Nickel Research Centre

Nickel News Roundup - Week 53

31st December, 2020

Market Overview:

The digital asset market made a return to bullish momentum this week, as Bitcoin surged to several new all-time highs, Ethereum also advanced strongly, and more institutional investors announced positions in cryptocurrency.

  • Bitcoin saw strong growth this week, steadily breaking through resistance levels and carving out new highs, and crossing $500bn in market cap for the first time
  • After beginning the week below $24,000, it picked up bullish momentum, breaking the $25,000 level on Saturday and consistently gaining value since, to a new all-time high of $29,330. Heading into the New Year, Bitcoin’s price is $29,140, representing a weekly increase of 25%
  • Ethereum also bounced back strongly from a pre-Christmas dip below $600, increasing from $633 to over $700 on Sunday, and hit a high of $754 late on Wednesday; currently trading at $750, for an overall weekly gain of 29%
  • XRP continued to decline due to the uncertainty surrounding the SEC’s lawsuit against Ripple, losing 17% in value over the week
  • Apart from XRP, all of the top 10 cryptocurrencies experienced growth in the last week
  • The overall cryptocurrency market cap recovered value strongly, rising from a low of $613bn on the 24th, to a high of $768bn on Thursday; its highest level since January 2018—and within $60bn of its all-time high
  • The DeFi sector reached another new Total Value Locked all-time high, non-Bitcoin DeFi value was measured at $14.9bn this week, whilst Bitcoin implemented in DeFi applications had a value of $3.9bn, for a combined value of $18.8bn

The year ended on a high for the cryptocurrency market, as most major cryptocurrencies (with the exception of XRP) posted strong growth coming out of the festive period. Bitcoin posted several new all-time highs en route to a new record value of over $29,000 per Bitcoin (and over $500m market cap), but Ethereum saw similar growth over the last week, breaking through $750 and also gaining over 20% in value.

What happenedBlackRock recruiting “VP of Blockchain” to drive demand for crypto investment offerings

How is this significant?
  • BlackRock is the world’s largest asset manager, with approximately $7.81trn in asset value—more than 10 times the current market cap of all cryptocurrency
  • The New York-based job posting indicates that they have identified the potential value that digital assets can bring to their business, with the VP’s role involving an expectation to “create and implement strategies designed to drive demand for the firm's offerings and enhance the value proposition to clients of the firm’s investments and technology offerings”
  • Senior BlackRock executives have been commenting in favour of digital assets recently, with Chief Investment Officer Rick Rieder speaking positively of Bitcoin as a store of value, saying it is “here to stay” and “will take the place of gold to a large extent”

What happened: Major exchanges delist XRP in wake of SEC lawsuit against ripple

How is this significant?

What happened: Microstrategy experiences best year since 2001 after shifting focus to cryptocurrency

How is this significant?
  • Microstrategy were one of the first in the institutional investment space to recognise the potential of cryptocurrency, and the results of that move have delivered them their best performance in almost two decades
  • Buoyed by Bitcoin’s performance, Microstrategy shares rose to over $375 on Monday; their highest level since June 2001
  • This growth comes just over a week after Microstrategy invested an additional $650m into Bitcoin, after exceeding their original $400m fund raising target from the issuance of convertible senior notes

What happened: Binance launches European-style options contracts

How is this significant?
  • As the world’s largest cryptocurrency exchange, Binance has significant opportunities to shape the behavior of retail investors
  • Introducing European-style (i.e. fixed term expiry) options could allow Binance to grow its presence in the options space, where it is still lagging behind Deribit, OKex, and
  • An advantage over the current American options is that users will be able to write the options themselves, with Binance announcing "Users can both buy the options for hedging and trading, as well as write and sell options as an issuer”
  • Bitcoin’s recent performance has been mirrored in increased volume on options, crossing $1bn in daily volume for the first time two weeks ago

What happened: SEC appoints new (acting) chairman

How is this significant?
  • Following the departure of Jay Clayton, the SEC has appointed Elad Roisman as acting chairman
  • Unlike Clayton, who denied every application for cryptocurrency ETFs, Roisman is viewed as favourably inclined towards cryptocurrency
  • Roisman noted the need to be open to cryptocurrency in the past, writing in 2018 that “the SEC must examine and re-examine its rules, regulations and guidelines to ensure that they are still working as intended to accomplish the SEC’s mission. This is most recently manifested in areas such as data protection and cybersecurity, as well as the emergence of new investments and technologies such as initial coin offerings and blockchain”
  • Although his tenure could be a short one depending on decisions by the incoming administration, it nonetheless evidences potential acceptance of cryptocurrency within the financial administration of US government

What happened: Bitcoin outperforms gold in 2020

How is this significant?
  • In a year as socially and financially turbulent as 2020, the traditional hedge of gold may have been expected as top performer—instead, Bitcoin led in terms of return on investment
  • The Independent noted that Bitcoin in fact performed significantly better than gold in 2020, “outperforming the combined gains of gold and the Dow Jones stock market by a factor of 10”
  • This outperformance has been particularly striking in the fourth quarter, usually a strong time of year for precious metals, with Bitcoin outperforming Gold by over 170% over the three months from 1st October
  • Bitcoin’s positioning as “digital gold” appears to be reinforced by these statistics, with the newspaper calling it a “safe-haven asset”, and writing “bitcoin’s bull-run has largely been the result of massive institutional investment moving into cryptocurrency.”

What happened: Cryptocurrency mining sees major developments in investmentrevenueand geographic diversification

How is this significant?
  • Investing in cryptocurrency mining infrastructure demonstrates a belief in increasing demand; spending money on more optimised mining hardware in order to benefit from increased retail and institutional demand
  • NASDAQ-listed Marathon Patent is betting big on this potential, buying $170m worth of miners from producer Bitmain, tripling the scale of their mining operation, and representing “the largest order in dollar terms as well as the single largest order for S-19 ASIC miners that Bitmain has ever received”
  • Cryptocurrency mining company Riot Blockchain surpassed $1bn in market cap for the first time this week, after its share value increased 1,250% in 2020. Before pivoting from biotech to Bitcoin mining in 2017, the company’s value was $50m
  • The Nordic region is increasing its presence in the cryptocurrency mining sector thanks to cheap (and carbon-neutral) electricity, with Philip Salter of Genesis Mining noting that “during the last year our profitability has more than tripled… There is a very important strategic shift away from mining in China to mining in western countries like Sweden as Bitcoin investors become more public and want more stability and critical safety”
  • Bitcoin miner revenue by terahash per second (TH/s) has reached a new 2020 high, exceeding pre-halving levels in February (when mining difficulty was significantly lower). Bitcoin miners are currently earning nearly $22m in block subsidies on a daily basis

What happened: First Japanese Yen-backed stablecoin is approved

How is this significant?
  • Although Japan is a significant presence in the digital assets field, a lack of locally-pegged stablecoin has complicated trading somewhat
  • Now, the New York Department of Financial Services has granted permission to Tokyo-based internet conglomerate GMO-Z to “issue, administer and redeem” stablecoins pegged to both the Japanese Yen and US Dollar
  • A JPY stablecoin can simplify the process of conversion to fiat for Japanese traders and investors, with GMO-Z president Ken Nakamura saying in a statement that “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe-haven asset”

What happened: Sweden officially launches review into digital currency

How is this significant?
  • Many countries have already announced or conducted reviews on the feasibility of digital currencies or CBDCs, but Sweden is doing so from the context of widespread acceptance of digital payments already
  • According to the Bank for International Settlements, Sweden is the world’s most cashless society, with a Swedish Riksbank report from October revealing that cash usage is at its lowest levels ever; under 10% of all payments
  • The Swedish central bank is already running a pilot scheme with Accenture on creating a retail e-Krona built on blockchain technology
  • The review (concluding in 2022) aims to explore the feasibility of moving the entire Swedish economy to digital via the e-Krona
  • Meanwhile this week, the Central Bank of Russia declared that digital currencies may make SWIFT “redundant”, adding further impetus to national CBDCs and cryptocurrency efforts

What happened: India considers Bitcoin-specific tax law

How is this significant?
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