Nickel Research Centre

Nickel News Roundup - Week 14

7th April, 2022 

Market Overview:

Digital asset performance cooled off after several weeks of strong growth, amidst hawkish comments from the Federal Reserve leading to wider market pullbacks.

  • Bitcoin lost some of its recent momentum this week, following forecasts of more frequent interest rate rises, and draft approval for anti-privacy measures in digital asset transactions from the European parliament
  • Bitcoin briefly topped $47,000 on Thursday and Monday, but was unable to sustain above those levels, and dipped sharply following news of proposed Fed policies including possible half-percentage point interest rate increases
  • Bitcoin’s current price of $43,500 marks a 7.5% weekly decrease, but still showcases a significant rise from around $38,000 one month ago
  • Ether outperformed Bitcoin this week, hitting a high of $3,574 on Monday, before a sharp drop on Tuesday
  • Ether’s current $3,229 price represents a 4.9% weekly drop, but as with Bitcoin, remains well above the $2,480 value one month prior
  • Total market capitalisation remains marginally above the $2tn mark, down from a weekly zenith of $2.19tn
  • Total value locked in DeFi dropped to $78.7bn, according to industry analytics platform DeFi Pulse

The digital asset market faced a pullback this week, following possible macroeconomic challenges from the Federal Reserve and European legislators. However, institutional adoption and enthusiasm continued apace; Goldman Sachs, HSBC, Brevan Howard, and BNY Mellon, as well as investment, development and approval from UAE sovereign wealth fund Mubadala, the Swedish Central Bank, and Chancellor of the Exchequer Rishi Sunak.


What happened: Goldman Sachs adding OTC Ether options trading due to client demand

How is this significant?
  • After their recent addition of OTC Bitcoin options trading, Goldman Sachs are adding the same service for the world’s second-largest digital asset, Ether
  • During a client webinar on Tuesday, Andrei Kazantsev (Goldman’s global head of crypto trading) said that Ether options would be added “in due course”
  • Goldman analysts revealed in the webinar that clients have been increasingly asking them about investing in the Ethereum network, as the blockchain’s native coin Ether is seen as “more of an investable asset class” due to widespread development efforts building on the largest smart contract platform

What happened: UK Chancellor reveals plans to make UK a “global cryptoassets hub”

How is this significant?
  • Chancellor of the Exchequer Rishi Sunak this week announced ambitions to make the United Kingdom a key player in the global digital assets scene
  • A key development includes plans to recognise stablecoins “as a valid form of payment” in the UK, potentially allowing them to exist alongside any future government-issued CBDC
  • In an official government release, Sunak said that “It’s my ambition to make the UK a global hub for cryptoasset technology, and the measures we’ve outlined today will help to ensure firms can invest, innovate and scale up in this country. We want to see the businesses of tomorrow—and the jobs they create—here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term”
  • Other aspects of the government’s plans for promotion of digital assets include establishment of a “financial market infrastructure sandbox” for experimentation, a “CryptoSprint” seminar with the Financial Conduct Authority, and a “Cryptoasset Engagement Group” for industry leaders to liaise with legislators
  • Perhaps the most headline-friendly point of the announcement was that Sunak has commissioned the Royal Mint to release NFTs this summer; likely the first-ever example of a government fiat issuer minting non-fungible tokens

What happened: Brevan Howard invests in Bitcoin scaling solution developer

How is this significant?
  • Hedge fund Brevan Howard—through its new BH Digital division—was one of the key investors in a new $70m funding round for Bitcoin technology firm Lightning Labs
  • Lightning’s Taro protocol “aims to enable high-volume transfers for fiat currencies, and other assets” directly to Bitcoin
  • By issuing assets like stablecoin on the Bitcoin blockchain and converting them to other assets through Bitcoin’s Lightning Network scaling solution, Taro could potentially help mitigate several of the asset’s major drawbacks; perceived slow transaction times and lack of direct DeFi and smart contract capabilities
  • Other significant investors included institutional Bitcoin firm NYDIG, federally-licensed digital asset bank Silvergate, Valor Equity, and Robinhood CEO Vlad Tenev

What happened: launches asset management service after $14bn valuation

How is this significant?
  • Digital asset exchange launched an asset management solution on Wednesday, shortly after the successful completion of a Series D round that valued the company at $14bn
  • The exact amount raised was not disclosed, but as with their early 2021 raise, Lightspeed Ventures and Baillie Gifford were key investors
  • Their new asset management brand will be called BCAM, offering “algorithm-based risk management exposure” to “institutional investors, family offices and high-net worth individuals”
  • Charlie McGarraugh, chief strategy officer of confirmed an increased focus on institutional customers, telling Bloomberg “like with everything in crypto, we think we are growing into the clear blue sky. It’s a big opportunity”

What happened: HSBC launches metaverse investment portfolio for high value Asian clients

How is this significant?
  • On Wednesday, HSBC announced a new fund allowing high net worth clients in Singapore and Hong Kong to capitalise on growth and investment opportunities in the rising metaverse sector
  • Access to the fund is limited to professional and accredited investors
  • Investments within the metaverse ecosystem will be concentrated on five pillars; “infrastructure, computing, virtualisation, experience and discovery, and interface”
  • Lina Lim, HSBC’s Asia-Pacific head of discretionary and funds for investments and wealth solutions, said “"The metaverse ecosystem, while still at its early stage, is rapidly evolving. We see many exciting opportunities in this space as companies of different backgrounds and sizes are flocking into the ecosystem”
  • In March, HSBC became the first major bank to purchase a virtual land plot on metaverse platform The Sandbox
  • According to a report released by Citigroup on Thursday, the metaverse could become increasingly ubiquitous in our daily lives over the next decade, potentially capturing as much as $13tn in value across 5 billion users by 2030
  • Citi wrote: “We believe the Metaverse is the next generation of the internet—combining the physical and digital world in a persistent and immersive manner—and not purely a Virtual Reality world… A device-agnostic Metaverse accessible via PCs, game consoles, and smartphones could result in a very large ecosystem”

What happened: Smart contract blockchain NEAR Protocol raises $350m in funding

How is this significant?
  • Tiger Global led a new funding round in the rising smart contract blockchain NEAR Protocol this week, with a total raise of $350m
  • This figure more than doubles their previous funding round, conducted in January this year
  • NEAR positions itself as a smart contract solution that allows more frictionless interaction with a broad audience, removing some of the finer technical knowledge required for interactions with Ethereum, whilst still remaining EVM (Ethereum Virtual Machine) compatible, to allow for interaction with the leading smart contract chain
  • According to a press release announcing the raise, the funds “will accelerate the decentralisation of the NEAR ecosystem by supporting growth across industry verticals via ecosystem funds and increasing the number of regional hubs in key community centres across the globe”

What happened: Sweden tests smart payment integration within e-Krona pilot project

How is this significant?
  • The Swedish central bank, Sveriges Riksbank, published an update on their official website on Wednesday, highlighting progress and current capabilities of their proposed CBDC
  • Tests involving the e-Krona’s integration into the existing banking infrastructure were declared successful; “it is possible to integrate a potential e-Krona into the internal systems the banks have today, and this would make it possible for their customers to exchange money in their bank account for e-Kronor, and vice versa”
  • The report also acknowledged the potential for smart payments, allowing e-Kronor to be transferred as soon as a contract is fulfilled
  • The Riksbank states “Concepts such as programmable money, smart money and smart payments are often said to be the future of payments, and this is used as an argument in favour of the new technology… we want to test and explore how such solutions can be used to create new payment services, and why they would be more effective than more traditional technologies”
  • Officials also stressed the need for some privacy provisions, to ensure a potential blockchain-based system doesn’t fall afoul of GDPR data protection requirements; “Consultation with both the Swedish and the European Data Protection Authorities may be necessary to clarify how a solution based on DLT/block chain technology relates to data protection regulations”

What happened: BNY Mellon custodies stablecoin backingleads crypto data funding round

How is this significant?
  • BNY Mellon deepened their involvement in the digital asset space this week, partnering with USDC stablecoin issuer Circle, and leading a $35m Series C round for crypto data provider Coin Metrics
  • Despite being one of the oldest (and largest) banks in America, BNY have been at the forefront of the banking industry’s involvement with digital assets, and they will now serve as “primary custodians” of the reserve assets backing popular stablecoin USDC
  • In a press release, Roman Regelman, BNY’s CEO of Asset Servicing and Head of Digital stated “Our role as a custodian for USDC reserves supports the broader [digital asset] marketplace and brings value to clients”
  • Meanwhile, on Wednesday, Coin Metrics revealed that BNY co-led their Series C round alongside Akrew Capital, with other investment from backers including Goldman Sachs, Fidelity Investments, UAE sovereign wealth fund Mubadala, Cboe Global Markets, and Brevan Howard Digital
  • As per the press release, the funding will allow Coin Metrics to finetune their data analysis services to the exacting standards of institutional investors; “financing will bolster the company's new product innovation and help the company expand into adjacent spaces, elevating their ability to usher the world's premier financial institutions into crypto markets”

What happened: European parliament approves restrictions on “unhosted” crypto asset wallets

How is this significant?
  • On Thursday, the European parliament voted (58 to 52, with 7 abstentions) to approve draft legislation aimed at enforcing AML standards in the digital asset industry by forcing centralised exchanges to collect and share information about digital asset transfers, in the same way as wire transfers
  • The move is essentially a crackdown on what parliamentarians dub “unhosted wallets”—wallets where a user directly custodies their own funds (by ownership and control of the wallet’s private key), rather than accessing them through a third party like a bank, exchange, or custodian
  • This vote was poorly received across the digital asset industry, where allowing users to hold direct control (and thus guaranteed ownership) of their funds without intermediaries is seen as a cornerstone of the asset class
  • Before being officially passed into law, the measures still need to work through European parliamentary procedure, including trilogue with the Commission and Council
  • Some analysts believe that the narrowly-passed draft could “face significant blowback from the Council and Commission, which are generally more technically savvy and less politically exposed than Parliament”
  • Implementation of the proposed Markets in Crypto Assets legislation package is scheduled to take two years, although some EU legislators wish to speed up the process with a particular eye on sanctions efficacy
News Roundups