Nickel News Roundup - Week 34

26th August, 2021 

Market Overview:

• Bitcoin briefly traded above $50,000 on Monday, with a 7-day high of $50,480
• As was the case last week, profit-taking occurred on Tuesday, leading to a retrace current values of 46,910; a 6% weekly growth
• Sunday’s close marked Bitcoin’s longest consecutive weekly run of growth since November last year
• Ether grew 4% over the week, with a weekly high of $3,373 on Monday and a current price of $3,103
• Altcoin Cardano rose to third by overall market capitalisation as a smart contract upgrade approaches, leading to 33% weekly growth and a new record high of $2.97 per coin on Monday
• Overall market capitalisation once again crossed $2tn, reaching a weekly high of $2.17tn and a current value of $2tn
• 89 of the top 100 digital assets by market capitalisation performed positively over the week, with several altcoins posting double-digit growth
• Total value locked in DeFi grew in line with the appreciation of Ether and Bitcoin, rising more than $5bn to $96.7bn

News:

• On Tuesday, reports emerged that Citigroup is undertaking the necessary regulatory filing to offer Bitcoin futures trading to clients
• A spokesperson of the bank said this move is being driven by institutional-level customer demand
• Speaking to Reuters, the representative said “Given the many questions around regulatory frameworks, supervisory expectations, and other factors, we are being very thoughtful about our approach. We are presently considering products such as futures for some of our institutional clients, as these operate under strong regulatory frameworks”
• Additionally, industry publication Coindesk observed that Citi are currently recruiting for new crypto-focused employees at their London office, with the job posting noting “The team is likely to win approval to begin trading CME Bitcoin futures first and then Bitcoin exchange-traded notes (ETNs)”

• Following on from the recent examples of Morgan Stanley and JP Morgan, Wells Fargo became the latest major American bank to develop a Bitcoin fund for private wealth clients, working in conjunction with NYDIG
• The fund will offer clients indirect exposure, as is the case of the other recently-created NYDIG funds
• In May, Wells’ Investment Institute’s head Darrel Cronk declared that Bitcoin has “hit an evolution and maturation of its development that allows it now to be a viable investable asset”
• As one of the “Big Four” of the US banking sector, this move by Wells Fargo indicates a growing acceptance of Bitcoin from the world of traditional finance and Wall Street

• According to a report in Forbes on Thursday, the world’s largest asset manager, BlackRock, has joined other financial titans like Fidelity and Vanguard in purchasing shares of digital asset mining companies—at a grand scale
• A mandatory SEC filing disclosed that the $9tn asset manager has committed almost $383m of capital across two mining companies; Marathon Digital and RIOT Blockchain
• This equates to slightly more than a 6.6% stake in each company, with exposure obtained across a range of its indexes, ETFs, and mutual funds, rather than one single direct purchase
• Earlier this month, Forbes also reported that Fidelity took a 7.4% stake in Marathon Digital, indicating optimism regarding future growth of the digital asset class (and the infrastructure required to run it)
• Days after news of BlackRock’s investments came to light, RIOT Blockchain announced record earnings in Q2, with net income of 22 cents a share compared to a loss of 31 cents a share in Q2 2020

• In a blog post titled “NFTs mark a new chapter in digital commerce”, Visa announced the purchase of a CryptoPunk (the earliest known collection of NFTs on Ethereum) and published a 17 page paper on the applications of non-fungible tokens for businesses
• Explaining their $150,000 purchase of the historical NFT, Visa’s head of digital assets Cuy Sheffield wrote that it was part of a learning experience, and that “We think NFTs will play an important role in the future of retail, social media, entertainment, and commerce. To help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store, and leverage an NFT”
• However, he added that the purchase was also driven by a recognition of value beyond practical teachings; “we wanted to collect an NFT that symbolizes the excitement and opportunity of this particular cultural moment. We’re a company steeped in the history of commerce and payments — but with our eyes on the future. With our CryptoPunk purchase, we’re jumping in feet first. This is just the beginning of our work in this space”
• Although NFTs have grown exponentially in value this year, Visa’s purchase appears to mark the first known instance of a corporation announcing an intent to collect and invest, rather than just individuals doing so
• In their report, Visa outlined their potential in various audience-led industries, writing “This new form factor for commerce has vast potential in the sports and entertainment world, representing a deeper and more dynamic way to engage fans and potential new revenue streams for organizations”
• Visa were keen to promote this move, changing their social media profile image to a representation of the NFT, and the collector market responded enthusiastically, with 90 other pieces from the CryptoPunks collection being sold within an hour after the announcement, for a total of $20m
• NFT enthusiasm continued to grow globally; leading exchange OpenSea set a new record of $194m trading volume on Monday, $70m above a record set the previous day, and August has already quintupled July’s trading volumes

• A new study commissioned by Nickel Digital this week showcased growing levels of demand for digital assets from British institutional investors
• The survey was focused on top-level investors, polling 23 wealth managers and institutions overseeing $66.5bn in assets
• 11 respondents expected to increase their exposure to digital assets, whilst a further 6 expected to dramatically increase it
• 16 of the 23 respondents believed that “structural long-term capital appreciation prospects of cryptoassets” was the key reason to increase allocations towards the asset class, with an increased confidence and improving regulatory environment being the next most-commonly cited factors driving their optimism

• On Thursday, Coinbase CEO Brian Armstrong announced that the company’s board has improved half a billion dollars towards buying digital assets for the company’s balance sheet
• Additionally, the company will use 10% of their profits to purchase digital assets, although Armstrong noted that “I expect this percentage to keep growing over time as the cryptoeconomy matures”
• The publicly-listed company is reaffirming its long-term commitment to the industry, according to Armstrong “Our investments will be continually deployed over a multi-year window using a dollar cost averaging strategy. We are long term investors and will only divest under select circumstances, such as an asset delisting from our platform”
• Given their position as an exchange, he also noted it could be possible for the company to make their investments informed by data of which assets their customers hold, but will make trades on third-party exchanges or in OTC deals to avoid conflicts of interests
• This week also saw reporting by the Wall Street Journal that Coinbase have been exercising prudent financial management, amassing a “war chest” of $4.4bn to ensure continued growth in the event of any major market pullbacks, regulatory uncertainties, or a prolonged “crypto winter”

• There were more applications this week for digital asset ETFs and ETPs, with a continuation of the recent Bitcoin futures ETF trend visible in filings
• AdvisorShares filed for a managed Bitcoin futures ETF, advised by digital asset specialists Morgan Creek Capital
• Deutsche Börse’s Eurex derivatives exchange announced the launch of Bitcoin ETN (exchange traded note) futures next month “to meet significant demand from institutional investors”
• On Tuesday, a regulatory filing by Nasdaq revealed a Bitcoin futures ETF application by Valkyrie that hadn’t previously been publicly disclosed, but could leave Valkyrie in a beneficial position having already secured a partner exchange
• Both VanEck and ProShares abruptly withdrew applications for Ether futures ETFs, leading some analysts to speculate that the SEC is only encouraging Bitcoin futures ETF filings at this time 

• MicroStrategy, the largest corporate holders of Bitcoin, added more of the leading digital asset to their balance sheet this week, executing the purchase of an additional $177m worth at an average of almost $45,300 per coin
• This brings the company’s holdings to just under 109,000 Bitcoins in total, at a cost of $2.92bn and an average price around $26,800
• Purchasing more Bitcoin so far above their average cost signals the continuing confidence in the asset from MicroStrategy CEO (and prominent Bitcoin advocate) Michael Saylor
• This was the first Bitcoin purchase for MicroStrategy since June, indicating that institutions may begin moving back into digital assets following market uncertainty over the last couple of months

• After its acceptance of digital assets in America formed a catalyst for increased market confidence in late 2020, payments giant PayPal this week announced that they were expanding crypto capabilities for customers elsewhere, starting with the UK
• The move marks the first international expansion of their policy, starting this week
• British customers will be able to buy, sell, and hold Bitcoin, Ether, Litecoin, and Bitcoin Cash on their PayPal accounts—but won’t be able to use them for payments or withdraw them to personal wallets at launch
• The app also allows them to track values in real time and access educational materials about digital assets
• Jose Fernandez da Ponte, PayPal’s general manager for digital assets, told CNBC that their ease of entry has been a key factor in introducing new customers to crypto; “It has been doing really well in the US. We expect it’s going to do well in the UK”

• Following on from reports last week of $400bn AUM asset managers Neuberger Berman investing in digital assets, the company clarified their approach this week through a SEC filing
• According to the filing, “effective immediately”, the company’s Commodity Strategy Fund can invest up to 5% of its value in Bitcoin futures and Canadian-listed Bitcoin ETFs
• The filing was an update replacing a previous version from August 11th, with key differences including the removal of any Ether exposure
• Until there is more regulatory clarity, it appears that the firm will not directly purchase Bitcoin, but only invest in derivatives

• After Chinese regulations in June shut down a significant share of its Bitcoin mining, a great deal of the total hashpower was wiped off the market, leading to a large decline in hashrate—the overall computational difficulty required to mine new Bitcoins
• On-chain analysis from industry data scientist Cryptoquant found that after dropping to a low of 52bn GH/s on the 28th of June, overall hashrate has now rebounded to 152bn GH/s, as Chinese mining power migrated overseas following local bans
• The higher hashrate is good for the security of Bitcoin, making it more difficult to manipulate due to larger amounts of computational power required to control a majority of the network

• A new investor note by Bloomberg ETF analysts Eric Balchunas and James Seyffart this week predicted that after years of waiting, a Bitcoin ETF approval could be imminent, perhaps even as soon as October
• Explaining their position, they cited several companies (including VanEck and ProShares) recently filing Ether ETF applications, only to withdraw them within days—thus speculating that the SEC is in regular contact with issuers “iron out” any potential issues and allow them to launch as close to 75 days after filing as possible
• Balchunas was keen to stress that the approval is more imminently likely for Bitcoin futures ETFs, rather than direct physically-backed Bitcoin ETFs
• In the opinion of Bloomberg analysts, ProShares is the “favourite” for the first launch, since their recent Bitcoin Mutual Fund launched just 77 days after filing

• Several significant events happened on opposite sides of the globe this week, involving national governments deepening their economic integration of digital assets
• In China, an article in the China Securities Journal reported that the country’s CBDC was used in the settlement of domestic futures for the first time, praising it as a “zero cost, efficient, and convenient” form of payment
• The e-CNY was used to pay warehouse storage fees in the city of Dalian, assisted by the Bank of Communications and the Dalian branch of the Bank of China
• Additionally, Chinese media reported a wave of small and medium-sized banks adding Digital Yuan wallets into their mobile banking apps, as the fullscale launch of the CBDC edges closer
• 35 banks ranging from joint stock companies to rural cooperatives were cited in the report, with another 91 Chinese and 3 foreign banks apparently seeking access to the e-CNY via a Shanghai-based clearing platform
• Other media reports noted that one of the country’s largest retailers, JD.com, successfully trialled the Digital Yuan with corporate customers, citing one who remarked that payments “meet the requirements of corporate financial and tax audits, but also simplify the operation process, which greatly reduces our labor costs and improves our daily operational efficiency”
• Meanwhile in Central America, El Salvador’s official integration of Bitcoin as legal tender moved closer this week, as president Nayib Bukele announced the country’s official Bitcoin wallet, named Chivo, will launch on September 7th
• Usage of the wallet isn’t mandatory for legal tender Bitcoin transactions in El Salvador, but those who download it will be awarded a pre-loaded $30 worth of Bitcoin
• Citizens will also be able to withdraw their Bitcoin as cash at over 200 official kiosks across the country

• Pennsylvania-based Customers Bank ($19.6bn in assets) became the third federally-insured banking companyto offer direct services to businesses involved in the digital asset sector this week
• They join California’s Silvergate Bank, and New York’s Signature in offering accounts and 24/7 blockchain payments platforms for crypto enterprises
• Customers’ head of digital assets, Cameron Somers said “We are well-positioned to be a great third banking option that can offer a strong offering to the digital asset space. The main focus is to build a low cost deposit franchise very similar to what Signature Bank and what Silvergate Bank has done”

• This week, Deloitte published a new study providing insight into the attitudes of senior executives globally towards the emergence of digital assets and blockchain
• Conducted with 1,280 executives across 10 major financial markets, the results returned spoke overwhelmingly in favour of digital assets going forward
• 76% of those polled believed digital assets will be a “strong alternative to or replacement for” fiat currencies within the next 10 years
• Financial executives in the survey responded the most strongly in favour of digital assets than other industries; 83% believed there are compelling opportunities for digital assets within their projects, the same amount believed partners, customers, and competitors are currently examining crypto, and 77% believed their companies would be at a competitive disadvantage if they don’t adopt blockchain and digital assets

• Blockstream, a company founded in 2014 and dedicated to developing the technological infrastructure around Bitcoin, became the latest in a recent line of digital asset startups to exceed a $1bn valuation
• They did so by concluding a $210m Series B raise, including investment from 113-year old Scottish firm Baillie Gifford, and iFinex
• Explaining their participation, a Baillie Gifford spokesperson said “We have enormous respect for Blockstream’s founders and management team, and we believe its settlement network for bitcoin-based assets and securities has the potential to transform the design and operation of capital markets”
• The raise gives Blockstream a total valuation of $3.2bn, and was immediately followed by Blockstream’s acquisition of Bitcoin mining hardware developers Spondoolies, with Blockstream CEO Adam Back saying; “the team’s pedigree in Bitcoin ASIC design and engineering complements our enterprise-class mining infrastructure, and will accelerate our continuing expansion and decentralisation of the bitcoin mining space”

• In contrast to some British high street banks, Lloyds Banking Group appears to be embracing the potential of digital assets, noting in a new job posting for a senior Digital Currency Manager that “The technology continues to evolve rapidly with the potential for it to be incorporated into traditional financial services”
• As the largest retail bank in the UK (30 million customers), this move could position Lloyds at the forefront of deeper blockchain, distributed ledger, and digital asset integration within their banking infrastructure
• According to the posting, the successful candidate will be responsible for developing payments use cases, CBDC integrations, and investment strategies around digital assets
• Lloyds recognise the potential of the sector, noting that: “The outlook for digital assets has shifted markedly as a number factors have converged to make them ready for the possibility of wider adoption. Regulatory clarity is improving whilst central banks are actively exploring digital currencies. 86% are running pilots, and certain geographies, e.g. China, are close to going live”