Nickel Research Centre

Nickel News Roundup - Week 18

6th May, 2021

Market Overview:

The digital asset market grew to new record highs this week, with Ethereum continuing its bullish performance

  • Bitcoin recovered from last week’s $55,000 levels to weekly highs of almost $59,000, with a current price of $56,800 representing a 4.3% weekly growth
  • Ethereum was a leading performer this week, breaking through several milestones; breaching $3,000 for the first time on Monday, and touching $3,500 on Tuesday. At the time of writing, Ether is priced at $3,438; a 26% weekly increase
  • The overall market capitalisation of the asset class was boosted to several new record by Ethereum and strong altcoin performance, exceeding the previous weekly record by nearly $200bn for a new high of $2.36tn
  • Performance was bullish across the whole market, with 43 out of the top 50 assets by market cap (excluding stablecoins) performing positively over the week. At one stage over the weekend, all of the top 100 coins and tokens displayed positive weekly momentum
  • The DeFi sector grew dramatically over the last 7 days, thanks primarily to Ether’s record-setting performance. The total value locked in DeFi applications and protocols rose from $76.2bn to approximately $89bn 

Ethereum accelerated its recent bullish momentum to bring the entire digital asset space to new record highs. Whilst the US and China have traditionally dominated digital asset headlines, this week saw German institutions make several major moves in the market. eBay acknowledged the potential of the asset class, BNY Mellon lamented their under-exposure in SEC filings, Fidelity built technology especially for institutional investors, Mastercard showcased Millennial enthusiasm for crypto, and 277 years of tradition at Sotheby’s couldn’t hold back a deeper integration of digital assets.


What happened: German lawmakers allow fund managers to invest in digital assets 

How is this significant?
  • According to reports in German financial industry paper Boersen Zeitung, a new bill approved in German parliament could theoretically bring as much as $425bn of fresh investment into digital assets
  • The legislation allows managers of German wealth and institutional investment funds—known as Spezialfonds—to allocate up to 20% of their fund’s value towards digital assets
  • The law is set to come into effect on July 1st, effectively introducing a wide range of investors from Europe’s largest economy to digital assets; there are currently over 4,000 Spezialfonds, with investments valued at $1.8tn
  • Given the conservative reputation of German investors, this news can be taken as a clear sign of this new asset class’ rising appeal. Speaking to industry publication Decrypt, German politician Frank Schäffler said “The addition of crypto assets in Spezialfonds is an important step for their acceptance. Here, the law is going in the right direction, and we expressly welcome it”

What happened: eBay CEO speaks about accepting crypto payments and NFT sales

How is this significant?
  • On Monday, eBay CEO Jamie Iannone confirmed in an interview with CNBC that eBay are examining digital assets as payments on their platform
  • In addition, Iannone said that eBay are interested in integrating non-fungible tokens (NFTs) as a sellable asset on their platform
  • In the interview, he cited digital collectibles as a particular opportunity for NFTs, saying “We're exploring opportunities on how we can enable it (NFTs) on eBay in an easy way… Everything that’s collectible has been on eBay for decades and will continue to be for the next few decades”
  • As one of the world’s largest e-commerce platforms, eBay has great potential to expand the utility of digital assets by accepting them as a payment option

What happened: BNY Mellon fund cites lack of Bitcoin as reason for underperformance

How is this significant?
  • In SEC filings submitted last week, BNY Mellon directly attributed the lacklustre performance of one of its ETFs to the decision not to invest in businesses with Bitcoin exposure
  • The BNY Mellon Opportunistic Small Cap Fund (DSCVX) under-performed its Russell 2000 Index benchmark by approximately 7%, and BNY cited allocations towards gold rather than digital gold as a key reason
  • The filing stated “Fund performance was hurt as well by a decision not to own MicroStrategy, whose stock surged when it announced it had invested in Bitcoin”
  • Additionally, BNY identified gold’s underperformance as an inflationary safe haven, stating that allocations in a gold mining company “hampered performance as shares were hurt by weak gold prices”

What happened: Mastercard survey reveals widespread appetite for digital asset investment

How is this significant?
  • On Tuesday, Mastercard released the findings from a worldwide survey of over 15,000 respondents for its New Payments Index
  • Survey respondents displayed a growing appetite for digital assets, as 71% actively believed they will use less cash going forward
  • Meanwhile, 40% of people said they plan to use crypto assets as payments in the next year
  • Amongst Millennials—the largest living adult generation—attitudes towards digital assets are even more positive
  • 67% of Millennials said they were more open to using crypto than a year ago, 75% would use them if they understood them better, and 77% are interested in actively educating themselves about digital assets 
  • Additionally, in an earnings call last week, Mastercard CEO Michael Miesbach noted that they were interested in deepening their integration of blockchain technology in order to build applications servicing future CBDCs; “This could be a smart trade contract… So smart contract technology is what we’re investing in”
  • Miebach also noted that they are only planning to increase their exposure to digital assets, saying that they have “several new crypto partnerships approved for launch this quarter”

What happened: California’s largest utility company joins Blockchain Education Alliance

How is this significant?
  • Pacific Gas & Electricity, the largest utility company in California (and by most metrics, the entire United States), joined the MouseBelt Blockchain Education Alliance (MBBEA) this week, alongside digital asset exchanges, data aggregators, and DeFi protocols
  • Working as both an education group and an accelerator network, MBBEA also includes corporate giants like Mastercard, ING Bank, and Rolls-Royce
  • Speaking about their decision to join the alliance, a PG&E spokesperson said “It is a good way to interact with other companies to see what they are doing and observe research around blockchain and to build relations”
  • They also confirmed that they hoped to leverage the expertise within the group to introduce blockchain technology into their core business, noting “We’ve explored two use cases”

What happened: Fidelity launches digital asset analytics platform for institutions

How is this significant?
  • On Thursday, Fidelity—one of the world’s largest asset managers with over $10tn in assets under administration—announced the creation of a digital assets analytics platform called Sherlock
  • Unlike existing analytics platforms in the space, Sherlock was built specifically for institutional investors, indicating how much of an opportunity Fidelity perceives for them in digital assets
  • In a press release, Fidelity’s Vice President of Product Management Kevn Vora said “It’s been exciting to see the tremendous growth in the digital assets data space over the past few years… That’s what we’re introducing with Sherlock – robust and insightful datasets paired with highly intuitive tools to help clients make data-driven digital asset investment decisions”
  • In other Fidelity related news, the company’s former director of research Ria Bhutoria became the latest high-profile name to make the leap from traditional finance to the digital asset space, joining early-stage crypto fund Castle Ventures

What happened: Australian Securities Exchange considering ETF launches as digital asset enthusiasm grows in Australia

How is this significant?
  • According to reports from Australia, the country is the latest to move into the burgeoning field of digital asset ETFs, following multiple applications in the USA, as well as successful ETF and ETP launches in Canada, Germany, and Switzerland
  • The Australian Securities Exchange (ASX) is believed to be listing a fund within this year
  • ASX executive general manager Mark Cunningham told Business Insider Australia that there is a global movement towards providing traditional investors digital asset exposure through such products, saying “You can see how mainstream this has become at an institutional level in developed markets, like the U.S., Canada, Europe and the UK. You can’t ignore that. We can’t ignore it, and we’re not”
  • The ASX didn’t indicate the specific composition of any future ETFs, but Cunningham confirmed they are “spending an enormous amount of time” on crypto, noting that “It’s an emerging asset class and it’s appropriate we put in time in the time and effort into what these assets might look like when they’re admitted to the public markets”
  • VanEck and BetaShares are both known to be amongst the applicants so far, with VanEck’s APAC chief executive Arian Neiron supporting Bitcoin’s “digital gold” value proposition, whilst BetaShares’ managing direct Alex Vynokur sees demand for digital asset investing in traditional frameworks: “From our perspective, a regulated structure of an ETF is the more appropriate structure for a significant number of investors”
  • There is already a rising tide of wealthy Australian investors who want to invest in digital assets without waiting for ETF processes to conclude; an Australian Business Insider article this week noted the rise of family offices buying not just Bitcoin, but a range of established digital assets
  • DigitalX chief executive Leigh Travers believes this desire for the asset class has been driven by its increased legitimacy; “The biggest change has been around institutional interest which has helped evolve it from a speculative asset to an asset that is part of a diversified portfolio and has the strongest macro winds of any investment possible, I think… As a conservative family office investing for the long term, they don’t want to be associated with something considered as a speculative frenzy”

What happened: German financial giants team up for tokenised art and real estate marketplace

How is this significant?
  • Commerzbank and Deutsche Börse, two of the most established financial institutions in Germany, announced a partnership on Thursday to create a new blockchain driven marketplace for multiple asset classes 
  • Working with fintech firm 360X, they aim to leverage their established liquidity in order to build a digital asset marketplace for tokenised art and real estate that can be sold on a fractionalised basis, with the first transactions on each asset class scheduled for this year
  • Deutsche Börse see this investment as a means of securing an early stake in an increasingly-tokenised world, with CEO Theodor Weimer stating “I am convinced that Deutsche Börse has to venture into new asset classes... In the future, we will see a broad tokenization and digitization of assets that are not tradable today”
  • CEO Manfred Knof of Commerzbank was similarly bullish about the potential of this technology, saying “We take real assets to digital marketplaces. With our and Deutsche Börse’s investment in 360X, we see the potential to actively shape one of these digital asset ecosystems of the future”

What happened: Andreessen Horowitz launching $1bn crypto venture fund

How is this significant?
  • The Financial Times reported that Venture capital firm Andreessen Horowitz (a16z) is in the process of launching its third digital asset venture fund—but on a much grander scale than its previous two efforts
  • According to four people interviewed by the FT, the firm are aiming to secure between $800m and $1bn for the new fund; effectively doubling the $515m value of their previous crypto venture fund
  • A16z has a long history of VC within the blockchain space, and were early supporters of Coinbase, cashing out nearly $450m of their stake the day that COIN stock launched on the Nasdaq

What happened: Sotheby’s increases scope of digital asset integration

How is this significant?
  • After a successful first venture into the world of digital assets via a multi-million pound NFT sale, 277-year old auction house Sotheby’s announced on Tuesday that they would begin accepting crypto assets as payment
  • The auctioneers will accept payment in Bitcoin or Ether for a famous piece by Banksy, valued at between $3m to $5m
  • Bids will be made in USD, but the winning buyer will for the first time have the option of executing the trade’s value in one of the two digital assets
  • In an interview with CNBC, Sotheby’s CEO Charles Stewart said that it was “likely the first time cryptocurrency has been accepted as payment for a physical artwork...we had our first NFT sale a few weeks back, we had over 3000 bidders, it made us really think we have to take this next step and begin accepting crypto as payment for physical art as well”

What happened: Swedish digital asset exchange’s IPO is oversubscribed by 1,240%

How is this significant?
  • Safello, a Sweden-based digital asset exchange, is planning to follow in Coinbase’s footsteps with a public listing, on the Nordic region’s Nasdaq First North exchange
  • With current interest levels in the digital asset industry, Safello found that their new share issue was massively oversubscribed as investors clamoured to gain exposure to digital asset companies
  • This occurred, according to a press release after “Swedish financial publication Affärsvärlden issued a subscription recommendation in Safello's IPO and the offer of SEK 40.5 million was subscribed for approximately SEK 502 million, which corresponds to a subscription rate of approximately 1,240 percent”
  • Safello CEO Frank Schuil saw the interest as an endorsement of the asset class, commenting “We are very happy about the overwhelming interest that Safello's IPO has generated. This is another validation of the maturity of the crypto industry and how it is finding its footing in the established financial industry”

What happened: Federal Reserve research paper says “DeFi may lead to a paradigm shift”

How is this significant?
  • On Sunday, the Federal Reserve Bank of St Louis released a research paper about decentralised finance (DeFi), recognising its transformative potential within the financial landscape
  • Written by Dr. Fabian Schär, professor of Distributed Ledger Technology at the University of Basel, the piece in particular focused on the value that could be unlocked through smart contracts, and Ethereum as the leading smart contract platform
  • The paper noted that “DeFi may lead to a paradigm shift in the financial industry and potentially contribute toward a more robust, open, and transparent financial infrastructure”
  • Schär found that DeFi has favourable momentum behind it as developers flock to create new applications; “DeFi still is a niche market with relatively low volumes—however, these numbers are growing rapidly”
  • It went on to state “The spectacular growth of these [digital] assets alongside some truly innovative protocols suggests that DeFi may become relevant in a much broader context and has sparked interest among policymakers, researchers, and financial institutions”

What happened: Singapore’s largest bank increases crypto volumes tenfold

How is this significant?
  • DBS, Singapore’s largest bank, released quarterly results this week, commenting on the performance of their Digital Exchange (launched in December 2020) for the first time
  • DBS CEO Piyush Gupta noted that over the last quarter, the exchange has experienced a ten-fold increase in trading volumes, up to $30m to $40m a day
  • In a media briefing, he said “we have been judicious by offering this to accredited investors and institutional counterparties to start with. Even with the careful expansion, the first-quarter numbers have been encouraging. We have about $80 million of assets under custody today. We have 120 customers with a pipeline of hundreds more”
  • Additionally, DBS confirmed that they wish to use their Digital Exchange platform to launch security token offerings in the second quarter, and expand their business hours from Asian trading hours to 24/7
  • Gupta also spoke enthusiastically about a recent blockchain powered cross-border payments initiative they joined with JP Morgan and Temasek Holdings; “Blockchain can change the paradigm. Money can be converted into digitized form that has been cleared, which can be sent across for settlement as quickly as the written message...We are actively bringing in other banks so that the euro, sterling, renminbi etc become part of the system. And if we can do that, we will be an important part of a game-changing infrastructure for payments”

What happened: Top decentralised exchange Uniswap launches v3 upgrade

How is this significant?
  • Uniswap, a leading decentralised exchange (DEX) credited with driving the rise of DeFi, launched a platform upgrade on Wednesday, introducing several new features
  • DEXes operate with no centralised order books, instead relying on paired liquidity pools contributed by token projects or individual investors. Since the turn of the year, Uniswap has been averaging over $1bn in daily volume, with record trade volume of $2.02bn achieved on Tuesday
  • Since they don’t rely on centralised exchanges granting them a listing, DEXes have been crucial to the development of the DeFi space, with many new tokens and protocols fundraising through Initial Dex Offerings (IDOs), the successors to 2017 and 2018’s ICOs (Initial Coin Offerings)
  • Uniswap v3’s upgrades could make DEXes even more appealing, and thus spur even more development in digital assets and DeFi applications 
  • The key upgrades are concentrated liquidity (only providing liquidity to a certain price range within a trading pair, enabling up to 4,000 times greater capital efficiency), tiered fees to compensate for impermanent loss, and cheaper access to blockchain oracles ensuring price integrity

What happened: Institutional managers are holding record levels of Ethereum

How is this significant?
  • According to industry analytics company Coinshares, the amount of Ether held by institutional investment managers reached record levels this week
  • Amidst increasing interest in Ethereum as a smart contract platform, there have been higher weekly inflows into Ether-based products
  • Industry platform Cointelegraph reported on Wednesday that “Month-to-date inflows for ETH products totaled $170 million, bringing the yearly total to $824 million. Managers now hold a combined $13.9 billion worth of ETH”
News Roundups