Nickel Research Centre

Nickel News Roundup - Week 36

9th September, 2021 

Market Overview:

Market momentum stalled across the digital assets market this week, as growth across the weekend and early week was counteracted by mass sell-offs on Tuesday that created a significant pullback in value

  • Bitcoin traded at a weekly high of $52,850 this week, before a significant dip on Tuesday dropped it as low as $43,290, before a gradual recovery and a current price of $46,330
  • Though the decline was steep, it came after several weeks of significant gains; current prices represent a pull-back to the levels of May 19th, less than a month ago
  • There were several possible reasons cited for this so-called flash-crash, including technological glitches as El Salvador’s official Bitcoin wallet failed to cope with the volume of sign-ups, a “sell the news” event as the impact of Bitcoin as legal tender failed to meet expectations, profit-taking after strong recent growth, and a cascading liquidation of overleveraged traders
  • Ether followed the same pattern as Bitcoin, hitting a high of $4,022 on Friday, before a steep decline in Tuesday’s marketwide sell-off
  • Ether is currently trading at $3,510, the same value as the beginning of the month
  • Solana, an altcoin backed by digital asset exchange FTX, experienced the most growth within the top 50; increasing 74.8% in value and rising to 8th in overall market capitalisation
  • The total value of all digital assets approached previous records with a high of $2.38tn this week, before Tuesday’s dip briefly dropped it below $2tn. Current values of $2.1tn are in line with total market capitalisation at the beginning of the month
  • Total value locked in DeFi reached a new high of around $115bn this week, before dropping back to current levels of $101.4bn

Several weeks of consistent market growth came to a halt this week, as traders seemingly took El Salvador’s “Bitcoin Day” as an opportunity to take profits, leading to widespread market sell-offs and cascading liquidations. However, despite some technological teething troubles in El Salvador, news remained positive for digital assets around the world. Japan seeks to launch its first crypto fund through SBI Holdings, German fund managers are beginning to allocate towards Bitcoin after changes in legislation, American financial giants are actively recruiting for digital asset expertise, BBVA Switzerland is integrating a crypto wallet into an investment fund, Visa seeks to boost Bitcoin in Brazil, and CBDC trials span multiple continents.


What happened: SBI Holdings set to launch Japan’s first crypto fund

How is this significant?
  • SBI Holdings, one of the largest financial services groups in Japan, is intensifying their focus on digital assets through plans to launch a new crypto fund, according to report in Bloomberg this week
  • Tomoya Asakura, the president of an SBI affiliate company Morningstar Japan K.K., told Bloomberg that the fund would require a minimum investment of between one to three million Yen, and would focus on more seasoned investors who are aware of the digital asset market’s relative volatility
  • He also told reporters that the fund could invest several hundred million dollars, across major crypto assets like Bitcoin, Ether, Litecoin, Bitcoin Cash, XRP, and others
  • According to Asakura, the fund is the culmination of four years’ effort towards Japanese regulatory compliance, and is intended as a portfolio diversifier; “Once people feel it firsthand... they will understand that we aren't recommending cryptocurrencies as a tool of speculation… I want people to hold it together with other assets and experience firsthand how useful it can be for diversifying portfolios”
  • Moreover, Bloomberg reported that if the fund is successful, the company will “move quickly” to launch another

What happened: BBVA Switzerland integrates crypto wallet into new digital investment account

How is this significant?
  • Switzerland’s branch of multinational bank BBVA have capitalised on the country’s positive regulatory attitude towards digital assets, by natively integrating blockchain wallets into new investment accounts
  • The NewGen account was created for customers to invest “in sectors with the greatest impact on the future”, allowing them to emulate the strategies of investors like Cathie Wood and Warren Buffett, according to promotional materials by BBVA
  • BBVA Switzerland began offering Bitcoin custody back in June, so this move appears a natural evolution of a pro-digital asset strategy
  • The New Gen investment account will be available to investors above the age of 18, and “resident in a country of the European Union, Mexico, Colombia, Argentina, Peru or Chile, among others”, expanding the reach of the product far beyond Swiss borders
  • In a statement, Javier Rubio of BBVA said “The new account offers a multitude of ideas so that every client can invest in what is of interest to them and in line with their principles, without obstacles or barriers, with one of the most competitive rates in Swiss banking and with all the guarantee and security of BBVA”

What happened: Ethereum records first ever negative daily issuance

How is this significant?
  • Since the introduction of the EIP-1559 protocol upgrade in early August, net issuance of new Ether on the Ethereum blockchain has been reduced, as Ether spent on transaction fees is burned (destroyed and permanently removed from circulating supply)
  • On Friday, Ethereum experienced its first negative net issuance day, as network users burned more Ether through transaction fees than was created by miners
  • Conditions for this volume of burning were buoyed by high volumes of trading during Ether’s recent price appreciation, as well as across NFT minting and marketplaces
  • On Friday, 13,506 Ether was created whilst 13,840 was burned; resulting in a daily issuance of -334 Ether
  • Although such conditions are currently anomalous, they are illustrative of Ethereum’s potential to move towards a deflationary supply model as network usage increases with additional scaling solutions
  • According to monitoring site, since the launch of EIP-1559, over 242,000 Ether have been burned, equating (at current conditions) to a burn of 2.6m tokens per year, or a 2.2% supply growth per year

What happened: Visa aims to integrate Bitcoin payments internationally

How is this significant?
  • In a recent interview with a Brazilian finance website, Visa’s VP of New Business, Eduardo Abreu, announced the company’s plans to integrate digital assets such a Bitcoin on their platform as not just a means of payment, but also a store of value
  • Abreu said he believes that there is a need for greater integration of digital assets across traditional banking infrastructure if they are to fully realise their potential
  • However, he sees minimal disruption on the pathway to adoption, due to the international nature of digital assets; “The great advantage of adopting Bitcoin is, without a doubt, its ease. Without needing to exchange a fiat currency, there is an optimization of exchanges when using Bitcoin”
  • Although he didn’t provide a specific date for wider integration, reporting suggests it could occur within the next few months
  • Abreu also promoted the idea of earning digital assets within new or existing rewards programs, an area which Visa is well-positioned to serve: “Brazilians already have the culture of receiving card points, miles, discounts, etc. Why not receive cryptocurrencies with their credit card as well?”

What happened: Senior Bloomberg strategist calls Bitcoin “a global reserve asset”

How is this significant?
  • Mike McGlone, senior commodity strategist at Bloomberg, sounded a bullish note for digital assets in the company’s most recent monthly crypto outlook 
  • He questioned portfolios without Bitcoin or Ether exposure, due to the relative underperformance of traditional safe haven assets; “Portfolios of some combination of gold and bonds appear increasingly naked without some Bitcoin and Ethereum joining the mix”
  • The report cited recovery from the previous dip in May through July as grounds for optimism heading forward in the second half of the year; “Crypto-assets appear in a revived and refreshed bull market with the 2H benefit of a steep discount from previous highs at the start”
  • McGlone also made predictions concerning Bitcoin’s status in the financial landscape; We believe Bitcoin represents the digital future… We foresee a future of Bitcoin, the digital reserve asset, complementing the dollar reserve currency”
  • Additionally, the report forecast that $100,000 Bitcoin and $5,000 Ether could be “the path of least resistance”, although the report was released before Tuesday’s market pullback

What happened: SEC tensions emerge in United States

How is this significant?
  • Following a recent interview by Gary Gensler about a need to regulate crypto assets, several reports emerged this week suggesting a heavy-handed approach from the SEC
  • On Friday, the Wall Street Journal reported that the commission may be taking on DeFi, by investigating Uniswap Labs, the primary developers behind Uniswap, the world’s leading decentralised exchange (or DEX)
  • Sources speaking to the WSJ claimed they were primarily seeking information regarding Uniswap’s marketing services
  • Additionally, Coinbase CEO Brian Armstong released several tweets this week expressing disappointment at the SEC’s behaviour, including a lack of clarity, and being the only regulator or federal agency that refused to meet with him during a trip to Washington after Coinbase’s IPO, speculating that “it feels like a reach/land grab vs other regulators”

What happened: Franklin Templeton recruits for digital asset expertise

How is this significant?
  • $1.5tn asset manager Franklin Templeton became the latest major firm to seek in-house expertise on this dynamic new asset class, recruiting for both expert traders and researchers according to new job postings on Linkedin
  • According to the posting, the company’s focus is on the “largest, most liquid and tradable crypto assets”
  • Successful candidates will help develop the framework for Franklin Templeton’s approach to digital assets, with responsibilities to “Develop and maintain valuation models and keep informed of various protocol regulatory and staking opportunities”, as well as “develop quantitative trading or relative value models”, and working alongside developers “to construct tools to support the platform’s growth”
  • These hires appear to be an execution of plans indicated by CFO Matthew Nicholls during an earnings call in May, when he said “Having the capability to field, let’s call it, digital assets, in general, is going to probably be important for the future”

What happened: New survey reveals scale of crypto asset ownership in Australia

How is this significant?
  • A survey published by the Australian web platform Finder this week showcased Australian attitudes towards and adoption of crypto assets
  • Nearly one in five (17%) adult Australians currently own digital assets
  • Bitcoin is the most commonly held asset, owned by 9% of the survey respondents, followed closely by Ether (8%)
  • Of those respondents who owned digital assets, the greatest motivation was as a portfolio diversifier (30%)

What happened: Publicly-listed Norwegian investment firm enters crypto mining sphere

How is this significant?
  • Arcane, a Norwegian investment firm listed on Stockholm’s Nasdaq First North exchange, announced plans to move into mining this week, though a press release detailing their first hardware order
  • Their order of 352 Antminers for just over $4m from producer Bitmain should bring in approximately $407,000 in revenue at current prices, produced through clean energy via subsidiary Arcane Green Data Services
  • This move also illustrates the trend of increasingly green Bitcoin mining, as hashpower moves overseas following crackdowns in China; Arcane CEO Torbjorn Anderson said “From Q1 next year, we have the hosting capacity to double this mining activity. In addition, we are exploring further scale up through new hosting arrangements… we are committed to securing the bitcoin blockchain in the cleanest way possible, with renewable energy.

What happened: BlackRock joins blockchain-based platform for equity swaps

How is this significant?
  • BlackRock, the world’s largest asset manager, announced this week that they were joining the Veris distributed ledger network for equity swaps
  • Other major financial institutions using the platform developed by Axoni include Citigroup and Goldman Sachs, who said in a press release “BlackRock joining the Axoni network represents an important step in the evolution of market infrastructure… We look forward to continuing these efforts with new and existing network members, working together to digitally standardize trade events and re-architect the derivatives post-trade ecosystem”
  • Mark Cox, COO of global investment operations at BlackRock praised the potential of blockchain technology in finance, calling the integration “a significant milestone and the culmination of years of collaborative industry research, design, and development... We see great potential in a distributed ledger network for uncleared derivatives as we continue to prove out this new area of innovation”

What happened: NFTs enter luxury market

How is this significant?
  • Sotheby’s has been on the cutting edge of NFT adoption since they entered mainstream consciousness earlier this year, and have experienced continued success with their non-fungible listings
  • Their latest major foray, a lot of 101 procedurally-generated avatars from the BAYC collection, has already exceeded expectations, with a current top bid of $19m exceeding the upper $18m estimate, more than a day ahead of the closing gavel
  • Additionally, Dolce & Gabbana are set to bring this new technology into the world of couture, with their “Collezione Genesi” (genesis collection) already believed to be attracting the attention of NFT-centric DAOs (decentralised autonomous organisations); groups of investors who pool resources to multiply their buying power
  • As well as conveying ownership of exclusively-created digital assets, the NFTs will also provide ownership of the physical couture items depicted (except for four digital-only creations), and act as a VIP membership to the world and events of Dolce & Gabbana

What happened: Tudor Group rumoured to launch “Digital Disruption Fund”

How is this significant?
  • Billionaire investor Paul Tudor Jones is a vocal admirer of Bitcoin and digital assets, particularly in light of recent global monetary policy 
  • This week, it was reported through sources (although not officially confirmed by representatives) that his Tudor Group is creating a “Digital Disruption Fund” that would feature a digital asset component
  • Other funds within Tudor Group do already have digital asset exposure through investment in Bitcoin mining companies, SEC filings revealed that Tudor Jones’ family fund included custody services from Coinbase, and Jones was amongst the investors in the FTX digital asset exchange’s record $900m raise

What happened: Challenger exchange FTX continues high-profile ambassador recruitment

How is this significant?
  • This week, it was reported that basketball superstar Steph Curry will be a new ambassador for $18bn-valued digital asset exchange FTX, one of the fastest-growing exchanges in the world, and a key challenger to Coinbase and Binance
  • As part of the deal, the two-time NBA Most Valuable Player will receive an equity stake in the trading platform, as well as securing annual donations from FTX for his charity foundation
  • Curry is just the latest high-profile “win” for FTX, which has invested in naming rights for multiple stadia, and confirmed fellow brand ambassadors Tom Brady and Giselle Bundchen in a $20m advertising campaign

What happened: New crypto unicorn set to emerge in India

How is this significant?
  • After news of CoinDCX—backed by Facebook founder Eduardo Saverin—becoming India’s first digital asset unicorn (a startup valued above $1bn), competing exchange Coinswitch Kuber looks set to follow suit
  • Founded in 2017, the exchange was valued at $500m during a Series B round in April, and is now in talks for a $100m investment at a valuation of approximately $2bn
  • Sources close to the company reported that Coinswitch Kuber has been in close communication with VC sources Andreessen Horowitz (a16z) as well as Coinbase, indicating they may be involved or lead the funding round
  • Since the last funding round, the company has experience significant growth, increasing from 4 million monthly app users to 7 million

What happened: $458bn German asset manager adds Bitcoin after new Spezialfonds law

How is this significant?
  • Union Investments, a large German asset manager, appears to be amongst the first to take advantage of changes in German regulations that now allow German Spezialfonds to allocate up to 20% of their portfolio towards digital assets
  • Reporting in Germany this week revealed that Union Investments will begin adding between 1% to 2% Bitcoin exposure to their investment funds for private investors
  • Kamil Kaczmarski of Oliver Wyman’s Frankfurt office said that “We’ve observed an increased interest in digital assets from fund managers” since the change in legislation went into effect at the beginning of August

What happened: Moody’s credit rating seeks to evaluate DeFi

How is this significant?
  • Moody’s Investors Services are another company currently hiring to increase their digital asset expertise, according to a new job posting for crypto analysts to help the organisation understand “the potential wide-reaching impact of decentralized finance (DeFi) on existing ecosystem”
  • Successful candidates will help direct Moody’s attention towards opportunities in digital assets, by “focusing on a broad range of activities to identify, develop and implement new blockchain and crypto-asset opportunities for MIS”
  • Crypto Analyst is just one of several postings related to the sector which Moody’s is currently recruiting for; other related jobs include Crypto-asset Analytical Framework Designer, and Senior Blockchain Analyst

What happened: China leverages blockchain for green energy trading

How is this significant?
  • China’s National Development and Reform Commission (NRDC) granted approval for national trials this week involving the use of blockchain to streamline the trading of green energy
  • Reporting in the People’s Daily newspaper indicates the trials will be spread across two trading centres in Guangzhou and Beijing
  • The NRDC believes the efficiency and transparency of blockchain could help incentivise the use of green energy in China, and thus help the country achieve its carbon emission goals
  • This news demonstrates the Chinese government’s complicated relationship with digital assets and blockchain technology, the former of which represents a possible threat to state control and adoption of the digital Yuan. 
  • The PBoC reported in its 2021 Financial Stability Report this week that concerns over virtual asset transactions have now been “rectified”, and that supervision levels will return to normal, as opposed to the previous focus during the recent crackdown

What happened: Multiple central banks collaborate on cross-border CBDC trials

How is this significant?
  • The Bank of International Settlements (BIS) this week announced a cross-border trial of CBDC payments
  • Dubbed “Project Dunbar”, the trials “will develop prototypes for shared platforms that will enable international settlements with digital currencies issued by multiple central banks”
  • Project Dunbar features the involvement of central banks across three continents, with CBDCs from Australia, Malaysia, Singapore, and South Africa
  • A BIS spokesperson said “With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity”
News Roundups