Nickel Research Centre

Nickel News Roundup - Week 1

6th January, 2022 

Market Overview:

Digital assets had a steady start to the year, with Bitcoin and Ether trading in a relatively tight range before dropping heavily late on Wednesday.

  • Bitcoin hit a weekly high of $48,450, and spent the majority of the week trading between $46,000 and $48,000, before hitting a low of $42,760 on Wednesday in a series of quick sell-offs
  • The main reason posited for the steep sell-off were minutes from the Federal Reserve’s December meetingreleased on Wednesday, which indicated the possibility of interest rates being increased earlier than expected
  • Another catalyst for the drop is believed to be a significant fall in Bitcoin’s hash rate due to political instability and resultant internet outages in Kazakhstan—one of the world’s leading Bitcoin miners
  • With Kazakhstan-based miners and mining pools removed from network participation, hash rate dropped, making it computationally easier to mine Bitcoins; and therefore cheaper for miners to sell them at a profit
  • Bitcoin is currently priced at $43,250, down about 8.4% from last week
  • Ether rose to a high of $3,876 on Tuesday, before dropping in tandem with Bitcoin to levels below $3,500, hitting a weekly low of $3,432
  • Ether is currently priced at $3,462; a 6.9% weekly decline
  • Total market capitalisation declined from weekly highs of $2.27tn to $2.07tn during the Wednesday drop
  • Total value locked in DeFi remained steady, at $100.6bn, according to industry analytics platform DeFi Pulse

2022 started with relatively sedate trading activity, before big sells on Wednesday evening led to a marketwide dip. However, the activity outside of markets was positive; Goldman Sachs outlined a continued growth prediction for Bitcoin versus gold, MicroStrategy increased its Bitcoin holdings, Airbnb announced interest in digital asset integration, Opensea achieved a $13.3bn valuation, and Samsung, Square Enix, Mexico, and El Salvador featured in a diverse lineup of other newsmakers across various fields of the crypto asset spectrum.


What happened: Goldman Sachs analysts forecast $100,000 Bitcoin as store of value grows

How is this significant?
  • According to a new research note published this week, Goldman Sachs analysts believe Bitcoin could hit a $100,000 price point over the next 5 years with a compound annualised return of up to 18%
  • Zach Pandl, Goldman's co-head of global FX and EM strategy, believes that Bitcoin is poised to win more of the "store of value" market share from gold, as institutional investors continue warming to digital assets, and Bitcoin's value as a hedge against monetary policies continues to shine
  • Pandl believes Bitcoin’s float-adjusted market capitalisation is around $700m, accounting for approximately 20% of the “store of value” market alongside gold (calculated as $2.6tn of gold available for investment). This share could grow to 50% of “store of value” investments within 5 years as gold has comparatively underperformed Bitcoin in recent years
  • He also predicts that concerns over Bitcoin mining won’t prove a significant deterrent to institutional investors, despite media noise on the issue

What happened: SEC delays NYDIG Bitcoin spot ETF decision

How is this significant?
  • Unlike recent Bitcoin spot ETF applications that were dismissed before their full consideration period had elapsed, the United States SEC chose to delay a final decision on an application from NYDIG until the 16th of March
  • A division of Stone Ridge asset management, NYDIG has gained prominence over the last year and a half for brokering major Bitcoin purchases by firms like MassMutural and Liberty Mutual, as well as a record-equalling $1bn funding round from investors including Morgan Stanley
  • Whether their links to established presences in the world of traditional finance are enough to allay the SEC’s previous justifications for spot ETF rejections remains to be seen
  • In other SEC news, Corey Fraser was appointed by chairman Gary Gensler this week to a new senior advisory role to oversee “policymaking and interagency work relating to the oversight of crypto assets”

What happened: Miami mayor proposes “crypto compact” amongst US mayoral group

How is this significant?
  • Miami mayor Francis Suarez, one of the leading digital asset advocates in the US political arena, made moves this week to encourage the adoption of Bitcoin and crypto assets amongst other mayors across America
  • On Monday, Suarez took over as head of the US Conference of Mayors, the official non-partisan organisation of all major American cities
  • In his new role, he pledged to encourage innovation and the adoption of a “crypto compact”
  • Although detailed contents of the compact have not yet been publicly disclosed, Suarez did comment on its purpose, saying “I’m going to ask my friends, my brothers and sisters, the mayors of this country to sign on to a mayoral crypto compact, because we need to lead in the absence of leadership… We need to make sure that a generation of prosperity and innovation is not lost because of a lack of innovative spirit”

What happened: Samsung introduces NFT support in CES 2022 device showcase

How is this significant?
  • Samsung—the world’s 5th-most valuable brand in last year’s Interbrand rankings—became the first major electronics retailer to announce native support for digital assets at this year’s Consumer Electronics Show (CES)
  • The Korean electronics giant has committed to rolling out support for NFTs across their smart TVs from this year onwards, including marketplace capabilities as well as display options and metadata access
  • According to statistics from 2017-2020, Samsung is the world’s most popular manufacturer of smart TVs, consistently maintaining about 1/3rd of overall market share—thereby potentially bringing this growing technology and asset class further mainstream
  • In a press release, Samsung acknowledged the growing interest in the technology, saying “With demand for NFTs on the rise, the need for a solution to today’s fragmented viewing and purchasing landscape has never been greater… In 2022, Samsung is introducing the world’s first TV screen-based NFT explorer and marketplace aggregator, a groundbreaking platform that lets you browse, purchase, and display your favorite art—all in one place”

What happened: MicroStrategy adds to Bitcoin holdings during December dip

How is this significant?
  • According to their latest regulatory filing, leading corporate Bitcoin holder MicroStrategy added more Bitcoin to their treasury last month “buying the dip” as Bitcoin’s price declined in December
  • The filing states that they purchased an additional 1,900 Bitcoins between the 9th and 29th of December, bringing their overall holdings above 124,000 Bitcoins
  • The document specified an average purchase price of $30,159 across their Bitcoin treasury, meaning an overall asset appreciation in excess of 50%
  • MicroStrategy’s share price benefitted from their Bitcoin strategy in 2021, rising by 47%—a nearly direct mirror of Bitcoin’s own appreciation in that timeframe

What happened: NFT marketplace Opensea reaches $13.3bn valuation in latest funding round

How is this significant?
  • On Tuesday, leading NFT marketplace Opensea announced it had secured $300m in new venture capital, bringing its current valuation to $13.3bn within four years of founding
  • According to data from Pitchbook, companies in the NFT field secured $3bn in VC funding throughout 2021, equating to about 1/10th of total investments into digital assets
  • Opensea said the funding would be used to grow its team, including doubling of headcount within its security and trust team
  • The New York Times noted digital asset startups of all kinds now have enough appeal to poach staff from established tech giants; “Start-ups focused on cryptocurrencies and NFTs are recruiting droves of employees from big tech companies like Meta, Google and Amazon, luring them with the promise of working on new—and potentially lucrative—technologies”
  • In other news related to the rise of NFTs as an investment prospect, Opensea experienced $3bn trading volume in December, and Metaversal—an investment fund focused on NFTs—secured $50m in Series A funding from investors including Franklin Templeton

What happened: Mexican Central Bank announces plans for CBDC by 2024

How is this significant?
  • Mexico became the latest major economy to outline plans for CBDC development, forecasting a nationwide launch by 2024
  • Banxico, as the central bank is known, stated that “These new technologies and next-generation payment infrastructure are extremely important”
  • Although the Mexican government doesn’t currently allow banks to offer digital asset custody services, some major financial figures, like billionaire Ricardo Salinas Pliego, urge their adoption; he published a New Year’s message advising followers to minimise exposure to fiat currency, whilst hoping to accept Bitcoin in his Banco Azteca banksafter accepting it as payment across his Elektra retail chain in mid-December 

What happened: Airbnb CEO notes demand for digital asset payment options

How is this significant?
  • Brian Chesky, the CEO of Airbnb, tweeted this week, revealing that the most sought-after new feature for the company to integrate in 2022 was the use of crypto assets as a payment method
  • He declared “We are looking into this”, after previously hinting at the possibility during a Fox Business interview in September 2021
  • Coinbase CEO Brian Armstrong was previously Airbnb’s technical manager before leaving to start up the digital asset exchange, potentially providing Chesky with an easy route into digital asset payment processing or custody
  • In their 2020 IPO prospectus, the company recognised digital assets as a key to remaining competitive going forward, writing “Our future success will also depend on our ability to adapt to emerging technologies such as tokenization, cryptocurrencies, new authentication technologies, such as biometrics, distributed ledger and blockchain technologies, artificial intelligence, virtual and augmented reality, and cloud technologies”
  • Chesky noted that since 2013, Airbnb has processed over $336bn in payments for its range of properties, representing a huge potential utility for crypto assets

What happened: El Salvador advances plans to issue Bitcoin bonds

How is this significant?
  • El Salvador, the first nation to officially recognise Bitcoin as legal tender, is enhancing the presence of the asset within their economic infrastructure, as they prepare legislation related to the issuance of Bitcoin bonds
  • On Tuesday, Finance Minister Alejandro Zelaya announced that the government has prepared 20 separate bills to provide a legal framework for the bond issuance, with Zelaya saying in an interview on local television that they will provide “legal certainty” for anyone who purchases the bonds
  • The inaugural bond aims to raise $1bn, with a coupon of 6.5%. Half the funds raised are earmarked for infrastructure development, whilst the other half will go towards Bitcoin purchases
  • The country’s president Nayib Bukele also tweeted a series of Bitcoin predictions this week, including a forecast oversubscription of the Bitcoin bonds and commencement of infrastructure construction funded by their sale

What happened: Video game developer Square Enix announces plans to invest in NFT gaming

How is this significant?
  • In a New Year’s letter outlining the company’s plans for 2022, Square Enix president Yosuke Matsuda announced the company’s interest in blockchain gaming and NFT asset integration
  • Square Enix are one of the largest and most culturally-relevant video game developers in the world, best known for their popular Final Fantasy franchise of games
  • In the letter, Matsuda wrote “Incorporating decentralized games into our portfolio in addition to centralized games will be a major strategic theme for us starting in 2022”
  • He also recognised the increasing maturity of the technology, saying “blockchain games, which have emerged from their infancy and are at this very moment entering a growth phase, are built upon the premise of a token economy and therefore hold the potential to enable self-sustaining game growth. The driver that most enables such self-sustaining game growth is diversity, both in how people engage with interactive content like games, and in their motivations for doing so”
  • Reaction online was mixed, with many gamers expressing reservations due to concerns over carbon footprint of the technology, or a long-running vendetta against the digital asset industry due to previous use of computer graphics cards in Bitcoin mining hardware
  • Reaction in the markets however was much more positive; on the first day of trading after the letter was published, Square Enix experienced its largest increase in share price since August 2021
  • Matsuda also disclosed that the company will keep an eye on “potentially issuing our own tokens in the future”, which could strengthen their position in the rising Metaverse space
News Roundups