Nickel News Roundup - Week 42

21st October, 2021 

Market Overview:

• Bitcoin grew steadily throughout the week, crossing $60,000 on Friday, rising to a new record high above $65,000 on Wednesday, and continuing to a new peak of $66,930
• Bitcoin also experienced its highest weekly close of all time on Sunday, closing just below $62,000
• Analysts noted Bitcoin’s positive momentum included the absorption of a large sell order of around 14,000 Bitcoins in early Asian trading, demonstrating the asset’s current bullishness and liquidity
• Since July’s market lows beneath $30,000, Bitcoin has more than doubled in value
• Ether broke through $4,000 for the first time in over five months, posting a weekly high of $4,141
• The total market capitalisation of all digital assets grew by approximately $300bn, reaching a new all-time high of $2.65tn on Wednesday, eclipsing the previous record of $2.53tn on May 12th
• Total value locked in DeFi also reached record highs, growing to $104bn according to industry analytics platform DeFi Pulse

News:

• On Monday, ProShares ($65bn in ETFs managed) officially announced approval for their futures-based Bitcoin ETF to launch on Tuesday, trading on the New York Stock Exchange under the BITO ticker
• ProShares CEO Michael Shapir believes the ETF is a watershed moment for the industry after nearly a decade of attempts at ETF listings; “This is an important milestone for ETFs, alongside the first equity ETF [in the US] in 1993, the first fixed-income ETF in 2002 and the first gold ETF in 2004”
• BITO debuted with nearly $1bn in volume ($999.473m to be precise), making it the second-most-heavily traded fund ever on debut (or the most-traded according to “natural volume”, if pre-seed investments are excluded)
• The price of the fund itself rose from $40 on launch to $41.94 at the end of trading, an almost-5% gain
• James Seyffart of Bloomberg Intelligence was impressed with the ETF’s performance on its first day, saying “It absolutely obliterated” expectations, and would “likely be the biggest launch of all time”
• According to ProShares, the fund reached $570m in assets at the end of the first day’s trading, up from just $20m in seed capital, putting it on course to be the fastest fund to reach $1bn in assets
• Data from digital asset analytics firm Bybit showed Bitcoin Options Open Interest hitting its highest levels since April, rising to $14bn alongside news of the ETF launch
• The week also featured several other pieces of ETF news, as interest stretched far beyond ProShares:
• The day after ProShares’ ETF debut, VanEck revealed their own Bitcoin futures ETF approval in a post-effective filing with the SEC, revealing a likely Monday launch date for their fund 
• Last Wednesday, Cathie Wood’s ARK Investments and 21Shares filed a joint application for a Bitcoin futures ETF, with ARK pledging marketing support
• On Friday, Jacobi Asset Management gained approval from Guernsey financial regulators to launch a physically-backed Bitcoin ETF for institutional investors, custodied by Fidelity, on CBOE Europe, pending FCA approval
• Following the launch of the ProShares ETF, Grayscale and the NYSE officially filed to convert Grayscale’s GBTC fund into a spot-based ETF. The Grayscale Bitcoin Trust (GBTC) is currently the world’s largest Bitcoin fund, holding about 3.4% of the total Bitcoin supply
• Grayscale CEO Michael Sonnenschein said “We are of the firm belief that because the futures and the spot pricing for Bitcoin are inextricably tied, that we have the willingness to allow or clear the way for a Bitcoin futures ETF in the market, and also clear the way for a spot ETF”
• Industry conglomerate (and Grayscale parent company) the Digital Currency Group announced plans to purchase $1bn worth of GBTC shares ahead of any possible ETF conversion, increasing their maximum previous authorisation by $250m
• On Wednesday, Canada’s Purpose Investments announced filings for three new crypto asset ETFs, including funds specialised on Bitcoin and Ether Yield, and one dedicated to companies with digital asset exposure
• French firm Melanion Capital confirmed the launch of a Bitcoin-linked ETF on the Euronext exchange for the 22nd of October, operating through investments into companies with significant Bitcoin exposure, rather than directly buying Bitcoin

• A press release on Wednesday revealed that Japanese investment bank Nomura is moving into digital assets, through a Memorandum of Understanding with crypto custodians Komainu, and digital asset service provider Crypto Garage
• According to the release, this move will “provide digital asset custody services to institutional customers in the Japanese market”
• Komainu CEO Hensen Orser said the move would help them to address increasing institutional demand; “The evolution of digital assets is changing the financial ecosystem and Komainu is building out custody solutions as well as additional services to provide institutions with the support they need throughout the entire custody process. We are thankful for the continued support of Nomura and look forward to working with Crypto Garage to further expand Komainu’s global presence, bringing trust and transparency to the servicing of this asset class”

• According to reports in the digital asset industry press this week, French financial giant Société Générale (SocGen) are in the process of acquiring (either wholesale or through a strategic stake) a crypto asset custodian, with a view to expanding their presence in the field
• The bank has sent out a Request for Proposal, inviting firms with the ability to provide trading services and security for cryptographic keys
• One of three sources speaking to industry publication Coindesk said SocGen had a particular interest in Swiss firms Metaco (digital asset technology providers to Swiss affiliates of Gazprombank and BBVA) and Taurus (who were recently helped Credit Suisse tokenise shares of a Swiss alpine resort)
• Industry observers have noted an increased interest in custody technology acquisitions by financial institutions, beginning with PayPal’s acquisition of Curv back in March. One expert on crypto custody told Coindesk “When PayPal acquired Curv, the impact of that was that they not only acquired the firm but they took it off the market,...All those customers have had to scramble and look for alternatives”

• Morgan Stanley CEO James Gorman sounded a respectful note on digital assets during a third-quarter earnings call this week, in contrast to recent statements by JP Morgan’s Jamie Dimon
• Gorman told analysts “I don’t think crypto is a fad. I don’t think it’s going to go away… I don’t know what the value of Bitcoin should or shouldn’t be. But these things aren’t going away, and the blockchain technology supporting it is obviously very real and powerful”
• Following Morgan Stanley’s recent appoint of Sheena Shah to lead their new digital asset research team, the bank appears to have an eye on the future of the asset class
• Gorman noted that they don’t currently make direct digital asset purchases for clients, providing exposure through funds instead—but that could change according to demand; “For us, honestly, it’s just not a huge part of the business demand from our clients. And that may evolve and we’ll evolve with it. We’re watchful of it, we’re respectful, and we’ll wait and see how the regulators handle it”

• A new survey released by Nickel Digital this week showcased a rising tide of institutional investor appetite for alternative asset classes, including digital assets
• The research involved wealth managers and institutional investors from the US, Europe, and the Middle East, managing a combined $275.5bn in assets
• 53% of respondents said they believe institutional investors will “dramatically increase” the level of diversification in their portfolios over the next two years
• A further 40% also believed that diversification will increase, but by a lesser degree
• 42% of those surveyed believed institutional investors will significantly increase their allocation towards crypto assets over the next two years, highlighting the rising institutional appeal of this new asset class
• Fiona King, Head of Institutional Sales at Nickel, noted that “The digitisation of the investment management sector has revolutionised the market in terms of the transparency around different asset classes and the investment strategies that can be developed. This, coupled with developments around alternative asset classes such as cryptoassets, means the opportunities to diversify portfolios have never been greater”

• Square, the fintech company founded by Twitter CEO (and prominent Bitcoin advocate) Jack Dorsey, released news this week that they are looking at the creation of an open-source Bitcoin mining system, including new hardware
• Currently, mining hardware is primarily produced by specialist companies solely dedicated to their manufacture; Square’s move could mark the first entry of a fintech company into the field
• Dorsey wrote that the company’s efforts are motivated by a desire to further boost decentralisation, distribution, and thus security of the Bitcoin blockchain by bringing more parties into the complex world of mining infrastructure
• “Bitcoin mining should be as easy as plugging a rig into a power source. There isn’t enough incentive today for individuals to overcome the complexity of running a miner for themselves”
• As of Monday, Square held 8,000 Bitcoin in their corporate treasury, currently worth well over $520m

• Bloomberg reported this week that Citigroup’s co-head of structured products trading and solutions, Matt Zhang, has left the financial institution to pursue a new career in digital assets
• According to sources, the 14-year Citi veteran is starting his own fund aimed at venture capital investments and trading in the digital asset field
• Citi declined to comment, but Bloomberg noted he is at least the second recent senior-level departure for the crypto asset industry, following former co-head of futures, clearing and forex prime brokerage Christopher Perkins, who left in August to join a blockchain investment firm

• According to industry analytics and custodianship firm Coinshares, investment managers have increased their Bitcoin and Ether exposure to record levels, following high institutional inflows in recent weeks
• For the week ending October 17th, institutional managers held $72.3bn in digital assets, compared to $71.6bn of institutional crypto asset holdings during the market’s previous all-time high in May
• Digital asset investment products saw inflows of around $80m last week, with Bitcoin accounting for $70m

• Pennsylvania’s Stronghold Digital Mining set the final price for their IPO on Wednesday at $19, exceeding the previously-predicted range of $16-$18 per share
• Their total share offering was also upsized above expectations, rising from 5.8 million shares to 6.7 million
• Stronghold stated that they expect to raise $115m from their offering, which could potentially rise above $132m if underwriters choose to execute options they were granted
• Stronghold traded 50% above listing during its debut session, seemingly spurred by attention from ProShares’ Bitcoin ETF debut the previous day
• As a low-carbon Bitcoin miner, Stronghold is anticipated to have high demand for their shares when they start trading, and the company could further benefit from China’s recent ban on digital asset mining which saw the United States ascend to the world’s leading mining power

• Chicago-based Cboe are re-entering the digital asset market two years after abandoning it, through the acquisition (financed by cash and debt) of a digital asset trading platform
• Cboe’s acquisition of Eris Digital Holdings LLC will give the exchange operator access to Eris’ spot market, regulated futures platform, and clearinghouse
• The firm’s CEO Ed Tilly cited rising demand as the prime driving force for their return to the field, saying “The demand for digital assets is huge, and there are some early movers in the retail-broker space that are eager to see this transaction… There is a trust factor when you see Cboe operate in a geography or asset class. This is no different”
• The company aims to utilise their new resources and expertise for the development of indexes, derivative products, and market data which Tilly touts as an “all-in-one solution”
• Cboe and Eris will develop their new platform in conjunction with a committee, featuring representatives from Robinhood, Galaxy Digital, and Virtu Financial Inc, who may all acquire minority stakes in the new entity

• Leading American exchange Coinbase had a busy week, announcing numerous new partnerships and product offerings, as well as increasing regulatory efforts
• Bloomberg reported their exchange of a policy proposal promoting the creation of a new regulator and rules specifically for digital assets, rather than the application of rules created in a context when crypto assets couldn’t even be conceptualised
• Coinbase launched their first partnership with a professional sports league, becoming an official sponsor of the NBA (as well as related entities like the WNBA), following in the footsteps of rival exchange FTX, who have made several major endorsement deals
• The exchange also announced collaboration with Facebook on the creation of the social media giant’s official digital wallet—named Novi—built for the integration of various digital assets including their forthcoming Diem stablecoin
• Coinbase also revealed the development of their own NFT marketplace, capitalising on the growth of the digital asset class this year, gathering more than 1.5 million user applications for whitelisting within one week

• According to an October 18th research note when they declared crypto assets “too large to ignore”, Bank of America have expanded their recent move into digital asset research, adding 23 firms to a watchlist of those that could benefit from digital asset exposure
• This more than doubled their initial list, taking the total number of companies to 43
• BofA’s list of stocks “that may see market value expansion due to digital asset exposure” now includes the likes of AmEx, Accenture, Facebook, IBM, Microsoft, Mastercard, and Visa, amongst others
• The bank in particular identifies firms operating in the industries of “finance, technology, supply chains, social media and gaming” as those most likely to see tangible benefits from integration of digital assets and blockchain technology

• This week prominent investor Paul Tudor Jones revealed his fears of continuing inflation, as well as his admiration for digital assets
• Calling inflation “probably the single biggest threat to certainly financial markets and I think to society just in general” in a CNBC interview, he believes current government financial policy is “absolute death” for the traditional 60/40 stocks/bonds portfolio split
• However, he sees great value in crypto assets, preferring them to classic inflation hedges like gold; “We're moving into an increasingly digitized world… Clearly there's a place for crypto, and clearly it’s winning the race against gold at the moment”
• He also confirmed that he has “crypto in single digits in my portfolio”, indicating he’s at least held to his attitude in June when he advised 5% Bitcoin portfolio allocation 

• Animoca Brands, a company focused primarily on blockchain gaming, achieved a $2.2bn valuation and unicorn status this week, following a $65m investment
• Investors included Sequoia China, Alan Howard-backed 10T, and perhaps most prominently, video game developer Ubisoft
• This new raise follows a $139m round of funding in as recently as July
• Animoca Brands chairman Yat Siu claims the raise was motivated by demand for collaboration from traditional gaming entities; “We weren’t originally looking to raise another round, but some of the partners that we had viewed as strategic people wanted to work with us and collaborate on potential blockchain games and licensing deals. That led to this round”

• This week, the Banque du France conducted a trial alongside Belgian financial services firm Euroclear, successfully using a CBDC for the settlement of French treasury bonds on a blockchain testnet (a theoretical test, rather than a public release)
• Participants in the experiment traded bonds and security tokens, settling them with a government-issued CBDC, using a system developed alongside IBM
• Euroclear chief Isabelle Delorme deemed the trial a success; “We have together successfully been able to measure the inherent benefits of this technology, concluding that central bank digital currencies can settle central bank money safely and securely”
• IBM’s global director of financial markets, Soren Mortensen was similarly positive, believing that the efforts “went well beyond previous blockchain initiatives” trialling “most central securities depository and central bank processes” without involvement from any market intermediaries