Nickel Research Centre

Nickel News Roundup - Week 13

31st March, 2022 

Market Overview:

Positive momentum continued across the digital asset market, with many major projects posting double-digit weekly growth.

  • Bitcoin broke through several major price points in a week of continued growth that included a high of $48,080 and an 8th consecutive green daily candle for the first time since July 2021
  • On Monday, upon exceeding $46,700, Bitcoin also marked a return to year-to-date growth, after a first quarter featuring many challenges including changing monetary policy and war
  • Bitcoin’s current price of $47,120 marks an increase of around 9.4% in seven days
  • Ether followed Bitcoin’s lead, hitting a weekly high of $3,468 on Tuesday
  • Ether managed another week of double-digit growth, with the current $3,402 price representing an 11.9% increase over the week
  • Only three of the top 100 digital assets by market capitalisation (excluding stablecoins) failed to post weekly growth
  • Total market capitalisation crossed the $2tn mark for the first time since pre-conflict, growing by almost $200bn for a current value of $2.16tn
  • Total value locked in DeFi grew to $83.4bn, according to industry analytics platform DeFi Pulse

Digital assets showcased bullish momentum this week, as BlackRock’s CEO Larry Fink acknowledged growing client demand, and recognised that the outcomes of current conflicts could have benefits for the category. Other major institutional names featured in the news too this week; including Goldman Sachs, Visa, and Grayscale, alongside significant entities from outside the finance world, such as Exxon Mobil, MicroStrategy, and Sotheby’s.


What happened: BlackRock CEO confirms growing client interest in digital assets

How is this significant?
  • In his annual chairman’s letter to shareholders, BlackRock CEO Larry Fink outlined the world’s largest asset manager’s evolving view on digital assets, indicating that increasing client demand would likely lead to crypto asset services being offered 
  • He wrote that “As we see increasing interest from our clients, BlackRock is studying digital currencies, stablecoins and the underlying technologies to understand how they can help us serve our clients”
  • Fink also cited the current war in Ukraine as a factor causing reappraisal of traditional assets; “The war will prompt countries to re-evaluate their currency dependencies. Even before the war, several governments were looking to play a more active role in digital currencies and define the regulatory frameworks under which they operate”
  • He cited numerous advantages of “thoughtfully designed” digital assets, such as international settlements, remittances, and “reducing the risk of money laundering and corruption” by virtue of their decentralised and transparent nature
  • Crucially, as a letter reflecting Fink’s personal views, it appears to confirm an evolution from digital asset scepticfive years ago, to a (tentative) advocate now
  • Fink also predicted the war could have an effect on the adoption of renewable energy; “Higher energy prices will also meaningfully reduce the green premium for clean technologies and enable renewables, EVs and other clean technologies to be much more competitive economically”
  • Although Fink didn’t directly tie this point to digital assets, it could theoretically address one of the key concerns about digital assets—the carbon footprint of Bitcoin mining

What happened: Exxon Mobil pilots program to use waste gas for Bitcoin mining

How is this significant?
  • Energy giant Exxon Mobil appears to be moving into the Bitcoin mining space, using waste gas that would otherwise be burned off in the process of oil extraction
  • According to Bloomberg sources, the company has an agreement with Crusoe Energy Systems at North Dakota oil wells to “take gas from an oil well pad in the Bakken shale basin to power mobile generators used to run Bitcoin mining servers on site”
  • The project has not yet been publicly disclosed, but according to the sources has thus far saved 18 billion cubic feet of gas per month from being “flared” or burned off into the atmosphere
  • Sources said the company is now considering expansion of the scheme into five additional territories
  • Last month, fellow energy giant ConocoPhillips confirmed they were supplying flare gas from Bakken shale operations to Bitcoin mining farms in North Dakota
  • In other mining news, carbon-neutral mining company Greenidge Generation secured $100m in new financing, for the purpose of tripling their existing mining capacity

What happened: MicroStrategy uses Bitcoin-collateralised loan to fund more Bitcoin purchases

How is this significant?
  • MicroStrategy—through its recently-established Bitcoin-specific subsidiary MacroStrategy—confirmed a $205m loan from Silvergate Bank this week, for the purposes of increasing the company’s corporate Bitcoin holdings
  • SEC filings indicate the $205m loan value “was collateralized at closing by Bitcoin with a value of approximately $820.0 million placed in a collateral account with a custodian mutually authorised by the Lender and the Borrower”, indicating a continued long-term Bitcoin appreciation view by MicroStrategy 
  • The interest-only term loan is secured by a portion of the company’s Bitcoin holdings, with Silvergate CEO Alan Lane lauding the company’s “innovative approach to treasury management [as] an exceptional example of how institutions can utilise their Bitcoin to support and grow their business”
  • MicroStrategy CEO Michael Saylor was similarly enthusiastic about the deal, and what it implies for corporate Bitcoin holdings in general; “Using the capital from the loan, we’ve effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy.”

What happened: Data reveals digital asset SPAC deals outperform other SPAC companies

How is this significant?
  • Market appetite for digital assets seems to extend for crypto-related companies that have gone public via SPAC (or blank cheque company) merger deals, with data from Bloomberg confirming they are more profitable than other SPAC deals
  • The De-SPAC Index of 25 companies that went public after blank-cheque deals is down about 9% since mid-January
  • However, SPAC companies related to digital assets have bucked the trend; “Core Scientific Inc., one of North America’s largest Bitcoin miners which premiered on Jan. 20, rose 1.5% through Wednesday as of 10:05 a.m. Bakkt Holdings Inc. and Cipher Mining Inc. rose 43% and 11%, respectively, over that period”

What happened: Opera web browser adds native support for additional digital assets

How is this significant?
  • Less than three months after its initial launch, web browser Opera added support for several digital assets to its native browser wallet
  • After initial support for Ethereum, users can now experience integrated storage and transaction for Bitcoin, rising smart contract platform Solana, Layer-2 Ethereum scaling chains StarkEx and Polygon, as well several others
  • Opera ranks as the 6th-most used web browser in the world, so whilst it doesn’t have the same impact as native integration in Firefox or Chrome, it does nonetheless represent a significant amount of users in terms of overall numbers, citing 380 million worldwide
  • Additionally, the wide breadth of supported chains surpasses many web3 wallets
  • Jorgen Arnesen, Opera’s mobile EVP said in a press release “Web3 is on its way to becoming a mainstream web technology and users won't need to know they're interacting with it. They need to get a superior user experience and a true benefit”

What happened: Goldman Sachs survey reveals increasing institutional investor appetite

How is this significant?
  • According to a client survey obtained by industry media platform TheBlock, Goldman Sachs clients are generally seeking to increase their digital asset exposure
  • Of 172 clients surveyed, 60% expected to increase their investment in digital assets within the next 12 to 24 months
  • Of those, around a third expected to “significantly” increase their exposure
  • A narrow majority (51%) of clients reported existing digital asset exposure; but this represents more than 25% growth from last year’s figure (40%)
  • 55% of respondents were willing to allocate up to 5% of their total assets to the category
  • The survey also reflected a growing interest in digital assets beyond Bitcoin, Ether, and stablecoins; “15% of respondents took an interest in altcoins, 14% in DeFi token exposure, and 9% in NFTs”
  • The news follows aptly from last week, when Goldman Sachs became the first major bank to execute an OTC crypto options call
  • In other survey news from Wall Street, BNY Mellon’s recent poll of family offices included a section dedicated to “Cryptocurrencies: The Digital Assets That Can’t Be Ignored”
  • Their findings revealed that over three-quarters of family office respondents “have at least some interest or involvement in cryptocurrencies”
  • BNY also found that 53% of those invested deemed it at least somewhat important to their overall investment strategy, and over 70% of those invested planned to increase their holdings

What happened: NFT News—Visa, Sotheby’s, and Jeff Koons

How is this significant?
  • In the NFT world, there were several significant developments after a relatively quiet month-to-date
  • Jeff Koons, the world’s most expensive living artist, announced his debut NFT project, “Moon Phases”; featuring physical sculptures with NFT counterparts to be launched onto the surface of the moon, in the first manned moon mission since the 1970s
  • Visa launched an NFT creator program to help bring small businesses into the Web3 space, saying “Large merchants and brands are asking every day how they can get involved… The thing that’s so exciting to us about NFTs is we think it lowers the barrier to entry for people to build a business and sell online… We think NFTs represent a new form of e-commerce”
  • Sotheby’s will host two auctions of 24 NFTs in an official collaboration with Liverpool Football Club, with the NFTs offering additional real-world benefits, and proceeds going towards the club’s charitable foundation

What happened: Grayscale prepared for legal action in case of ETF rejection

How is this significant?
  • Digital asset investment firm Grayscale are keen to turn their $30bn Bitcoin trust (GBTC) into the first physically-backed Bitcoin ETF—and have announced willingness to take legal action against the SEC if their application is denied
  • Thus far, the SEC has granted permission for Bitcoin futures ETFs, but steered clear of officially endorsing any products based on direct rather than derivative exposure
  • Grayscale CEO Michael Sonnenschein said “I think all options are on the table come [final decision deadline] July… GBTC today has been traded since 2015 and it’s been an SEC-reporting company since January of 2020, so every single day that it is trading and being bought and sold by investors and is not being folded into the familiarity and the protections of an ETF wrapper, we really don’t feel that the SEC is doing everything they can to actually protect investors”
  • He believes that the lack of any spot ETFs is to the detriment of investors, by forcing them to only seek out futures-based products
  • Sonnenschein also pointed out that the fund currently trades below its Net Asset Value, and that the NAV and price should converge under an ETF format
  • Regardless of whether Grayscale are ultimately the first to be granted a coveted spot ETF, Sonnenschein believes that market forces will eventually make it an inevitability; “It’s a matter of when, not a matter of if, a spot Bitcoin ETF is approved”

What happened: Hackers exploit gaming sidechain for $600m

How is this significant?
  • In one of the largest digital asset exploits of all time, hackers managed to drain around $600m worth of Ether and tokens from leading blockchain gaming project Axie Infinity; the second-largest exploit in history
  • The funds were held in the “bridge” of the company’s Ronin sidechain—a cross-chain solution designed to help users send funds from one blockchain (such as the main Ethereum chain) to another (such as Axie’s own Ronin chain built on top of Ethereum)
  • Of the hundreds of millions drained from the bridge, only $17m have thus far been sent to exchanges in an attempt to cash out, with the hacker’s address blacklisted from transactions
  • Axie’s parent company Sky Mavis said they are “working with law enforcement officials, forensic cryptographers, and our investors to make sure there is no loss of user funds”
News Roundups