Nickel Research Centre

Nickel News Roundup - Week 6

10th February, 2022 

Market Overview:

Digital assets returned to positive momentum this week, with Bitcoin and Ether recovering above $40,000 and $3,000 respectively.

  • Bitcoin grew from weekly lows around $36,400 to briefly trade above $45,000 on Tuesday, following recovery back above the $40,000 mark on Friday
  • Indeed, Bitcoin experienced its longest rally since September, amidst a wider market movement back towards risk assets
  • Bitcoin currently trades at $44,110; a commendable 18.9% weekly appreciation
  • Ether followed a similar trajectory to Bitcoin (but peaked a day later, at $3,250 on Wednesday), recovering from weekly lows of $2,593 to break through the $3,000 mark on Saturday
  • Ether is currently priced at $3,194—representing a 19.3% weekly growth, and a second consecutive week of double-digit growth
  • Total market capitalisation moved above $2tn again, with a current value of $2.04tn
  • Total value locked in DeFi grew by over $8bn, to $87.5bn, according to industry analytics platform DeFi Pulse

Digital asset markets bounced back this week, featuring double-digit growth across the majority of major projects. This performance was matched by ringing endorsements from the likes of KPMG, Wells Fargo, and Tesla, whilst major VC investments continued, law enforcement from the United States secured the largest-ever recovery of stolen crypto, and lawmakers from Russia sought to recognise digital assets as analogous to currencies.


What happened: KPMG Canada adds Bitcoin and Ether to corporate balance sheet

How is this significant?
  • KPMG’s Canadian office confirmed this week that they have invested in both Bitcoin and Ether, “as part of a commitment to emerging technologies and asset classes”
  • As one of the traditional “Big Four” accounting firms, they are now one of the most prominent financial services firms to make a direct investment into digital assets
  • Although they did not disclose the amount invested, they confirmed that they used the services of the Winklevoss-owned Gemini exchange to make the purchase, and that carbon offset credits were also purchased to mitigate any environmental impact
  • The move is another illustration of Canada’s more progressive policies towards crypto assets than their neighbours to the south, following Fidelity Canada’s launch of a Bitcoin spot ETF back in December
  • A KPMG spokesperson indicated the investment was not executed solely for their own investment aims, but do give them the expertise to assist clients in doing likewise; “Having gone through this process ourselves now, we’re confident we can guide clients and prospective clients through the process of crypto asset treasury allocation,... Our investment allows us to share our journey, our experiences, our challenges with them so that we can help them navigate the crypto asset world”

What happened: SEC invites public feedback on proposed Grayscale Bitcoin spot ETF

How is this significant?
  • After rejecting numerous previous applications for a Bitcoin spot ETF, the SEC this week indicated some possible confidence in applications from both Grayscale and Bitwise, inviting feedback from the public about the proposed investment vehicles
  • In particular, the commission is looking at investor perceptions around the possibility of market manipulation for the ETFs
  • Grayscale’s application is seen as particularly significant, as it would involve the conversion of their current GBTC investment funds, currently the largest holdings of Bitcoin in any investment vehicle
  • GBTC is currently worth a total of $27bn, having served as an early gateway into Bitcoin investment for financial institutions—a fact that has traditionally caused a price premium compared with actual Bitcoin value
  • Bloomberg analysis recently found sustained demand for Bitcoin spot ETFs despite price volatility

What happened: US Department of Justice seizes billions of dollars in stolen Bitcoin

How is this significant?
  • This week, American law enforcement successfully recovered around $3.6bn worth of Bitcoin from one of the largest exchange hacks ever; the 2016 hack of crypto exchange Bitfinex
  • At the time of the theft, the Bitcoin was valued around $71m, but upon recovery this week, the value had risen to more than $4.5bn
  • The recovery is by far the largest coup thus far for the National Cryptocurrency Enforcement Team of the Justice Department, founded 4 months ago. The previous largest recovery of funds was $2.3m

What happened: Russian lawmakers agree to treat digital assets as currency

How is this significant?
  • According to reports in Russian newspaper Kommersant this week, Russia’s central bank and government have come to a consensus (as encouraged by Vladimir Putin) regarding the regulation of digital assets in the country
  • Kommersant quoted documents from a government meeting last week, and wrote that “The government and the Bank of Russia have agreed on a future regime for the circulation of cryptocurrencies in Russia. Before February 18, they will prepare a draft law on the circulation of digital currencies in the Russian Federation, in which cryptocurrencies are recognised as an analogue of currencies, and not digital financial assets”
  • The draft document recognises the scale of digital asset adoption, and the power of their decentralised nature, making regulation rather than banning a much more feasible option; “The establishment of rules for the circulation of cryptocurrencies and control measures will minimise the threat to the stability of the financial system and reduce the use of cryptocurrencies for illegal purposes since a complete ban on the segment of operations related to their circulation is impossible”
  • The article also noted a reporting obligation on any transactions valued above 600,000 Rubles (roughly $8,000), and that crypto asset possession and transacting will remain legal, but must be conducted through regulated channels such as banks or licensed exchanges
  • This regulation will likely take effect from the second half of this year, or 2023, according to the Kommersant report 

What happened: Wells Fargo declares crypto assets are approaching “hyper-adoption phase”

How is this significant?
  • In a special “Understanding Cryptocurrency” report this week titled “Cryptocurrencies — Too Early or Too Late?”, analysts from Wells Fargo emphatically concluded that it’s “still early” in the investment evolution of the assets
  • Dismissing the opinion that it may be too late, the report states that digital assets “are viable investments today, even though they remain in the early stages of their investment evolution”
  • Analysts wrote “We understand the ‘too late to invest’ argument but do not subscribe to it… We believe that focusing too much on past performance, especially with cryptocurrencies, can be misleading to new investors”, due to the fact that historical performance numbers may appear skewed when most major digital assets began from a price point near zero
  • Instead, they believe investors should look to the future, rather than the past, when anticipating digital asset performance, likening adoption now to the internet in the 1990s; “cryptocurrency adoption rates look to be following the parth of other earlier adbanced technologies, particularly the internet. If this trend continues, cryptocurrencies could soon exit the early adoption phase and enter an inflection point of hyper-adoption”

What happened: Alfa Romeo integrates NFTs for service history

How is this significant?
  • Although NFTs are currently primarily viewed as a digital art delivery model, the technology has numerous possible applications where tamper-proof, transparent data can be of value
  • Italian automobile manufacturer Alfa Romeo has recognised this, announcing that its Tonale SUV will be “the first car on the market equipped with an NFT digital certificate”
  • Their “blockchain card” will “record of the main stages in the life of an individual vehicle”, allowing for more transparency in matters of insurance and second-hand resale
  • Francesco Calcara, Alfa Romeo’s head of communications, stated that “Upon customer’s consent, the NFT will record vehicle data, generating a certificate that can be used as a guarantee of the car’s overall status, with a positive impact on its residual value”
  • In other NFT news this week, the CEO of hit gaming franchise Grand Theft Auto spoke out about the potential of the technology in video games, telling an industry publication “We're highly convinced there's an opportunity for NFTs to fit with [our] offerings in the future… We believe in rare goods, we believe in collectibles”
  • He did also caution against exploitative integration of NFTs based primarily on speculation, noting that companies need to strike a balance between rewarding gameplay and implementation of assets with real-world value

What happened: Tesla confirms nearly $500m gain on Bitcoin holdings

How is this significant?
  • Elon Musk’s Tesla confirmed in their latest SEC filings that at the close of 2021, their corporate Bitcoin holdings were valued at $1.99bn
  • This represents a gain of almost $500m since they invested one year ago, despite selling approximately $128m worth last March in order to demonstrate the asset’s liquidity
  • Barrons summarised the company’s performance in regards to Bitcoin thusly; “Tesla disclosed an initial $1.5 billion position in its 2020 annual report, filed in early February 2021. The company’s position has grown to $2 billion, net of sales, even though the carrying value of the Bitcoin is $1.26 billion”

What happened: Sequoia, SoftBank, Tiger Global amongst $450m investors in Polygon token

How is this significant?
  • Several major VC groups participated this week in the sale of tokens for Polygon, an Ethereum scaling solution operating as a Layer 2 blockchain
  • More than 40 investors participated in the funding round, including SoftBank Group Corp.’s Vision Fund 2, Mike Novogratz’s Galaxy Digital, Tiger Global, and Reddit co-founder Alexis Ohanian
  • Purchasing tokens is seen as the closest equivalent to equity investment in many digital asset protocols, effectively forecasting growth in protocol adoption and therefore token value
  • Layer 2 solutions building on Ethereum are a key potential growth area for blockchain, as many teams favour Ethereum’s established position and developer mindset in the smart contract space, but users struggle with its current transaction fees before the network completes its transition to proof-of-stake consensus mechanisms
  • According to Polygon, use of their Layer 2 is growing astronomically; “more than 130 million unique users, over 3 million daily transactions and in excess of 3.4 billion transactions since the company’s founding in 2017”

What happened: Private equity giant KKR participates in $500m metaverse funding round

How is this significant?
News Roundups