Nickel Research Centre

Nickel News Roundup - Week 51

23rd December, 2021 

Market Overview:

Digital assets experienced a relatively quiet week ahead of the festive season, trading within relatively tight ranges. 

  • Bitcoin experienced a weekend slump that dropped it below $47,000 (and briefly below $46,000), but recovered on Tuesday and spent the majority of the week trading between $47,250 and $49,000
  • Bitcoin is currently priced at $48,780, representing modest growth from last week
  • Ether continued to trade below $4,000 for the majority of the week, briefly hitting a low of $3,720 over the weekend, but recovered above $4,000 
  • Ether is currently priced at $3,990, in line with last week’s price
  • Total market capitalisation grew slightly, to around $2.28tn
  • Total value locked in DeFi grew by over $3bn this week to $99.8bn, according to industry analytics platform DeFi Pulse

Digital assets had a calm week after some notable turbulence in the weeks prior. In the USA, financial bodies continue to request more regulatory clarity, as year-end statistics reveal record growth in both investment funds and venture capital involvement. JP Morgan, Siemens, Deutsche Telekom, Sequoia Capital, and a $744bn AUM Singaporean sovereign wealth fund all featured in the news this week, proving the expanding and enduring appeal of this asset class.


What happened: American credit unions seek federal approval to hold digital assets

How is this significant?
  • The National Credit Union Association (NCUA) published a letter last week stating that federally-insured credit unions can collaborate with third-party crypto asset service providers to hold digital assets for clients
  • This news was recognised as providing some clarity for the field; according to Lance Noggle, senior director of advocacy for payments and cybersecurity at the Credit Union National Association “It’ll help credit unions that have been kicking the tires move ahead and have a bit of a road map of what the regulator will expect”
  • Additionally, representatives from various industry groups told Bloomberg that American credit unions seek to go a step further and hold digital assets themselves, without the involvement of third parties
  • One told Bloomberg that their industry could “start to shrivel” if they aren’t able to offer services available from banks, such as the growing trend of digital asset services
  • Ann Kossachev, vice president of regulatory affairs for the National Association of Federally-Insured Credit Unions also told Bloomberg that they are specifically seeking federal permission to directly offer digital asset custody services

What happened: Crypto-tracking investment vehicles more than double in 2021

How is this significant?
  • According to Bloomberg Intelligence data, crypto asset funds had a bumper year, reflecting the growth in the market and the rising involvement of institutional investors
  • They currently identify 80 crypto-tracking investment vehicles, compared to just 35 at the end of 2020
  • The value of associated assets grew to $63bn, up from $24bn in early January
  • Inflation was cited as one of the major drivers for the growth of such investment vehicles, with widespread currency devaluation occurring globally in the face of the coronavirus epidemic
  • Leah Wald, chief executive of crypto asset manager Valkyrie Investments told Bloomberg that institutional investors were also a key pillar of growth for the asset class; “Globally, it’s obviously a phenomenon that’s starting to take off… If you look at inflows on a volume perspective, not only has it been steady even with the price corrections that Bitcoin is notoriously famous for, but you’re seeing a lot of institutions jump in”
  • The first Bitcoin futures ETF in October was identified as a key watershed for traditional investors, but Bloomberg Intelligence ETF analyst James Seyffart believes current American regulatory caution leaves lots of untapped potential; “I can’t help but think that the assets in this space would be even larger if we had more efficient structures, like spot ETFs, in the U.S”

What happened: Sequoia Capital embraces digital asset investment

How is this significant?
  • Venture firm Sequoia Capital allocated 25% of its total investments to startups in and around the crypto asset ecosystem, according to Sequoia partners speaking to Bloomberg this week
  • As one of the most respected names in venture capital, Sequoia’s growing interest in digital assets is indicative of a wider shift in the VC landscape. Sequoia partner Shaun Maguire told Bloomberg “The conviction on crypto has only increased since I joined Sequoia and it basically broke through over the last year”
  • Additionally, he believes that once investors understand digital assets, they become staunchly convinced of their potential, speaking about a “one way ratchet” of interest
  • Sequoia partner Michelle Bailhe noted relevance for digital assets and blockchain technology across a variety of industries; “I’m definitely a true believer in the technology and the potential… It’s already in fintech and consumer applications, and it’s seeping into enterprise and health care”
  • Maguire also revealed that the VC giant has spent the last 18 months building a “policy team” in Washington to help “favourably shape legislation”—a team that he claims is speaking to regulators on a daily basis
  • Sequoia also revamped their fund structure this year to remove maximum caps towards crypto asset allocations, creating the possibility of dedicated industry-specific funds in future, as pioneered by rivals Andreessen Horowitz (a16z)

What happened: Digital asset firms nearly quadruple previous VC funding record in 2021

How is this significant?
  • 2021 was the year in which big VCs like the aforementioned Sequioa and Andreessen Horowitz started to really back digital asset startups; investing around $30bn this year in digital asset firms or those providing crypto-based services (such as Revolut and Robinhood), compared to the previous record of $8bn in 2018
  • In fact, according to Pitchbook data, the digital asset industry secured more VC funding this year than in all previous years of existence combined
  • Spencer Bogart of industry VC Blockchain Capital LLC believes the sector has matured and evolved enough now to attract the deep pockets of traditional VC firms; “We’ve moved beyond just digital gold. We’ve got financial services, art, gaming as a subcategory of NFTs, Web 3.0, decentralized social media, play-to-earn — all of that made investors think, We don’t have enough exposure
  • Key deals this year from the digital asset industry included FTX exchange raising $1bn on a $18bn Series B valuation, NYDIG securing $1bn in funding earlier this month, and blockchain gaming developer Forte closing a $725m round in November 

What happened: MicroStrategy considers lending out Bitcoins to generate yield

How is this significant?
  • MicroStrategy, the leading corporate Bitcoin holder in the world, may lend out some of their 122,000 Bitcoins to generate passive income or finance the purchase of additional Bitcoins, according to CEO Michael Saylor
  • In an investor call, he revealed “there may be opportunities to either put a mortgage against it and generate long-term debt under favorable circumstances, which we could leverage up against the Bitcoin, or we think that we could lend it to a trustworthy counterparty… That could become a good source of income for us, or we could develop it with some kind of interesting applications”
  • Whilst decentralised finance (DeFi) has grown massively on the smart contract blockchain Ethereum this year, Bitcoin’s technological architecture has made native DeFi opportunities more difficult to come by, alongside a lack of support in traditional finance, as Saylor said “I think that we’re still a little bit too soon to say whether there’s a good Bitcoin-backed bond market, but I look forward to exploring that in the future”
  • Betting big on Bitcoin has been beneficial to MicroStrategy’s bottom line; their share value is up around 180% year-to-date, around three times Bitcoin’s current approximate 60% year-to-date growth

What happened: Singapore sovereign wealth fund invests in blockchain analytics startup

How is this significant?
  • This week, blockchain analytics firm Nansen AI secured $75m of investment from sources including the Singaporean sovereign wealth fund GIC, as well as tiger Global, a16z, and SCB 10X
  • Nansen CEO Alex Svanevik plans to use the new funds to grow the company’s team via acquisitions; “The next 12-18 months will be a phase of consolidation in the industry. Some great teams will join forces, some acquisitions will take place. I’d like Nansen to be well-positioned for that with a strong war chest”
  • The involvement of a Singaporean sovereign wealth fund was particularly notable in the intelligence company’s raise, as the city-state recently announced intentions to position itself as a global hub for the crypto asset industry

What happened: Kraken exchange makes acquisitioncreates $65m startup investment fund

How is this significant?
  • American digital asset exchange Kraken (the fourth-largest exchange globally by volume) released several announcements this week, seeking to expand their suite of services both internally and externally
  • In a press release, they announced the acquisition of crypto staking platform Staked for “an undisclosed sum in one of the largest crypto industry acquisitions to date”
  • This will allow Kraken to expand the range of DeFi and yield-generating services they offer, as CEO Jesse Powell identified a move towards “a holistic crypto platform with a diverse range of products that serves the needs of retail, professional, and institutional clients”
  • Additionally, the company launched the first investment fund of Kraken Ventures, following the conclusion of a $65m raise
  • Kraken Ventures will seek to target early-stage companies in the digital asset space, offering investments between $500,000 and $2m
  • In a press release, Kraken Ventures stated “Our long-term view on investing, and the possibility to leverage Kraken’s experience in building a truly global, scalable platform, definitely contributed to the overwhelming interest we received from investors”

What happened: Deutsche Telekom invests in smart contract platform Polkadot

How is this significant?
  • German telecommunications and technology giant Deutsche Telekom announced on Tuesday that they will participate in the smart contract platform Polkadot as a validator, purchasing a “significant” amount of the protocol’s DOT token to participate
  • The company’s blockchain lead, Dr Andreas Dittrich, said the company recognises digital assets as viable businesses, and had to “basically put our money where our mouth is to support our infrastructure case… The main difference now is that this is not a VC or innovation budget anymore; we are doing this from our business unit. So this really has become a business case for us”
  • Dittrich identified possible areas of interest from their involvement in the new protocol, saying “I think the opportunities that Polkadot provides for enterprise use cases are really interesting… even the good old supply-chain use case could make a lot of sense on Polkadot, and I know that big industry consortia are definitely eyeing that ecosystem”
  • Polkadot is currently the 11th-largest digital asset by market cap, and was created by Ethereum co-founder Gavin Wood as an Ethereum-compatible smart contract platform running on a proof-of-stake consensus mechanism, addressing many of Ethereum’s scaling issues

What happened: JP Morgan develops blockchain project for Siemens

How is this significant?
  • JP Morgan’s blockchain division Onyx revealed a collaboration with Siemens this week, concerning the development of a blockchain-based payment infrastructure for the tech company
  • This makes Siemens the first “anchor client” of Onyx—the first publicly announced in “a pipeline of clients” according to Onyx’s global head of coin systems, Naveen Mallela
  • The project will allow for the automation of payments and transfers between Siemens’ own accounts, beginning with US dollars before integrating Euros next year
News Roundups