Nickel Research Centre

Nickel News Roundup - Week 26

1st July, 2021 

Market Overview:

Digital assets continued to rally from last week’s losses, with Bitcoin, Ethereum, and a host of altcoins all posting strong 7-day growth

  • Bitcoin recovered from last week’s negative performance, bouncing above $30,000 on Saturday and hitting highs of $36,540 on Tuesday, with current prices of $33,300 representing a modest growth over the 7 day range
  • Ether likewise had a positive week, recovering previous losses with a high of $2,242, and an 11% weekly growth at current values of $2,137
  • The overall market capitalisation of digital assets grew slightly, to $1.4tn
  • The total value locked in the DeFi sector rallied to $61.5bn thanks to the steady performance of Ether and Bitcoin

Digital assets recovered from last week’s declines, with the only piece of concern coming from digital asset exchange Binance being barred from conducting derivatives trading within the UK and Ontario. In contrast, tens of millions of bank accounts in America gained access to Bitcoin trading, Citigroup created a division dedicated to digital assets, Deutsche Börse spent over $100m on a crypto custody acquisition, and TP ICAP, Fidelity, and Standard Chartered joined forces to create an institutional investment platform.


What happened: Over 20m American bank accounts provided exposure to Bitcoin trading

How is this significant?
  • Investment services company NYDIG struck a deal this week with enterprise payments company NCR, effectively giving 650 banks and credit unions access to Bitcoin trading
  • Reports of customer numbers affected by this have varied, but range from 18m accounts to 24m accounts
  • Financial services that choose to make use of Bitcoin trading capabilities won’t have to custody the assets for their customers, thus saving on infrastructure upgrade costs; custody will be handled by NYDIG
  • NYDIG inked a similar deal with Texas-based Q2 last week, gaining access to 18.3m registered users on the Q2 platform.
  • According to Q2 EVP of Emerging Business, Jonathan Price, demand for digital assets across banking is growing; “According to a December 2020 study by Cornerstone Advisors, 15 percent of U.S. consumers own Bitcoin or some other form of cryptocurrency… The consumer survey also revealed that the majority of these crypto owners would use their banks to invest in cryptocurrency if they had the choice to do so. We are excited to work with NYDIG to enable financial institutions to take advantage of this market opportunity and meet the demands of their account holders”

What happened: Citi creates “Digital Assets Group” dedicated to blockchain and crypto assets

How is this significant?
  • Citigroup became the latest major bank to create a dedicated crypto division this week, with the formation of their “Digital Assets Group”
  • According to a memo seen by Bloomberg, the digital asset division will concentrate on HNW and institutional investors, sitting within its wealth management division
  • In addition, the memo revealed that the group’s leaders “will be responsible for developing our future product capabilities, client delivery mechanisms and thought leadership around all digital assets”, as well as liaising with “all other business groups at Citi that are expanding into this rapidly emerging space”
  • Citi’s decision comes after acknowledgement last month of a “rapid uptick” in demand for Bitcoin by clients, and follows similar moves this year from competitors including State Street, Morgan Stanley, and JP Morgan

What happened: Andreessen Horowitz raises over $2bn for digital assets VC fund

How is this significant?
  • Digital asset-focused VC Andreesen Horowtiz (a16z) this week announced a total raise of $2.2bn for their “Crypto Fund III”
  • This almost quadruples the $515m size of their previous fund (launched last April), and more than doubled the initial expected raise of $1bn, indicating the scale of interest in early-stage investments for the digital asset industry
  • According to their blog post announcing the deal, a16z intend to fund businesses across a variety of development stages, as well as leverage the emerging capabilities provided by smart contracts and DeFi; “We’ll continue to deepen our focus on the kind of behaviors our entrepreneurs expect from a crypto investor including staking, delegating, running nodes, actively participating in governance and designing mechanisms”
  • A16z also announced the hire of former SEC official Bill Hinman to their board, marking another major name from American financial legislation to make the leap into the crypto asset space

What happened: Cathie Wood’s ARK Invest files application for Bitcoin ETF

How is this significant?
  • SEC filings this week revealed that ARK Invest (in partnership with European ETP issuer 21Shares) have become the latest company to submit an application for a Bitcoin ETF
  • According to the filing, the “ARK 21Shares Bitcoin ETF" would be linked to the S&P Bitcoin Index for price tracking, and utilise 21Shares’ expertise in ETP creation, several of which are trading on exchanges across Europe
  • In May, ARK’s CEO Cathie Wood joined the board of 21Shares’ parents company, signalling her intent to bring Bitcoin ETPs to America

What happened: Morgan Stanley invests heavily in Bitcoin Trust shares

How is this significant?
  • This week, Morgan Stanley filings with the SEC revealed a sizeable purchase of Bitcoin exposure, through their Europe Opportunity Fund
  • According to the SEC documents, Morgan Stanley has purchased over 28,000 shares in the Grayscale Bitcoin Trust
  • Along with cash-settled futures, this represents one of the ways Morgan Stanley allows a select group of their funds to allocate up to 25% of their value towards Bitcoin exposure for clients

What happened: Deutsche Börse integrates digital asset custody with $109m+ acquisition

How is this significant?
  • On Tuesday, Deutsche Börse announced the purchase of a majority stake in digital asset custodians Crypto Finance AG, a move they described as “an important step on Deutsche Börse’s way to building a trusted and fully regulated digital asset ecosystem in Europe”
  • Although no specific figures were shared regarding the acquisition, they did state that it was in the “moderate three-digit CHF million range”, making it a deal worth at least $109m
  • In a press release announcing the deal, Executive Board Member Thomas Book noted growing demand for digital asset services, saying “Digital assets will transform the financial industry. There is increasing demand from established financial institutions who are looking to become active in this new asset class and want a trusted partner”

What happened: Coinbase launches savings productreveals plans for future services

How is this significant?
  • Coinbase, the publicly-traded US digital assets exchange, revealed several pieces of news this week regarding future product and service offerings
  • On Tuesday, they announced the launch of a digital asset banking product, allowing US-based customers to pre-enroll to earn 4% APY on holdings of the USDC stablecoin—a rate approximately 50 times higher than the average traditional savings account, and 8 times more than high-yield savings accounts
  • The same day, CEO Brian Armstrong posted a blog outlining the company’s future plans, indicating an increased focus on DeFi (decentralised finance), as well as expanding global asset availability and app interoperability through their Coinbase Wallet app

What happened: DBS working on blockchain-based bond issuance

How is this significant?
  • DBS in Singapore have been one of Asia’s most progressive banking institutions in terms of digital assets, including in the development of their own digital asset exchange
  • On Friday, news emerged that DBS are working with London-based firm Nivaura, for the creation of “one click” securities issuance on the blockchain 
  • According to industry reports; “The new DBS platform enables its origination, syndicate, legal, operations and sales desks to easily communicate and share complex transactional information to manage the end-to-end flow of transaction data and documentation”, instantly and transparently through blockchain
  • The platform has already been utilised by DBS clients such as Singaporean shipping giant Keppel Corp, who praised it for providing the ability to respond quickly to market opportunities
  • Speaking about the platform, DBS’ Global Head of Fixed Income, Clifford Lee, noted, “The time is ripe for traditional ways of bond origination to make way for a more digital approach, to do what has been aspired for so long – by taking the first step towards the creation of an independent platform that allows bond issuers efficient and effective direct access to the market place and bond investors. The FIX Marketplace marks the first step in this ambitious journey to democratise the capital markets for better transparency and broader financial inclusion”

What happened: Fidelity, Standard Chartered, and world’s biggest interdealer broker collaborate on digital asset exchange launch

How is this significant?
  • On Tuesday, Reuters reported the launch of a new digital asset exchange, created as a joint venture between TP ICAP (the world’s biggest interdealer broker), Standard Chartered bank, and investment managers Fidelity
  • The platform is scheduled to launch later this year, pending approval from UK regulators
  • Reuters revealed that on launch the platform will allow institutional trading of Bitcoin, with Ether to follow at a later date
  • The consortium aims to differentiate their offering through “post-trade infrastructure with a network of digital asset custodians”, making the trading experience resemble traditional markets like bonds, stocks, and forex
  • Duncan Trenholme, co-head of digital assets at TP ICAP, told Reuters "Investor interest in this new asset class has exploded dramatically in the last six to eight months"

What happened: Multiple major digital asset companies take action on carbon emission concerns

How is this significant?
  • In the wake of environmental sustainability concerns over Bitcoin mining, several major entities in the digital asset space have taken action to lower their carbon footprint
  • American exchange Gemini, owned by the Winklevoss twins, announced the creation of “Gemini Green”, partnering with Climate Vault to offset carbon emissions through the purchase—and lockup—of carbon permits, before using their value in active decarbonisation efforts
  • Gemini estimate that this initiative will lead to the removal of 350,000 metric tons of carbon from the atmosphere
  • In Singapore, leading NFT (non-fungible token) project Enjin achieved carbon-negative status by joining the Crypto Climate Accord and purchasing carbon credits for five years in advance, which includes investment in hydroelectric power plants through Beyond Neutral

What happened: Mexico’s third-richest man intends to integrate Bitcoin into banking chain

How is this significant?
  • Mexican billionaire Ricardo Salinas Pliego (net worth $15.8bn) this week revealed that “me and my bank (Banco Azteca) are working to be the first bank in Mexico to accept #Bitcoin”
  • Although there is not yet any regulatory approval in Mexico for such a move, it would represent instantaneous access to a broad new audience in Central America’s largest economy, where Banco Azteca claims 34 million savings and credit accounts
  • Salinas is a long-time Bitcoin advocate, who has stated in past interviews that “I have studied Bitcoin for a long time and it is an asset that should be in every investor’s portfolio. It is an asset that has international value, traded with enormous liquidity at a global level”
  • Bitcoin’s finite issuance is a key factor in his admiration for the asset, with Salinas believing that increased issuance of fiat currency creates the risk of inflation and depreciation

What happened: CBDC plans continue to advance globally

How is this significant?
  • Central Bank Digital Currencies continue to be a key area of digital asset development, with global efforts seemingly intensifying after the Bank of International Settlements gave them their approval last week
  • In CBDC leader China, Digital Yuan trials were expanded this week when Beijing and Suzhou enabled the asset as a payment method for travel across subway systems (the Beijing subway alone spans nearly 430 stations across 24 lines)
  • In Russia, the country’s central bank released a list of 12 financial institutions for testing of their planned Digital Ruble
  • Meanwhile in Southeast Asia, the Monetary Authority of Singapore teamed up with the IMF to announce the Global CBDC Challenge, a competition aimed at addressing potential pitfalls for CBDC adoption

What happened: Digital asset analysis firm raises $100m for more than $4bn valuation

How is this significant?
  • On Thursday, Chainalysis—a firm dedicated to blockchain data analysis—announced a $100m Series E financing round, giving the company a $4.2bn total valuation
  • Chainalysis’ tools are key to transposing blockchain data onto the real world, helping in matters of legal compliance and anti-money-laundering
  • As the popularity of digital assets grows, so does the value of blockchain data analysis; this was the third raise in the sector over the last few weeks, with Chainalysis competitors CipherTrace and TRM Labs raising $27m and $14m respectively
  • Blockchain data analysis can also be helpful in prediction markets, with funding round leaders Coatue commenting “As cryptocurrency adoption grows, we believe that financial institutions, government agencies, and cryptocurrency businesses will increasingly deploy Chainalysis's platform to make important decisions—from figuring out the best way to dismantle the operations of a threat actor to deciding which new cryptocurrency products are likely to drive the most demand”

What happened: NFT technology reaches the music industry

How is this significant?
  • Sotheby’s auction house has been a driving force behind mainstream awareness of NFT technology, auctioning provably-unique digital art for millions of dollars, and accepting digital assets like Bitcoin and Ethereum as payment
  • Now, the historic auctioneers have branched out into a new application of the technology, using it to auction off music-inspired works based on celebrity culture and landmark albums
  • In commemoration of the 25th anniversary of American rapper and mogul Jay-Z’s Reasonable Doubt album, Sotheby’s are auctioning a lot that can currently be viewed in their digital gallery
  • Music itself could see a deeper integration of NFTs and smart contracts soon; in an interview about their music streaming platform Tidal this week, co-owners Jack Dorsey and Jay-Z both lauded the potential of blockchain technology, with Jay-Z stating “it’s recorded there, so it’s very transparent, there’s no hiding behind any fancy words, and lawyers, etc… With these blockchains and these smart contracts, you can write the contract today to say, any sale that happens, I want to receive 10% or 30%. Or you can write it out: 50% on the first one, 40% on the next”

What happened: Prominent voices in American political and investment circles speak out in favour of Bitcoin

How is this significant?
  • In addition to speaking about integration of smart contracts into the music industry this week, Jack Dorsey also announced a conference aimed at increasing institutional understanding of digital assets; “The ₿ Word: How Institutions Can Embrace Bitcoin”
  • Hosted alongside Cathie Wood and the Crypto Council for innovation, Dorsey appeared to secure the participation of Elon Musk as well this week, through an exchange on Twitter
  • Eric Adams, the current frontrunner in the New York City mayoral race, intends to make digital assets a key part of America’s financial capital, saying in a speech this week that “I’m going to promise you in one year … you’re going to see a different city… We’re going to become the center of life science, the center of cybersecurity... the center of Bitcoins”
  • Senator Cynthia Lummis, of crypto-friendly Wyoming, was interviewed by CNBC and revealed her wishes for greater digital asset exposure within pension funds; “I worry about having all of our retirement monies denominated in U.S. dollars. As part of diversification, having a very diverse asset allocation, you don't have all your eggs in one basket. I think one of the strongest stores of value for the long run is Bitcoin”
  • Also in the political field, the National Republican Campaign Committee (NRCC) announced they would begin accepting campaign donations in the form of digital assets, driven by donor demand
  • In the field of public investment gurus, CNBC’s Jim Kramer announced that he added to his Ethereum holdings last week when the market rallied from its drop, believing it to be more viable in a currency function than Bitcoin
  • Fellow CNBC finance guru Suze Orman also revealed a recent digital asset purchase—although she went with a modest Bitcoin buy executed through PayPal. Although she noted the volatility of the asset, she said “I still am a fan of Bitcoin. I don’t plan to sell even my little amount, no matter what”
News Roundups