Nickel Research Centre

Nickel News Roundup - Week 47

25th November, 2021 

Market Overview:

Digital assets experienced a relatively stable week, with declines in Bitcoin and relatively flat performance from Ether partly offset by growth in numerous altcoins

  • Bitcoin fell further this week in line with wider financial market performances, but significantly reduced last week’s rate of decline
  • Bitcoin briefly traded above $60,000 on Thursday, but has since ranged between $56,000 and $59,800, with a current price of $57,850 reflecting a 3% weekly decline
  • Ether achieved a landmark of 1 million ETH burned in transaction fees since the network’s EIP-1559 implementation in August, permanently removing those tokens (worth over $4.2bn) from supply and reducing issuance to currently deflationary levels
  • Ether briefly dipped below $4,000 on Friday, but spent most of the week trading in the $4,055 to $4,330 range. Its current price of $4,300 represents a 1.4% weekly growth
  • Overall market capitalisation dropped slightly to $2.43tn on industry aggregator Coinmarketcap
  • Several altcoins posted strong growth, particularly exchange tokens and those driven by metaverse and NFT narratives; Crypto.Com, Decentraland, Sandbox, and Enjin’s coins all posted strong weekly growth (partly helped by declines in the previous week’s market dip), ranging from 51% to 109%
  • Total value locked in DeFi dropped slightly to $106.9bn, according to industry analytics platform DeFi Pulse

Digital performed steadily this week amidst wider global economic uncertainty. Major institutions like Citi continue to recruit for crypto asset expertise, the world’s largest digital asset exchange appears likely to secure funding from sovereign wealth funds, venture capital continues to create crypto unicorns, American banking regulators announced plans for more clarity, and banks across the Asia-Pacific region continue to add digital asset capabilities driven by investor demand.


What happened: Citi appoints Head of Digital Assets to spearhead recruitment push

How is this significant?
  • Citigroup this week acknowledged the growing legitimacy and demand for digital assets amongst institutional investors, appointing Puneet Singhvi—formerly head of blockchain and digital assets in the firm’s trading group—to lead efforts in the space
  • As head of digital assets, Singhvi will operate inside the institutional clients group, and report directly to Citi’s business development chief Emily Turner, as per a memo seen by Bloomberg
  • In the memo, Turner told employees “We believe in the potential of blockchain and digital assets including the benefits of efficiency, instant processing, fractionalization, programmability and transparency… Puneet and team will focus on engaging with key internal and external stakeholders including clients, startups and regulators”
  • Singhvi’s appointment appears to be just the start of a significant shift into digital assets for institutional clients; according to sources speaking to Bloomberg, Citi plan to recruit 100 people to work within their digital asset division

What happened: Binance negotiating with sovereign wealth funds for investment

How is this significant?
  • Binance, the world’s largest digital asset exchange, is seeking outside investment for the first time this year; but rather than going the traditional venture capital route, they are reaching out to sovereign wealth funds instead
  • The Financial Times reported this week that Binance CEO Changpeng “CZ” Zhao believes the source of investments can play an important role in confirming the legitimacy of the wider digital asset industry to regulators
  • Zhao noted that “perception and relationships” with governments could be improved through investments via sovereign wealth funds, but also sounded caution about becoming too closely tied to any one nation, saying “The ticket size involved will not be small . . . it won’t be a short process”
  • He also spoke out about Binance’s recent efforts to ensure greater compliance across territories, advocating against regulatory ambiguity; “we actually want regulation to be more clear in this space”
  • Zhao additionally confirmed that the company’s American Binance US subsidiary will complete pre-IPO funding in “one to two months”

What happened: South East Asia’s second-largest bank seeks to add digital asset capabilities

How is this significant?
  • Singaporean bank OCBC—the second-largest lender in the region—confirmed this week that they are investigating the process of creating a digital asset exchange “to respond to customer needs”
  • OCBC’s CEO declared in a Bloomberg interview that “We are looking at it and seriously there is some work being done in the bank… If you say we are looking at it, it is very much in addressing customer needs, but in a safe manner… We want to help them to recognize the investment and how to handle it”
  • The move aligns with recent efforts by the Monetary Authority of Singapore to position the nation as not just a regional financial hub, but a global digital asset hub as well
  • Singaporean rival DBS was the first bank in the region to provide a crypto asset exchange for institutional clients, and recently revealed plans to expand access to retail customers

What happened: Hedge funds Marshall Wace and Third Point amongst $200m Web3 investors

How is this significant?
  • Blockchain development company Consensys announced the successful conclusion of a $200m funding round this week, including participation from hedge funds Marshall Wace and Third Point, alongside HSBC, Coinbase Ventures, and Animoca Brands
  • The funding round gives Consensys a current valuation of $3.2bn, and will allow the company to accelerate efforts in Web3 development—i.e. integrating blockchain functionality as seamlessly as possible into websites
  • Consensys CEO (and Ethereum co-founder) Joe Lubin said the investment would help expand access to digital assets across the world; “It’s really important to us that not only these investors come from traditional finance and decentralized finance but they are also based in different regions of the world, helping us accelerate the global adoption of Web3”
  • One of the key beneficiaries of funding will be the company’s Metamask wallet; deployed as a plugin on web browsers like Google Chrome, it is the most popular means of interacting with DeFi applications, and boasts over 21 million monthly active users

What happened: JP Morgan, Tiger Global join blockchain infrastructure Series B round

How is this significant?
  • Blockdaemon was another company on the infrastructure side of the digital asset industry to secure funding this week, accepting investments from JP Morgan and Tiger Global
  • According to a press release, Blockdaemon has undergone impressive year-to-date growth; including five-fold growth in headcount, twenty-fold growth in revenues, and seventy-fold growth in valuation
  • Umar Farooq, CEO of JP Morgan’s blockchain division Onyx said “Making a strategic investment in Blockdaemon is a logical next step in our multi-layered approach to investing in blockchain technology and we’re pleased to participate in the funding round as they continue to grow and scale their business”
  • Blockdaemon’s CEO Konstantin Richter noted a 2000% growth in nodes run by Blockdaemon due to growing institutional demand in the space; “The institutional demand has driven massive changes around security and compliance… We always want to be ahead of regulatory and security concerns, so have invested massively in these areas”
  • Their Series B round in September saw Blockdaemon valued above $1.2bn, and included notable names from the world of traditional finance (SoftBank, Goldman Sachs) alongside institutions dedicated to digital asset investment (Kraken Ventures, Morgan Creek Digital)

What happened: American regulators seek to clarify banking participation in digital assets

How is this significant?
  • Banking regulators in the USA provided details on Tuesday regarding plans for the regulation of crypto assets, outlining their key priorities and announcing a new policy requiring banks to apply for permission to list any digital asset products
  • After the conclusion of a “crypto sprint”, regulators identified key areas in need of clarification, including issuance of stablecoins, asset custody, and liquidity standards
  • In notes published by the OCC, they announced that “Throughout 2022, the agencies plan to provide greater clarity on whether certain activities related to crypto-assets conducted by banking organizations are legally permissible, and expectations for safety and soundness, consumer protection, and compliance with existing laws and regulations related to:
             • Crypto-asset safekeeping and traditional custody services.
             • Ancillary custody services.
             • Facilitation of customer purchases and sales of crypto-assets.
             • Loans collateralized by crypto-assets.
             • Issuance and distribution of stablecoins.
             • Activities involving the holding of crypto-assets on balance sheet”

What happened: Ernst & Young survey reveals crypto asset appetite from alternative investors

How is this significant?
  • In a survey published this week, Ernst & Young (EY) revealed a growing interest in digital assets across the alternative investment spectrum since the turn of the year
  • According to their report, “Digital assets became an area of focus during 2021, and while current exposures to cryptocurrency among most managers remain small, one in four managers expect their exposures to increase”
  • In total, 31% of hedge fund managers, 24% of alternative investors, and 13% of private equity managers told EY they were planning to increase or maintain their crypto asset exposure
  • 46% of those with crypto asset exposure favour direct purchase of the assets themselves
  • Additionally, those with the most assets (hedge funds managing more than $10bn, or investors with $2bn to $10bn) were most likely to invest, at 36% of hedge funds and 32% of investment managers

What happened: Australia’s Commonwealth Bank warns against missing out on digital assets

How is this significant?
  • Commonwealth Bank, the largest of the “Big Four” banking institutions in Australia, recently became the first in the country to provide crypto asset services to clients, and in an interview with Bloomberg this week, CEO Matt Comyn explained why
  • Whilst acknowledging inherent risks in the sector, Comyn believes digital assets have proved their staying power and can’t be ignored; “We see risks in participating, but we see bigger risks in not participating. It’s important to say that we don’t have a view on the asset price itself we see it as a very volatile and speculative asset, but we also don’t think that the sector and the technology is going away anytime soon”
  • Elsewhere in Australia, the Rest Super retirement fund announced plans to begin investing in crypto assets, making them the first Australian “Super” to do so
  • Chief Investment Officer Andrew Lill said that the $66bn fund would enter the space gradually and cautiously, but also optimistically; “any allocation exposure we make to cryptocurrencies is likely to be part of our diversified portfolio as initially a fairly small allocation that may, over time, build… We see it as a very interesting and important part of our portfolio going forward into the future”

What happened: Pantera Capital raises $600m for new crypto investment fund

How is this significant?
  • According to technology investment site The Information, digital asset investment firm Pantera Capital have raised $600m for their fourth crypto investment fund, with approximately three-quarters of funds attributed to institutional investors 
  • This represents a significant increase from their first fund in 2018, which raised $175m in total, predominantly from wealthy individuals
  • Sources said that Pantera expects to raise approximately $1bn before they close fundraising in March
  • As of August, Pantera had $4.7bn in assets under management, and the new fund will take a varied approach, investing in equity, as well as pre- and post-launch tokens 

What happened: Morgan Stanley research note advises on Metaverse exposure and NFTs

How is this significant?
  • In a recent research note, Morgan Stanley identified companies and stocks that will provide the best exposure to the Metaverse, the shared online spaces underpinned by blockchain and NFTs
  • Facebook was unsurprisingly identified as the top pick, after the company rebranded itself as Meta and was the first mainstream company to speak on the concept
  • Morgan Stanley noted that “American daily users already spend the total equivalent of ~11 [billion] days per year consuming digital media”, identified as “metaverse hours to capture”, leading to a potentially huge opportunity in the United States alone; “addressable U.S. consumer expenditure to monetize is large … at $8trln”
  • Morgan Stanley also wrote about the latent power of NFTs for the luxury market, identifying them as a €50bn opportunity by 2030, equivalent to 10% of the total sector

What happened: Fidelity launches Canada’s first institutional digital asset custody service

How is this significant?
  • On Wednesday, Fidelity Clearing Canada became the country’s first regulated entity to provide institutional investors with Bitcoin trading and custody services
  • President Scott Mackenzie identified investor demand as a motivator for the move, saying in a press release that “The demand for investing in digital assets is growing considerably and institutional investors have been looking for a regulated dealer platform to access this asset class”
  • This development will allow more Canadian institutional investors to gain direct exposure to Bitcoin, as they were previously limited to mutual funds and ETFs custodied by US institutions
  • Fidelity Investments Canada ($166bn AUM) also filed prospectuses for two new Bitcoin ETFs to further leverage investor demand and their own custody services

What happened: KKR to lead $3bn valuation Series D round for crypto custodian Anchorage

How is this significant?
  • According to reports in The Information, private equity firm KKR (approximately $459bn AUM according to recently published Q3 results) is going to lead a funding round for regulated crypto custodian Anchorage, which would give the company a valuation of around $3bn
  • Anchorage was the first company to receive a federal banking charter for the custody of crypto assets, allowing them to act as a digital asset bank for institutional investors
  • Back in February, Anchorage raised $80m in a Series C funding round, but no valuation was disclosed at the time
  • The Information also reported that “New York-based Fireblocks, which offers similar custody services to Anchorage, is also in talks with investors to raise a new round of cash at a valuation of approximately $8 billion, according to three people with direct knowledge of the matter”

What happened: NFT” enters cultural consciousness as Word of the Year

How is this significant?
  • Non-fungible tokens, or NFTs, have experienced significant growth this year, a fact which has now been recognised by lexicographers as “NFT” was named the Word of the Year by Collins Dictionary
  • Collins’ Alex Beecroft said that the ubiquity and utility of the technology was key to its place atop the neologism table; “It’s unusual for an abbreviation to experience such a meteoric rise in usage, but the data we have from the Collins Corpus reflects the remarkable ascendancy of the NFT in 2021… NFTs seem to be everywhere, from the arts sections to the financial pages and in galleries and auction houses and across social media platforms”
  • Usage of the word “NFT” is up 11,000% in 2021, and two other words closely tied to digital assets—”crypto” and “metaverse”—also featured in the publisher’s top 10 shortlist, reflecting growing acceptance of digital assets
News Roundups