite the material price correction, we continue to see a significant amount of interest in this space”
  • In early May, Goldman Sachs began dealing in Bitcoin derivatives, and has participated in funding rounds such as a $15m investment into blockchain intelligence firm CoinMetrics
  • McDermott seemingly anticipates more investments in the digital asset space, telling Bloomberg that they are “looking at a number of different companies that fit our strategic direction”

What happened: Stanley Druckenmiller and Daniel Loeb join $70m funding raise for crypto asset manager

How is this significant?
  • Hedge fund billionaire Stanley Druckenmiller and Daniel Loeb’s Third point LLC were amongst several participants in a recent $70m Series B funding round for digital asset index fund manager BitWise
  • According to reports the investment came “from a handful of institutional investors and almost 30 individuals from Wall Street and Silicon Valley”, including former Federal Reserve Governor Kevin Warsh
  • Druckenmiller’s support for digital assets has grown recently, after speaking out against the Federal Reserve’s quantitative easing and fiscal policy

What happened: NFT News: FOX, Nvidia, and Sotheby’s

How is this significant?

What happened: Insurance firms add digital asset investments to balance sheets

How is this significant?
  • According to a recent report from S&P Global, several major insurance firms have made investments into digital assets, following the lead of companies like MassMutual
  • Although the companies didn’t directly purchase crypto assets, they purchased shares investment vehicles like Grayscale Bitcoin Trust, with some seeking the same exposure to Ethereum
  • The S&P report says that Grinnell, Donegal, State Mutual, Safeway, Westfield, and Fidelio were among some of the more prominent names gaining exposure to the asset class

What happened: Paul Tudor Jones recommends 5% Bitcoin allocation

How is this significant?
  • In an interview with CNBC, billionaire investor Paul Tudor Jones outlined why he believes in the long-term potential of Bitcoin and crypto-assets
  • He voiced skepticism about the Federal Reserve’s recent monetary policies, saying “The idea that inflation is transitory, to me... that one just doesn’t work the way I see the world”
  • Meanwhile, he praised Bitcoin as a portfolio diversifier, saying “I like Bitcoin… Bitcoin is math...I like the idea of investing in something that’s reliable, consistent, honest, and 100% certain. Bitcoin has appealed to me because it’s a way to invest in certainty”
  • Speaking about his current portfolio approach, he said "The only thing that I know for certain is I want to have 5% in #gold, 5% in #bitcoin, 5% in cash, 5% in commodities”, noting that he would have to wait for news on the Fed’s latest policies before deciding how to allocate the remaining 80%
  • This already represents an increase from May, when Jones said he was allocating 1% to 2% of his assets to Bitcoin

What happened: Data suggests more Britons bought digital assets than shares last year

How is this significant?
  • Research published by investment platform AJ Bell this week found that more people in Britain may have invested in digital assets than traditional stocks and shares last year
  • Results of their survey found that 7% of adult Britons bought digital assets last year, compared to 5% who invested in stocks & shares ISAs
  • Of those who invested in digital assets, 71% were in profit, with only 12% of respondents reporting a loss
  • Whilst acknowledging the possible risks caused by a lack of understanding over digital assets, AJ Bell’s analysts did conclude that they could be beneficial in a diversified portfolio; “There’s no harm in buying crypto if you have lots of other bases covered with your finances”

What happened: Texan banks allowed to custody crypto assets

How is this significant?
  • This week, the Texas Department of Banking issued a notice allowing regulated banks to custody crypto assets for their customers, giving more support to digital assets within the financial infrastructure of the state
  • The move follows an announcement from Texas governor Greg Abbott last week that where he announced plans to “expand the blockchain industry in Texas”, amending the state’s commercial code to provide more clarity regarding digital assets 
  • Speaking about the new banking regulation, a representative from the Texas Department of Banking said “Both at the state and federal regulatory agencies, we’re seeing a rise in the virtual currency industry as it continues to evolve. We expect our banks to start seeing demand from their customers and we want them to be prepared for that. The point of the notice is to make it clear to banks that under the existing law, they can provide these services”

What happened: Elon Musk clarifies Tesla’s stance on Bitcoin payments

How is this significant?
  • In response to reporting within the crypto media this week, Tesla CEO clarified the company’s stance on Bitcoin
  • He noted that the company has kept all of their Bitcoin holdings, except for the 10% sold in order to prove the asset’s liquidity
  • Musk also noted that Tesla would accept Bitcoin as payment again when there was confirmation of a reasonable (and rising) trend of “clean energy” generating Bitcoin, with 50% or more traced to sustainable sources

What happened: Tanzanian president urges central bank to prepare for digital assets

How is this significant?
  • Following El Salvador’s adoption of Bitcoin as legal tender last week, several nations (including Paraguay and Panama) have voiced interest and made moves toward a deeper economic integration of digital assets
  • One of the most notable voices this week came from Tanzania’s president Samia Suluhu Hassan—22 years the senior of El Salvador’s president—who identified digital assets and blockchain as the future of finance
  • During a speech, she noted “We have witnessed the emergence of a new journey through the internet... My call to the Central Bank is that you should start working on that development. The Central Bank should be ready for the changes and not be caught unprepared”

What happened: Global CBDC development continues

How is this significant?
  • Development of central bank digital currencies (CBDCs) continues across the globe, with major economies moving towards official digital currencies
  • On Thursday, the Bank of England’s executive director of financial market infrastructure Christina Segal-Knowles gave a speech in which she increased speculation around a digital pound by noting that adoption of stablecoins “does not inherently constitute a financial stability risk as long as it happens in an orderly manner"
  • In China, Xiong’an New Area (60 miles south of Beijing) announced a pilot-scheme for on-chain payment of wages in digital Yuan—the latest in a series of trials for the nation’s upcoming CBDC
  • Nigeria followed Ghana in announcing imminent trials of a digital currency, with the Cental Bank of Nigeria declaring it could launch by the end of the year
News Roundups