Nickel Research Centre

Nickel News Roundup - Week 10

8th March, 2024

Market Overview:

Digital assets built on last week’s bullishness, as Bitcoin surged to a new all-time high.
  • Bitcoin achieved a new all-time high on Tuesday, followed by widespread profit-taking
  • This represents Bitcoin’s highest value in over two years, since peaking just below $69,000 in mid-November 2021
  • Bitcoin once again traded in a narrow range over the weekend, before exploding into life as ETF markets opened on Monday, when it grew from $62,800 to $67,800
  • On Tuesday, it rose swiftly from the low $66,000 range to a new high of $69,170
  • As often happens, the record wasn’t long-lived, as traders quickly moved to book profit, which drove the price as low as $61,340, almost equal to the weekend low of $61,270
  • Bitcoin hit a new record versus the Euro on Monday, before the US dollar landmark followed the next day
  • Ether reached a weekly high of $3,940 on Thursday, its best performance since December 2021
  • Growth was steady throughout the week, except for a flash crash in the wake of market-wide post-record profit-taking, which dropped the price to a low of $3,360
  • Ether outperformed Bitcoin, and registered its second straight week of growth above 15%
  • Network activity continued to increase across the Ethereum blockchain thanks to surging trading and DeFi activity; bringing the annual supply deflation (based on last seven days’ activity) to -1.43%; equivalent to burning $9.5bn of Ether
  • Momentum has been positive across the entire market; 89 of the top 100 projects by market capitalisation were green on the weekly (despite last week’s historic market performance)
  • Bloomberg reported that “An index tracking the bottom half of the largest 100 digital assets is up about 60% over the past month, beating the 56% advance in Bitcoin. During the same period, the overall value of tokens jumped by more than $800 billion”
  • According to data from K33 Research, retail traders are returning to the market, with a 45% increase in 90-day crypto exchange traffic compared to August-October, alongside a 66% increase in visits to market aggregators like Coinmarketcap and Coingecko
  • However, metrics on both still lag behind the levels of summer 2022, before the Terra Luna blockchain collapse set off industry-wide contagion and truly kickstarted crypto winter
  • Overall digital asset market capitalisation rose above $2.5tn for the first time since December 2021; a 20% increase since hitting $2tn in late February
  • According to industry monitoring site DeFi Llama, total value locked in DeFi was once again buoyed by Ether’s performance and grew over $8bn to $98.5bn, putting the metric within touching distance of $100bn once more

Digital assets achieved double digit growth as Bitcoin reached a new record and Ether secured its highest value since 2021. Bitcoin’s all-time high was facilitated by more record-breaking performances across ETFs, even stablecoins achieved record values (by circulating supply), an asset manager moved to purchase $250m of tokens from the FTX bankruptcy estate, multiple startups inked eight-figure VC deals, MicroStrategy announced plans for another $700m of Bitcoin acquisitions, Deutsche Börse launched a spot crypto exchange, and further remnants of 2022’s crypto contagion moved towards conclusion amidst extradition deals and debt agreements.

What happened: Bitcoin hits new all-time high

How is this significant?

  • On Tuesday, Bitcoin hit a new record high, two years and four months after its previous peak of $69,000
  • The new record stands (according to Coinmarketcap data) at $69,170
  • Bitcoin’s recovery from previous high to new high was markedly quicker this time around than during the previous cycle; Bitcoin topped out around $20,000 in December 2017, a mark it wouldn’t hit again for another three years, until December 2020
  • Soon after breaking the record, many traders moved to secure profits, resulting in a highly-volatile trading day, with over $1.1bn in liquidations over 24 hours, according to Coinglass data
  • According to some blockchain analysts, these sell-offs included a large amount of Bitcoin mined in 2010, potentially setting a new record for profitability, as Bitcoin never broke above a dollar that year
  • Bitcoin’s march to a new record coincided not only with worldwide social media outages; but as Cathie Wood of ARK pointed out previously; even though websites may crash or shares may suspend trading (as New York Community Bancorp did this week), decentralised networks like Bitcoin and Ethereum keep running regardless
  • According to your currency of choice however, Bitcoin had already beaten its all-time high earlier; hitting a GBP record at the start of the month, a JPY record in mid-February, and a EUR record in early March—just 11 days after the European Central Bank (issuers of the Euro) published a blog post claiming that Bitcoin’s “fair value should be zero” and describing its performance over the last year as a “dead cat bounce”
  • Even before Bitcoin broke its record, options interest was already positioned for continued bullish momentum, with open interest in month-end strike prices of $70,000, $75,000, and $80,000 climbing on Monday
  • CME Bitcoin futures open interest indeed hit a new peak off the back of Bitcoin’s surge towards all-time high
  • Hedge fund billionaire and digital asset advocate Anthony Scaramucci urged caution rather than full-blown euphoria after the new record, telling Bloomberg “I’ve been humbled by life. I’ve been humbled by markets,” he said. “The industry is back. I don’t think it’s going to be a straight line up”
  • Bloomberg noted that “At its high on Tuesday, Bitcoin was up about 63% so far in 2024, outperforming global stocks and spreading optimism across the digital-asset market”
  • Unsurprisingly, the number of Bitcoin addresses in profit also stands at its highest level since the previous all-time now, at nearly 100%

What happened: ETF news—more records broken

How is this significant?

  • Bitcoin’s record performance this week was matched (and partially driven) by record performance across Bitcoin ETFs as well
  • Monday registered the second-biggest trading day since ETF launch, clocking in at around $5.5bn of volume—but industry observers didn’t have to wait long to see that record broken
  • On Tuesday, as Bitcoin hit an all-time high, spot ETFs blew away their previous records, set only the week before
  • The ten spot ETFs combined for $10bn of trading volume, exceeding the previous record by over $2bn
  • This included records for BlackRock, Fidelity, Bitwise, and ARK’s ETFs
  • BlackRock’s IBIT was particularly impressive once again, registering $788m of inflows; according to Bloomberg ETF analyst Eric Balchunas, “for context on relative size of $IBIT's cash haul, it now ranks 2nd among all ETFs in 1D flow, 1W flow, 1M flow and 3rd in YTD flows”
  • IBIT also exceeded $10bn in AUM, less than seven weeks after trading began; the fastest-ever new ETF to reach that mark (and one of only 152 in total)
  • BlackRock also extended trading of IBIT to Brazil on Friday, broadening access to more potential investors
  • Fidelity followed BlackRock in performance, with over $400m of inflows on Tuesday
  • In total, spot ETFs recorded around $1bn of gross inflows, despite large-scale profit-taking and GBTC sell-offs
  • Balchunas characterised this performance as “bananas numbers for ETFs under 2 months old”
  • A corollary of this record volume (and the pullback from profit-taking) is that other Bitcoin-focused ETFs also experienced record trading, including BITI (a short Bitcoin ETF), and futures ETFs BITX and BITO (which did $2.5bn of volume)
  • These volumes also included a sharp uptick in outflows from Grayscale’s GBTC; which aligned with a recent agreement by crypto exchange Gemini to pay back in-kind assets lost due to the bankruptcy of lending partner Genesis
  • Vetle Lunde, senior analyst at K33 Research, believes that “Based on the pace of outflows, all the Gemini/Genesis flows should be cleared by the end of the week”
  • Speaking of GBTC, despite almost $10bn of outflows thus far (spurred by their fees sitting significantly higher than all competitors), GBTC actually has the same asset value as when it launched, thanks to the “bull market subsidy” of Bitcoin’s appreciation
  • According to Nate Geraci of The ETF Store, Grayscale’s elevated fees “look like a savvy business move at this early juncture”, taking advantage of its status as a converted fund, rather than a newly-launched ETF
  • In terms of total metrics, spot ETFs have now grown to over $50bn of assets, after launching with around $30bn; “about $8b of it is from flows, the rest from bitcoin value going up”
  • Balchunas points out that with current momentum “If they keep up this pace and add $10b a month (which is pretty insane but very poss if BTC price complies) they will pass gold ETFs this summer”
  • A student-run fund at Stanford University (funded by the university’s endowments) made the news through a 5% allocation towards Bitcoin ETFs in its portfolio
  • BlackRock filed to add spot Bitcoin exposure to both its Strategic Income Opportunities Fund ($36.5bn AUM) and its Global Allocation Fund ($18bn AUM)
  • In other ETF news, closed-end fund (and pre-conversion GBTC rival) Ospreay Bitcoin Trust announced that it intends to be bought out or merged with a Bitcoin ETF, otherwise it “intends to liquidate and dissolve the Trust within 180 days from today [Tuesday]”
  • GBTC owners Grayscale introduced a new fund predicated on staking digital assets for income, known as the Grayscale Dynamic Income Fund (GDIF)
  • This fund will feature assets from nine different blockchains, including Ethereum
  • The Arizona state senate advanced a resolution obliging local lawmakers to look into adding spot Bitcoin ETFs to the state’s retirement fund
  • The SEC delayed a decision on potential approval for options trading on spot Bitcoin ETFs, and (as widely expected) delayed a decision on BlackRock’s proposed spot Ether ETF a second time
  • The final deadline date for the first spot Ether ETF filings falls on May 23rd, so it’s not widely anticipated (based on precedent from the Bitcoin ETF process) that final approval or rejection would happen anytime before then

What happened: Tether hits record issuance, signs nation-level deal

How is this significant?

  • US Dollar-pegged Tether, the largest stablecoin on the digital asset market, surpassed $100bn in circulating supply for the first time this week, a consequence of rising demand for Bitcoin
  • Despite its USDT stablecoin’s express purpose being to remain (as the name suggests) stable in value, Tether as a company has experienced a wildly profitable year, thanks to the yield on the liquid backing for its tokens
  • According to its latest attestation report, around 76% of backing value for USDT is held in short-dated US treasury bills, and at the end of the year the firm’s excess reserves stood at $2.85bn
  • On Monday, Tether announced a new recovery mechanism, allowing users to bridge their Tether between different blockchains in the event that one chain becomes disrupted
  • According to their press release “Users would be able to verify ownership of their addresses on an unresponsive blockchain and a recipient address on another supported blockchain, and Tether will transfer the USDT between them”
  • On Thursday, Tether confirmed a memorandum of understanding with the nation of Uzbekistan
  • Tether stated that “This strategic collaboration aims to position Uzbekistan as a central hub for peer-to-peer and blockchain technology, igniting a revolution of innovation and economic growth”
  • This includes assistance to government agencies in developing legal frameworks and regulation for digital assets in Uzbekistan, as well as “facilitating the development and implementation of Uzbekistan's digital currency, exploring the potential of asset tokenization mechanisms, analysing and improving Uzbekistan's digital currency payment infrastructure and collaborating on educational initiatives to raise awareness and understanding of blockchain technology and stablecoins”
  • Last June, Tether signed a similar MoU with Georgia, and in November it announced $500m of investments in Bitcoin mining initiatives across Uruguay, Paraguay, and El Salvador
  • In other stablecoin news, rival issuers USDC agreed a deal with hardware wallet developers SafePal and Swiss bank Fiat24 to launch “a crypto-focused Visa card and in-app banking services with the dollar-pegged stable coin USD Coin (USDC) as the default deposit currency”

What happened: Terra Luna blockchain chief Do Kwon faces South Korea extradition

How is this significant?

  • A Montenegro court reversed an earlier ruling to extradite former fugitive blockchain developer Do Kwon to the United States, seeming to end an extended period of legal wrangling regarding who would try him
  • Do Kwon went on the run in 2022, following the collapse and depegging of an algorithmic stablecoin on the Terra Luna blockchain ecosystem which he developed—setting off a chain of crypto contagion events that led to cascading liquidations (including the $40bn ecosystem he’d created) and a brutal industry-wide bear market
  • Both the United States and Korea sought to try him for financial fraud, but it now appears his destination will be his homeland
  • He travelled into Montenegro on a false passport, and was apprehended through an international arrest warrant; but there nonetheless exist possibilities that Korea (his lawyers’ preferred destination due to lighter punishments for white-collar crime) could themselves strike a deal to extradite him to the US for trial in New York first

What happened: Revolut launches direct crypto purchase in leading browser wallet

How is this significant?

  • e-Bank Revolut this week announced Revolut Ramp, a feature allowing customers to top up their Metamask wallets directly from their Revolut bank account
  • Metamask is the leading self-custodied browser-based wallet for DeFi activity, available as a plugin on major web browsers—but up to now it has suffered for a lack of convenience in terms of fiat on-ramps
  • Revolut Ramp will allow users to “use their fiat currency balance in their Revolut account or pay with Visa or Mastercard cards” in order to top up the balance on their Metamask accounts
  • The service is limited to customers within the UK and EEA, and follows on from plans to release a crypto exchange for “advanced traders” first revealed last month
  • Lorenzo Santos, senior product manager at Metamask developers Consensys commented “This partnership is really about giving our users what they want—more control over their crypto, in a straightforward way, using platforms they already know and trust. It also plays a crucial role in fostering broader crypto adoption, opening up the world of crypto to more people”

What happened: MicroStrategy plans $700m convertible notes for additional Bitcoin purchases

How is this significant?

  • MicroStrategy, the leading corporate balance sheet holders of Bitcoin, are looking to expand their exposure further, through the issuance of $700m in convertible senior notes to fund further Bitcoin purchases
  • The notes will offer an interest rate of 0.625% per annum, payable semi-annually, until they mature in 2030
  • 2030 is only around halfway through what MicroStrategy founder and chairman Michael Saylor believes is now the “Gold Rush Era” of Bitcoin
  • He posits a 10 year “gold rush” window for Bitcoin starting now and ending in 2034, on the basis that “when spot ETFs were approved… that was the most consequential thing that kicked off the gold rush… in November 2034, 99% of all Bitcoin will have been mined”, meaning that supply has essentially peaked, since the last 1% will release over generational timeframes
  • MicroStrategy also announced in a press release that “The conversion rate for the notes will initially be 0.6677 shares of MicroStrategy class A common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $1,497.68 per share… a premium of approximately 42.5% over the last reported sale price”

What happened: Deutsche Börse launching regulated crypto trading platform

How is this significant?

  • German stock exchange group Deutsche Börse this week announced the launch of Deutsche Börse Digital Exchange (DBDX); a regulated crypto spot exchange for institutional clients
  • According to their press release, DBDX offers a “secure ecosystem for trading, settlement and custody of crypto assets”
  • Initially, the exchange will operate on a Request for Quote (RfQ) basis, followed later by multilateral trading
  • Swiss firm Crypto Finance will provide the custody and settlement services, enabling an experience more akin to institutional TradFi than the “one stop shop” approach of most native digital asset exchanges
  • This follows Crypto Finance’s recent approval for four crypto-linked licences last month from German regulators BaFin
  • Carlo Kölzer, Head of FX & Digital Assets at Deutsche Börse, stated: “Our new solution is a game changer for digital ecosystems. We aim to provide trusted market operations for crypto assets, ensuring transparency, security, and regulatory compliance for institutional clients in Europe”

What happened: ETF issuers VanEck outline European crypto expansion plans

How is this significant?

  • VanEck, one of the ten issuers of spot Bitcoin ETFs, believes that digital assets will play a key role in its overall asset management strategy and European footprint, according to a recent interview with industry publication Coindesk
  • The firm’s Europe CEO Martijn Rozemuller says that 10% of the company’s assets are currently derived from crypto investing products, but believes “that balance will shift. Crypto will become more important … and it will be closer to 50/50”
  • VanEck is one of the most tenured ETF issuers in terms of (attempted) digital asset exposure; they first filed for a Bitcoin ETF in 2017, six years before BlackRock entered the spot Bitcoin race
  • Back in 2021, VanEck launched the VanEck Crypto and Blockchain Innovators UCITS ETF in 2021; containing shares of publicly-traded industry firms like Coinbase Global, Block, MicroStrategy, and miners Marathon Digital and Bitfarms
  • This ETF is one of their top 15 performers by AUM, though Coindesk noted that it does face more fluctuations in value with the industry market cycles

What happened: VC News—multiple eight-figure raises

How is this significant?

  • The recent industry venture capital resurgence continued this week, with several firms achieving raises in the tens of millions of dollars
  • Encryption technology firm Zama led the way, closing a $73m Series A round co-led by Multicoin Capital and Protocol Labs at a $400m valuation
  • Zama’s co-founders have been working on the technology since 2016, using cryptographic algorithms to secure data as it travels across blockchains
  • Web3 firm Taiko raised $37m to build Layer 2 scaling solutions with a particular focus on decentralisation, setting aside $30m for developer grants to foster creation of Dapps and protocols
  • Without disclosing an exact valuation, Taiko did confirm unicorn status to TechCrunch
  • Institutional wallet provider Utila raised $11.5m in a seed round
  • The firm aims to build wallets compatible across several blockchains, splitting the private keys through multi-party computation (MPC) in order to eliminate single points of failure in security
  • A Utila spokesperson said the firm “has onboarded 35 institutions and digital asset firms to its platform to date and has facilitated $3 billion in crypto transactions over the past six months”
  • Baanx, an FCA-authorised crypto payments firm, raised $20m in a Series A, led by Ledger, Tezos Foundation, Chiron, and British Business Bank
  • The firm aims to fund US expansion efforts with the raise, alongside services in Latin America

What happened: Binance reduces services in Nigeria

How is this significant?

  • Following a reported (but later denied) $10bn fine from Nigerian authorities over alleged tax dodging, digital asset exchange Binance has cut support for the Nigerian Naira
  • Three days after announcing the shift, any remaining Naira balances on the exchange would be converted to the US Dollar pegged USDT stablecoin
  • All existing Naira trading pairs were delisted on March 7th, after delisting a week earlier on the peer-to-peer version of the exchange
  • Last week, two local Binance executives were reportedly detained as part of the Nigerian central bank’s probe
  • In an apparent move to increase adoption of the eNaira CBDC rather than crypto assets, the central bank partnered with with blockchain credit infrastructure company Gluwa
  • In a press release, the firm stated “Gluwa sets its high ambitions of onboarding millions of Nigerians by implementing its Credal technology to build credit reputations for eNaira users as a valuable new way to drive the adoption of the CBDC”
  • In other Binance news, the removal of Naira trading pairs was apparently counteracted by the addition of Japanese Yen trading pairs on both its global platform and local regulator-approved Japanese exchange

What happened: FTX agrees settlement with BlockFi

How is this significant?

  • Reuters reported this week that FTX has agreed to pay bankrupt lender BlockFi up to $874m, the conclusion of a series of lawsuits between the two contagion-felled firms
  • This includes a prioritisation of $250m payment to BlockFi, with the balance contingent on FTX repaying its own customers
  • BlockFi had issued Sam Bankman-Fried’s hedge fund Alameda Research with several loans, before the collapse of both Alameda and FTX
  • FTX recently indicated a belief they will repay customers in full (in cash based on November 2022 digital asset prices), but according to Reuters BlockFi sees itself as “unlikely to fully repay customers who had interest-bearing BlockFi accounts”
  • As part of the agreement, BlockFi renounces its claims to Robinhood shareholding funded by loans; these shares have already been seized by the US Department of Justice
News Roundups