Nickel News Roundup - Week 13

1st April, 2021

Market Overview:

• Bitcoin reached a weekly high of $59,840, returning above a $1tn market cap in a bounce back up from last week’s lows. One Bitcoin is currently valued at $59,120
• Ethereum grew strongly in midweek, outpacing Bitcoin for a high of $1,948, marking a recovery from the $1600 levels last week, and is currently valued at $1,931
• Bullish momentum returned across the market, with 93 of the top 100 crypto assets on Coinmarketcap growing in value over seven days
• The rebound was evident in the larger market cap coins as well as smaller altcoins, with 7 of the top 10 coins (excluding stablecoins) experiencing double-digit weekly growth
• The overall crypto market cap reached new heights on Wednesday, within sight of the $2tn mark at $1.99tn
• The recovery of major digital assets had a positive effect on the value locked in DeFi applications and protocols; a total of $54.2bn

News:

What happened: PayPal roll out payments with digital assets

How is this significant?

• PayPal is one of the largest payment processors in the world, with their website claiming over 375 million consumers and merchants in more than 200 markets 
• Their integration of digital assets into the PayPal wallet in October, allowing customers to buy and sell Bitcoin, Ether, Bitcoin Cash, and Litecoin was seen as a key catalyst for positive sentiment returning to the crypto space
• In a press release on Tuesday, PayPal announced that their “Checkout with Crypto” service was now live for US customers
• This feature will allow customers to use their crypto assets as a method of payment on PayPal, “converting cryptocurrency holdings to fiat currency at checkout, with certainty of value and no additional transaction fees”
• Dan Schulman, PayPal’s CEO said “As the use of digital payments and digital currencies accelerates, the introduction of Checkout with Crypto continues our focus on driving mainstream adoption of cryptocurrencies… Enabling cryptocurrencies to make purchases at businesses around the world is the next chapter in driving the ubiquity and mass acceptance of digital currencies”
• Checkout with Crypto will feature guarantees of PayPal’s existing payments process, including fraud protection, return shipping, and purchase protection, potentially opening the door to far greater utility for crypto assets 

What happened: VISA conducts first stablecoin-based transaction on its network

How is this significant?

• VISA is the largest payment processor in the world, giving them reach to greatly increase the acceptance of crypto assets 
• An exclusive report by Reuters on Monday revealed that VISA has activated the Ethereum-based stablecoin USDC as a method of payment on its network
• VISA is operating a pilot program with digital asset exchange and payment platform Crypto.com, whilst confirming “plans to offer the option to more partners later this year”
• In partnership with digital asset bank Anchorage, they completed their first test transactions this month, with Crypto.com sending USDC to VISA’s Ethereum address on Anchorage
• Unlike PayPal’s payment Checkout with Crypto payment option, the use of a stablecoin means that cryptocurrency needn’t be converted to fiat currency before a payment can be settled
• Cuy Sheffield, VISA’s head of crypto, lauded the development, saying that “We see increasing demand from consumers across the world to be able to access, hold and use digital currencies and we’re seeing demand from our clients to be able to build products that provide that access for consumers”
• Additionally, the move serves as a large institutional endorsement of the Ethereum blockchain; the second-largest digital by market cap, and driving force behind the rise of decentralised finance applications

What happened: Goldman Sachs offering “full spectrum” of digital asset investments to HNW clients

How is this significant?

• According to Mary Rich, Goldman Sachs’ newly-appointed global head of digital assets, Goldman aims to offer Bitcoin and crypto-related investment opportunities to their private wealth management clients from the second quarter of this year
• Rich said clients would be offered a “full spectrum” of investments, across a variety of exposures; “whether that’s through the physical bitcoin, derivatives or traditional investment vehicles”
• The bank feels that it’s still early in terms of the asset class’ potential, noting that their clients “feel like we’re sitting at the dawn of a new Internet in some ways and are looking for ways to participate in this space”
• Rich further said that Goldman believes we are in “the very nascent stages of this ecosystem” and that the “digital gold” narrative of Bitcoin is compelling; “There’s a contingent of clients who are looking to this asset as a hedge against inflation, and the macro backdrop over the past year has certainly played into that”

What happened: BlackRock confirms trading of crypto asset futures

How is this significant?

• On Wednesday, BlackRock filings with the SEC revealed that the company had invested in Bitcoin futures—albeit on a small scale
• According to the filings, BlackRock’s Global Allocation Fund bought 37 futures contracts at the end of January, which expired on March 26th
• This $6.5m allocation only represented 0.03% of the fund’s holdings on reporting day; but does confirm reports by BlackRock CIO Rick Rieder last month that the firm had “started to dabble” in Bitcoin 

What happened: BNY Mellon publishes report on Bitcoin valuation models

How is this significant?

• After recently announcing their intention to allow customers to hold digital assets on their accounts, BNY Mellon released an investment report for March, focused on Bitcoin
• In particular, the 12 page report outlined various valuation models that have been proposed for the leading digital asset, helping their customers to form their own assessment
• The report noted that “Using conventional currency models will either be conceptually wrong (no sanctioning issuer) or wrong in practicality” due to the unique properties and value propositions of this new asset class
• Rather than favouring any particular valuation model above others, the research piece serves as an overview of many different possible valuation methodologies, including the Stock-to-Flow ratio, net cost model, and comparison to gold and other commodities 
• Titled “Blending Art & Science: Bitcoin Valuations”, BNY Mellon confirmed in the report “Valuation is more art than science… Ultimately, Bitcoin valuation will likely be a combination of several models and be constantly evolving, especially as it gains mainstream acceptance”

What happened: George Soros’ investment fund moves into digital assets, declares crypto market is at “an inflection point” 

How is this significant?

• In an interview with Bloomberg Front Row this week, Soros Fund Management CIO Dawn Fitzpatrick acknowledged that infrastructure around cryptocurrency is a “top theme” for their current investment strategy
• Over the last month, Soros Fund Management have invested in Bitcoin financial services company NYDIG (the company that brokered MassMutual’s Bitcoin investment), as well crypto data provider Lukka
• According to Fitzpatrick “we are at a really important moment in time, in that something like Bitcoin might have stayed a fringe asset, but for the fact that over the last 12 months we’ve increased money supply in the US by 25%, so there’s a real fear of debasing of fiat currencies”
• Outlining her viewpoint on Bitcoin, Fitzpatrick said “I don’t think about Bitcoin as a currency, I think it’s a commodity, but it’s a commodity that’s easily storeable, it’s easily transferable… it has a finite amount of supply, and that [issuance of new] supply halves every four years”
• She also backed Bitcoin’s “digital gold” narrative, noting that “If you look at gold’s price action, in the context of a fairly robust inflation narrative of late, it’s struggled getting traction, and I think that’s because Bitcoin is taking some of its powerbase away”
• Fitzpatrick also believes that “central bank digital currencies will be here quicker than we expect”, but didn’t believe they would be able to permanently destabilise Bitcoin

What happened: CBDC developments intensify globally

How is this significant?

• This week, the Bank of Japan officially formed a “Liaison Committee on Central Bank Digital Currency”, designed to accelerate the implementation of experiments and trials in the field
• The director-general of China’s digital currency institute proposed a set of global rules for CBDCs during a seminar of the Bank of International Settlements. Key themes in the rules included interoperability and information exchange
• China’s CBDCs trials in Shanghai this week added support from 6 major (state-owned) banks, promoting the creation of digital Yuan wallets via scan of a QR code
• In the Bahamas, the country’s central bank announced they expected their national digital currency (aka the Sand Dollar) to complete interoperability with wallet providers (Authorised Financial Institutions) within a week, likely making it the first CBDC to fully launch via full integration with commercial banking infrastructure
• On Tuesday, the Central Bank of Jamaica disclosed that they have completed the procurement process for their CBDC technology provider, Ireland-based eCurrency Mint. Rollout of the CBDC is scheduled to roll out in early 2022

What happened: New Zealand-based retirement fund invests in Bitcoin

How is this significant?

• According to reporting by New Zealand outlets, the country’s KiwiSaver Growth Strategy Fund, one of several funds in the KiwiSaver retirement fund scheme (similar to Superannuation in Australia or a 401(k) in the USA) has begun investing in Bitcoin
• The $350m fund has allocated 5% of its investments to Bitcoin
• Although some other KiwiSaver providers were reticent of the move, NZ Fund Management (the administrators of the Growth Strategy Fund) believe they are ahead of the curve, with chief investment officer James Grigor​ telling local journalists that within 5 years, he anticipates Bitcoin to feature in more KiwiSaver funds
• Grigor explained the company’s reasoning for investment, using the comparison to gold; “[With] all of the hallmarks and the case for investing in gold, you should absolutely be investing in bitcoin. The investment philosophy and reasoning is very similar, around store of value and protecting from government inflation”

What happened: Crypto mining sees more revenues, innovation, and legislative support 

How is this significant?

• Data collected by crypto analytics company The Block Research found that as of March 28th, the Bitcoin mining sector had achieved record monthly revenues of $1.51bn, ahead of the previous month’s record $1.36bn
• On Friday, Argo Blockchain issued a press release announcing a memorandum of understanding with DMG Blockchain Solutions to launch Terra Pool, “the first Bitcoin mining pool powered exclusively by clean energy”, in response to recent media concerns about Bitcoin’s carbon footprint
• Bitcoin miner blockstream is issuing security tokens to qualified investors (outside the US) representing a share of their mining power, allowing institutional investors to access Bitcoin mining without having to procure the necessary complex infrastructure behind it. According to reporting in Coindesk, the tokens “can be redeemed after three years for the Bitcoin equivalent to the total hashrate the note represents
• In the United States, Kentucky governor Andy Beshear signed two bills into law, providing sales and excise tax breaks to crypto miners, in an attempt to lure their business to the state
• Miami mayor Francis Suarez gave an interview on Sunday where he said it was “extremely easy” to reconcile his enthusiasm for digital assets with environmental concerns, by making Miami a “mining hub” using clean (nuclear) energy before integrating renewables 

What happened: UK updates guidance on digital assets

How is this significant?

• On Tuesday, HMRC updated its taxation guidelines for “cryptoassets”, with a particular focus on staking
• This is the first time UK authorities have commented on how staking is treated for taxation purposes, with the guidelines broadly stating that a range of factors, such as degree of activity, will determine whether staking counts as a taxable trade or miscellaneous income
• Speaking to Coindesk, an HMRC representative said “The guidance manual demonstrates our commitment to providing clarity to our customers and will help individuals and businesses understand the tax consequences of different types of transactions in crypto assets”
• Additionally, the UK’s financial services minister John Glen said that Britain will focus regulatory efforts on stablecoins, in order to stave of possible monopolies from centralised issuers like Facebook’s Diem
• Regulation tailored to other digital assets may follow, but speaking to Reuters he said “We believe the case for intervention in the wider cryptocurrency markets is less immediately pressing”

What happened: Non-Fungible Tokens continue to gain acceptance, and investment

How is this significant?

• Since Christie’s and Sotheby’s auction houses both confirmed auctions of non-fungible tokens (NFTs), the blockchain-based technology has rapidly increased in acceptance and investor appeal
• The famed State Hermitage Museum in St Petersburg announced on Thursday that they will hold their first exhibition of non-fungible token art this year, adding further credence to the technology as a means of creating provably unique digitised assets
• Michael Jordan was amongst a slew of investors in a $305m funding round for NFT digital collectibles creator Dapper Labs, bringing the company’s valuation to $2.6bn according to USA Today
• On Wednesday, leading NFT project Enjin announced that they had raised almost $19m for the creation of an NFT-specific blockchain on the Polkadot network, enabling interoperability of NFT projects across multiple different blockchains with low-cost and high-speed transactions thanks to proof-of-stake consensus

What happened: Sumitomo Mitsui Trust Bank announces tokenised securities in Japan

How is this significant?

• Sumitomo Mitsui, one of the largest banks in Japan, revealed this week that they will issue the first tokenised securities in Japan
• According to reporting by Coindesk Japan, “it has converted Japan’s first certificates of ownership backed by securities into security tokens, and is conducting a trial on the digital asset issuance platform Securitize Japan”
• This will allow businesses to raise funds by conducting Security Token Offerings (STOs), broadly equivalent to the issuance of stocks and shares using blockchain technology
• SBI Holdings, a leading Japanese financial institution with a strong focus on digital assets also announced plans to provide STOs recently, whilst Coindesk Japan also reports that “Nomura Holdings, Mizuho Financial, Mitsubishi UFJ Financial and others have been researching and developing digital securities backed by assets such as bonds, stocks and real estate”

What happened: Former SEC leadership make moves into digital assets

How is this significant?

• One River Digital Asset Management (a subsidiary of One River Asset Management) issued a press release on Monday announcing former SEC Chairman Jay Clayton as one of three additions to their advisory council
• In a joint statement with the other appointees, Kevin Hassett and Jon Orszag, Clayton said that “We look forward to working with One River as the effects of digitization on our markets play out across the globe"
• Coinbase also added SEC leadership experience to their ranks, appointing former SEC Trading & Markets director Brett Redfearn as the head of Coinbase’s capital markets division
• The company’s Chief Product Officer Surojit Chatterjee stated that Redfearn “will be responsible for defining and driving a vision and strategy to set the global standard for crypto capital markets, including digital asset securities and our crypto trading platform”

What happened: CBOE and CME to launch more digital asset futures products

How is this significant?

• CBOE chief executive Ed Tilly revealed in an interview with BNN Bloomberg that he expects the company to increase their offering of futures products, driven by both retail and institutional demand
• He told Bloomberg “We’re keen on building out the entire platform. There’s a lot of demand from retail and institutions, and we need to be there” and noted that they filed with the SEC to list and trade VanEck’s Bitcoin Trust, declaring “We’re very keen to move along approval for the VanEck ETF”
• On Tuesday, the Chicago Mercantile Exchange issued a press release announcing the creation of “CME Group Micro Bitcoin Futures”, going live on May 3rd
• Micro Bitcoin futures will be equal to one tenth of one Bitcoin; Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products said that "The introduction of Micro Bitcoin futures responds directly to demand for smaller-sized contracts from a broad array of clients and will offer even more choice and precision in how participants can trade regulated Bitcoin futures”

What happened: Norwegian billionaire “realised I had been wrong” about Bitcoin, joins board of Norwegian digital assets exchange 

How is this significant?

• Øystein Stray Spetalen, one of Norway’s richest men this week conceded that he had been proven wrong in speaking out against Bitcoin earlier, but believes “when the facts change, I change”, and that he was now a proponent of the asset
• After meeting the heads of local digital asset exchange Mirai Ex, he was educated on the potential of crypto assets, and joined the company’s board, as well as purchasing Bitcoin in a private capacity
• His attitude appears to have been precipitated by fellow Norwegian billionaire Kjell Inge Røkke’s recent move into Bitcoin, with Spetalen wryly observing “When I also read that Kjell Inge Røkke had got into Bitcoin, it was quite obvious. I can't bear to see that Røkke makes money and not me”

What happened: Galaxy Digital prepares for US exchange listing

How is this significant?

• Mike Novogratz’s Galaxy Digital became the latest major digital asset company in America to announce plans for a public listing “in the second half of 2021”
• The declaration was made in a release of their Q4 2020 results on Tuesday, which included a year-on-year net comprehensive income increase of over 1,100%
• Income from their trading business also increased significantly compared to Q4 2019, up 842% overall
• In the press release, Novogratz sounded long-term optimism for digital assets; “We believe our industry is at an inflection point as we participate in a once in a lifetime secular shift into cryptocurrencies as an institutionalized asset class”

What happened: New PwC report finds—and forecasts—significant increase in digital asset M&A values

How is this significant?

• On Monday, a new report by PwC was published, examining the value of fundraising as well as mergers and acquisitions conducted in the digital asset sector
• PwC found that the value of fundraising deals in 2020 was worth 33% more than the year before, reaching over $3bn in venture capital—despite the massive financial effect of Coronavirus in the first half of the year
• Meanwhile, the value of M&As more than doubled in valued, to over $1.1bn; with Binance’s $400m acquisition of market data aggregator Coinmarketcap the biggest deal of the year
• The report also forecasts 2021 to exceed this growth “from every single metric” according to Henri Arslanian, PwC’s global crypto leader
• PwC wrote that “We expect to see more institutional players consider entering in the crypto industry through investments or acquiring companies as part of their buy or build analysis in 2021” believing that the “crypto industry is continuing on its institutionalization journey”