Nickel Research Centre

Nickel News Roundup - Week 8

24th February, 2022

Market Overview:

Digital assets retraced sharply alongside most global markets, as geopolitical tensions continued to escalate in eastern Ukraine.

  • Bitcoin declined throughout most of the week amidst the backdrop of international tension, opening at highs around $44,000 on Thursday, before hitting lows of $36,490 on Tuesday
  • Bitcoin currently trades at $35,630, down about 18% from last week
  • Ether followed the same movements, posting a low of $2,513 on Tuesday after opening the week around $3,100
  • Ether is currently priced at $2,632—a 17% weekly drop
  • Total market capitalisation declined to $1.71tn
  • Total value locked in DeFi declined accordingly to $71.1bn, according to industry analytics platform DeFi Pulse

Digital asset values dropped sharply in value this week, as global markets were spooked by ongoing geopolitical tensions in Eastern Europe. However, there were numerous positive developments in the digital asset industry; approval from major sovereign wealth funds, legislators, and traditional asset exchanges, alongside more involvement from names including Sequoia, BNY Mellon, Morgan Stanley, State Street, UBS, and BlackRock.


What happened: Singapore sovereign wealth fund participates in $200m crypto funding round

How is this significant?
  • Temasek Holdings, one of Singapore’s state investment firms, participated in a $200m Series B raise by digital asset exchange Amber Group this week
  • Other investors included Coinbase Ventures, Sequoia, Pantera, Tiger Global Management, and True Arrow Partners
  • The funding round gives Singapore-based Amber a valuation of $3bn, and appears to build on reported ambitions of the city-state to become a global hub for digital assets
  • Amber Group CEO Michael Wu was keen to stress the importance and impact of investment with government ties, saying they specifically extended the duration of their Series B to secure Temasek’s support; “They are very strategic, so we made this special effort to bring them in”
  • He also indicated the company would likely undertake another funding round this year, with aims to increase hiring in Europe and America, expand the reach of their mobile app, and possibly run an IPO in the USA before the end of next year

What happened: EU legislators are open to digital assets—with greater regulation

How is this significant?
  • One of the issues discussed at this week’s Munich Security Conference was adoption of digital assets within the European Union, and their existence seems to be supported by EU Commissioner for Home Affairs Ylva Johansson—albeit with more regulation
  • She supports the concept of both decentralised digital assets, as well as government-issued CBDCs, but stressed the need for strong fraud prevention practices in light of the anonymity provided on many blockchains
  • Johansson told delegates at the conference that “I’m not uncomfortable with digital currencies but we need to regulate them in a proper way”; marking the EU’s stance as more open than China’s, which banned most crypto asset activity last year
  • Sam Bankman-Fried, the CEO of leading digital asset exchange FTX also attended the panel, speaking about enhanced oversight mechanisms across exchanges helping to reduce fraudulent transactions or illicit fund movements

What happened: London Stock Exchange boosts digital asset capabilities in $325m acquisition

How is this significant?
  • On Tuesday, the London Stock Exchange Group (LSEG) confirmed a deal worth £239m to purchase trading technology company TORA
  • Pending regulatory approval, the deal is expected to be finalised later this year, integrating TORA into LSEG’s data and analytics division
  • Of particular interest to industry analysts was the fact that TORA’s acquisition allows LSEG to integrate digital asset trading capabilities into their portfolio of services
  • Dean Berry, the exchange group’s head of Trading & Banking Solutions, identified the acquisition as “an important extension of our global Trading business… at a time when institutional market participants are increasing their exposure to crypto and other digital assets”
  • In other news related to stock exchanges integrating digital assets this week, ICE (the parent company of the New York Stock Exchange) purchased a stake in tZero—a blockchain-based exchange allowing the trade of tokenised stocks and shares
  • As part of the deal, ICE Chief Strategy Officer David Goone has been appointed the new CEO of tZero

What happened: BlackRock rumoured to be developing crypto investing services

How is this significant?
  • According to insiders who first spoke to agency publication Coindesk, global asset management giant is currently developing digital asset trading services for clients 
  • Although no date was provided for the launch of such services, sources told Coindesk that they would likely be provided to institutional clients (including pension schemes and sovereign wealth funds) through BlackRock’s integrated investment management platform, Aladdin
  • Sources also reported the company currently has a 20 person working group dedicated to the development of digital asset analysis, and that the move was precipitated by the drastic growth of the sector over the last year; “They see all the flow that everyone else is getting and want to start making some money from this”
  • If true, this would mark the latest step in a continuous exploration of the crypto industry by the world’s largest asset manager; a few weeks ago they filed for an ETF product tied to companies with blockchain and crypto exposure
  • BlackRock also featured in the news this week as part of a consortium of companies behind a new blockchain-based trading service for alternative assets, developed by iCapital
  • Institutional backers of the platform include several financial industry heavyweights; Apollo, Blackstone, BNY Mellon, Carlyle, KKR, Morgan Stanley, State Street, UBS, and WestCap
  • Blockchain technology was praised for its potential in streamlining complex financial processes by the CIO of iCapital, Tom Fortin; “The value in a private, permissioned, distributed ledger solution is that it creates one single golden source of data—eliminating the need for multiple reconciliations, allowing all the parties in a transaction to read from and write to the same record”
  • Jerry Pascucci, Head of Global Alternative Investment Solutions at UBS Global Wealth Management agreed, stating “We see the potential distributed ledger technology has to significantly improve both efficiency and security across the alternatives industry”

What happened: Stablecoin issuer Circle doubles company valuation to $9bn 

How is this significant?
  • Circle—the developers and issuers of the USDC stablecoin—doubled its valuation to $9bn this week, as terms of an SPAC merger with Concord Acquisition corp changed
  • Concord, headed by former Barclay’s chief executive Bob Diamond, recognised “material improvements in Circle’s financial outlook and competitive position” due to increased adoption of USDC
  • Diamond acknowledged Circle’s growth, saying in a press release that “Circle is one of the most interesting, innovative and exciting companies in the evolution of global finance and will have an historic impact on the global economic system”
  • Jeremy Allaire, CEO of Circle, also spoke about improvements in the regulatory landscape, saying stablecoins are “being acknowledged by the White House as a critical area that’s going to play a major role in the growth of the dollar and the dollar on the internet… We’ve gotten clarity that the federal government wants to ensure that well-run clearly defined rules around large-scale dollar stablecoin issuers like Circle is actually a critically important thing”

What happened: Sequoia Capital launching new crypto investment fund worth up to $600m

How is this significant?
  • Venture capital giants Sequoia are currently raising funds for three new investment sub-funds; including one aimed exclusively at the digital asset industry, which is seeking $500m to $600m of capital
  • The Sequoia Crypto Fund will mainly invest in established coins and tokens trading on third-party exchanges, rather than providing early-stage growth funding to companies before token launches
  • Sequoia partner Shaun Maguire told the Financial Times “The area in crypto where we have the most opportunity for improvement is really in the liquid stuff… Our founders have asked us for a lot of help there, and we just haven’t been able to deliver in the traditional venture capital model”
  • Around 20% of Sequoia’s VC funding last year went towards companies in the digital asset space, and the new fund will allow additional support for projects in their portfolio
  • The investments are being made with a “20 year lens”, avoiding trading of the assets outside of “exceptional circumstances”
  • Maguire acknowledged the likelihood of incoming regulation making some changes to the investment landscape, but cautioned against too much legislative restriction; “We expect regulation, but there’s a balance that we need to find between protecting consumers and maintaining innovation in a really important space… It reminds me of early internet regulation”

What happened: South Korea’s largest bank launching crypto ETFs

How is this significant?
  • According to an announcement this week, Kookmin Bank—South Korea’s largest by net assets—is launching crypto ETFs with a focus on retail investors
  • They confirmed the formation of a Digital Asset Management Committee to develop and launch such a product as soon as regulators permit
  • Hong-Gom Kim, head of Kookmin Bank's index quant management division said “We will launch a virtual asset-themed equity fund, etc., as soon as possible… We will also publish periodicals”
  • Kookmin are also developing a virtual currency index, and investigating the feasibility of hybrid funds trading digital assets alongside traditional assets
  • South Korea is a major digital asset trading market, with the FT reporting the Korean Won as the third-most-popular currency for digital asset pairings, after the US Dollar and Japanese Yen

What happened: Multiple jurisdictions propose official Bitcoin integration

How is this significant?
  • This week, Mexican senator Indira Kempis announced she would submit a bill to recognise Bitcoin as legal tender across the country, citing benefits she perceived in a recent visit to El Salvador, and the impact of digital assets towards financial inclusion
  • In an interview, she stated “Making Bitcoin a legal tender means putting a level playing field for people who are excluded in almost all countries…We need bitcoin to be legal tender in Mexico, because if it is not so, if we do not make that decision as El Salvador did, it is very difficult to take action”
  • Colorado governor Jared Polis revealed that his state aims to accept digital assets (particularly Bitcoin) as payment for taxes from this summer onwards, as well as endorsing “a digital token bill that would effectively allow state-created digital tokens to be utilized for state reserve purposes and other purposes. Assigning value to them”
  • Senator Sydney Kamlager of California proposed a bill to do the same in California, allowing state agencies to accept digital assets as payment for government services, including taxation

What happened: FTX launches gaming division to grow digital asset adoption in video games

How is this significant?
  • FTX exchange diversified their portfolio further this week with the launch of a new gaming unit, aimed at offering “crypto as a service” to established video game developers
  • Despite the growth of NFTs and “play-to-earn” gaming models over the last year, and the endorsement of major gaming studios like Ubisoft, Square Enix, and Take Two, many gamers remain skeptical of digital asset integration into video games
  • FTX US president Brett Harrison acknowledged the current backlash, saying they aim to integrate digital assets unobtrusively; “I think the backlash is primarily out of concern that the focus on cryptocurrency will divert the efforts of game studios away from making the best game possible for the players…the enjoyability of the game for all players, including those who don’t wish to participate in these kind of economies, should always be the primary objective regardless of whether blockchain tech is involved” 
  • However, he also cited that the technology just adds benefits to existing player behaviours, rather than forcing new ones; “We believe that blockchain technology takes features of games that already exist, such as in-game avatars, skins, and rewards, and makes it possible for players to own, invest, and trade these items outside of the game”
News Roundups