Nickel Research Centre

Nickel News Roundup - Week 4

26th January, 2023

Market Overview:

Digital assets built on the bullish performance of previous weeks, taking the industry’s overall market capitalisation back above pre-FTX collapse levels. 

  • Bitcoin broke through more price barriers this week as its bullish momentum continued, posting its highest value since August 2022
  • Bitcoin grew steadily throughout the week, passing $22,000 on Friday and $23,000 on Wednesday, with seven-day lows and highs of $20,710 and $23,720 respectively
  • Bitcoin’s current price of $23,080 equates to an 11% increase; a second consecutive week of double-digit growth for the leading digital asset
  • Additionally, when viewed on a year-to-date basis, Bitcoin has one of the strongest performances of any major asset, up 39.5% from January 1st
  • Ether exhibited similar performance, growing from a weekly low of $1,517 to a high of $1,673
  • Ether’s current price of $1,615 represents 5.6% weekly growth
  • Total Ether issuance dropped further below pre-merge levels as burn rates from transactions once again exceeded fresh Ether entering circulation. Current annual issuance increased slightly, but still remains deflationary at -0.1%
  • Overall market capitalisation remained above $1tn since Friday, peaking at $1.06tn, and currently valued at $1.05tn
  • According to industry monitoring site Defi llama, total value locked in DeFi this week across all blockchains and platforms increased by $2bn to $46.4bn

Digital asset markets experienced another bullish week to continue their strong year-to-date growth. Goldman Sachs ranked Bitcoin the top-performing asset thus far in 2023, UAE and Saudi Arabia both outlined greater plans for digital assets within their economic future, crypto and blockchain firms maintained a significant presence at and around the World Economic Forum in Davos, Visa praised the potential for stablecoins in payments, and several digital asset firms announced major funding rounds after several quiet weeks on the VC front.

What happened: Digital asset firms maintain strong presence at Davos despite crypto winter

How is this significant?

What happened:  Goldman Sachs analysts identify Bitcoin as best-performing asset of 2023

How is this significant?
  • In their most recent US Weekly Kickstart report, analysts from Goldman Sachs identified Bitcoin as the best performing asset in the world year-to-date (ytd), out of 24 different markets measured
  • At the time of publication on January 23rd, Bitcoin had posted a 27% ytd return, more than thrice as positive as its nearest competitor (MSCI emerging markets) and more than five-fold the return of gold
  • Despite its relative reputation as a risk-on asset, Bitcoin also topped Goldman’s analysis for Sharpe Ratio returns, with a risk-adjusted return of 3.1
  • In the same ytd timeframe, the S&P 500 posted a comparatively lacklustre 2% return, on a Sharpe ratio of 0.4
  • Additionally, since the report was published on January 23rd, Bitcoin experienced additional growth, sitting at 40.4% ytd returns at the time of writing

What happened: Contagion latest—Genesis files for bankruptcy

How is this significant?
  • Following last week’s speculation, embattled digital asset lender Genesis Global confirmed its bankruptcy on Thursday, filing for Chapter 11 protection in the Southern District of New York
  • Genesis’ filing listed over 100,000 creditors, with the top 50 unsecured claims accounting for approximately $3.4bn
  • The lender aims to fund itself with $150m of cash in hand throughout the bankruptcy process, whilst it tries to sell assets or raise fresh capital
  • Recent Genesis nemesis Cameron Winklevoss (co-founder of digital asset exchange Gemini, whose Earn program was scuppered by Genesis’ liquidity crisis) tweeted that the filing was “a crucial step towards us being able to recover your assets”, but continued recent allegations against Genesis’ parent company Digital Currency Group (DCG) and its CEO Barry Silbert
  • He tweeted “the decision to put Genesis into bankruptcy does not insulate Barry, DCG, and any other wrongdoers from accountability” and “Unless Barry and DCG come to their senses and make a fair offer to creditors, we will be filing a lawsuit against Barry and DCG imminently”
  • Filings showed that DCG themselves owe Genesis over $1.65bn, “$575 million due in May of this year and a $1.1 billion promissory note due June 2032”; industry publication Coindesk (another DCG entity) reported that a special committee is now investigating the lending activities between Genesis and DCG
  • Bankrupted lender Celsius meanwhile mulled the issuance of a new digital asset token to creditors as part of a proposed payout plan, as lawyers argued that reorganising Celsius into a publicly-traded and properly licenced firm “would bring in more money for creditors than selling hard-to-liquidate assets at today’s depressed prices”
  • The proposal has echoes of previous cases in the industry, such as when exchange Bitfinex issued a new proprietary token to compensate victims of a hack, but is the first case in which a firm has proposed a token to buy their way out of bankruptcy, and would require the blessing of a federal judge
  • The SEC arrested and sued developer Avraham Eisenberg for “manipulative and deceptive” price inflation, through which he exploited DeFi protocol Mango Markets for $116m in 2022
  • Eisenberg publicly boasted about his role in the exploit, classifying it as a “legal open market action” and “highly lucrative trading strategy”, but the SEC evidently disagrees, identifying the DeFi protocol’s proprietary token as a “crypto asset security”
  • This represent the first major case of a hacker facing federal fraud and market manipulation charges for exploiting a DeFi protocol
  • On Thursday, digital asset firm Nexo settled with the SEC in a “final landmark resolution” for a total of $45m in fines, after previously offering interest-bearing products to US customers
  • New FTX CEO John Ray III claimed that “everything is on the table” in terms of securing financial recovery for creditors, including a potential revival of the exchange itself
  • Federal Prosecutors announced the confiscation of almost $700m in assets from Sam Bankman-Fried in a court hearing on Friday, the majority from Robinhood Shares purchased via a loan from his trading firm Alameda Research
  • Additionally, $6m was seized from Silvergate Bank, $50m from Moonstone Bank— previously known as Farmington State Bank—which only had a net worth of $5.7m before Alameda invested $11.5m in them last March
  • In a press release, the bank announced a rebrand back to Farmington State Bank, alongside a “change in strategy” “discontinuing its pursuit of an innovation-driven business model to develop banking services for industries such as crypto assets or hemp/cannabis”

What happened: Visa and Saudi Arabia announce stablecoin and CBDC developments 

How is this significant?
  • At Visa’s annual shareholder meeting CEO Alfred F. Kelly sounded an optimistic note about digital assets and blockchain technology, with a particular focus on the role of stablecoins in commerce
  • Kelly confirmed a company stance that “It’s very early days, but we continue to believe that stable coins and central bank digital currencies have the potential to play a meaningful role in the payments space, and we have a number of initiatives underway”
  • His anticipation of wider CBDC adoption may be well-founded; the central bank of Saudi Arabia announced a new CBDC phase “in line with several central banks CBDC initiatives across the globe”
  • Specifically, the current investigations on Saudi CBDC development centre on “domestic wholesale CBDC use cases in collaboration with local banks and FinTechs”
  • The Saudi central bank added that future research on its CBDC would focus on “economic impact, market readiness, and potential robust and fast applications of a CBDC-based payment solution”

What happened: UAE foresees major role for digital assets in commerce

How is this significant?
  • Speaking at Davos, Thani Al-Zeyoudi, the UAE’s minister of state for foreign trade, spoke about numerous national strategies for commerce; including a growing role for crypto assets
  • They could potentially be used to settle (non-oil) international trades in future, as Al-Zeyoudi told Bloomberg “Crypto will play a major role for UAE trade going forward”, with Dubai in particular enacting a raft of pro-crypto policies over the last few years
  • Additionally, he advocated for the creation of global regulatory standards regarding digital assets; “The most important thing is that we ensure global governance when it comes to cryptocurrencies and crypto companies. We started attracting some of the companies to the country with the aim that we’ll build together the right governance and legal system, which are needed”
  • UAE minister for Artificial Intelligence, Digital Economy and Remote Work Application, Omar Sultan Al Olama, also defended the nation’s embrace of digital assets at a WEF panel titled “Finding the right balance for Crypto”
  • He said that the influx of digital asset firms “calling the UAE home is definitely a positive thing”, and likewise advocated for global regulatory standards to ensure “if someone does something wrong, he can’t move from one place to another”

What happened: Layer-1 blockchain Injective launches $150m ecosystem fund

How is this significant?
  • After an institutional funding round backed by Brevan Howard and trading firm Jump last year, finance-focused blockchain Injective announced a new $150m ecosystem fund this week to incentivise and attract new projects and developers
  • Funding was pooled from a consortium of investors including previous backers, and will be deployed over the course of several years
  • The fund aims to encourage development on both Injective and the related Cosmos blockchain, with CEO Eric Chen stating “For Injective’s case, there’s a huge surge in builders coming from other layer-1 networks, but more importantly [centralised finance] builders like exchanges and trading firms that are committed to creating something truly decentralised”
  • Particular areas of focus for funding will be “interoperability, DeFi, trading, proof-of-stake infrastructure and scalability solutions”

What happened: Swiss private bank becomes first to tokenise its shares

How is this significant?
  • Cité Gestion, headquartered in Geneva, became the first private bank to utilise Swiss regulations allowing the issuance of shares as blockchain-based securities
  • Working alongside Finma-licenced digital asset firm Taurus, the bank can now issue tokenised shares, as well as “manage the smart contract that creates the shares and perform asset servicing of its securities”
  • Although this marks the first tokenisation of shares in the banking sector by Taurus, they have already worked with 15 companies across Switzerland and Europe to tokenise “equity, private debt, and structured products from firms in Switzerland as well as Europe”
  • Christophe Utelli, the bank’s CEO, told a Swiss finance publication that “It was important for our bank to be among the first to take advantage of the new possibilities offered by Swiss law for the digitalization of securities by tokenising our own shares”

What happened: Investment manager Wilshire develops new digital asset index

How is this significant?
  • Financial services firm Wilshire ($79bn AUM) announced a partnership with institutional digital asset exchange FalconX on Tuesday, developing new digital asset indexes for institutional clients
  • Wilshire developed its own digital asset taxonomy system called DATS, alongside “over 70 single-coin, multi-coin and themed digital asset indexes, with DATS classifying over 1,300 digital assets”
  • Under their new partnership, the firms will collaborate on creating “single-coin, multicoin and thematic indexes providing institutional investors with access to the fast-growing OTC crypto derivatives market and enhanced ability to conduct safe and regulated trading”
  • Mark Makepeace, CEO of Wilshire, touted the collaboration, saying; “we aim to help institutional investors realise the benefits of new digital forms of investment and blockchain technologies while providing the products that meet the most stringent institutional requirements to access this emerging asset class with confidence”

What happened: VC news

How is this significant?
  • Former FTX.US president Brett Harrison confirmed $5m in funding from Coinbase Ventures and Circle Ventures to help launch a new digital asset trading software firm called Architect
  • Harrison told TechCrunch “It’s a software company aiming to build institutional-grade infrastructure to connect various crypto venues across decentralised and centralised exchanges… We’re building this single interoperability platform across crypto services with a focus on trading”
  • Digital asset infrastructure firm Blockstream secured $125m in a convertible note to expand mining operations
  • Blockstream CFO Erik Svenson commented “This fundraise allows us to accelerate the [year-over-year] revenue growth we created with our 2021 Series B and continue to build infrastructure for the future Bitcoin economy”
  • Blockchain deployment platform QuickNode completed a Series B with $60m raised at a $800m valuation
  • The round included investment from 10T Holdings, Tiger Global, Seven Seven Six Ventures and QED Investors
  • QuickNode CEO Alex Nabutovsky said that headcount growth was a key area of focus with the new funding; “We’re going to continue expanding the team. The amount of enterprise coming in is incredible, so we want to continue building these abstraction layers, grow our technology and expand to new regions”
  • Despite 2022’s bleak market performance, QuickNode experienced record revenues thanks to an increase in Web 2.0 businesses entering the space alongside growth in the Web 3.0 sector
  • The company provides infrastructural services to help facilitate blockchain adoption, with Nabutovsky declaring “We would like to be the AWS [Amazon Web Services] or Azure of blockchain”
News Roundups