Nickel Research Centre

Nickel News Roundup - Week 49

9th December, 2021 

Market Overview:

Digital assets suffered from a “flash crash” over the weekend, before a gradual recovery across the rest of the week took overall market capitalisation back to mid-October levels.

  • Once again, the 24/7/365 nature of digital assets exposed traders to bad news before traditional markets, as concerns over Evergrande debt defaults re-emerged
  • Bitcoin dropped as low as $45,000 on Saturday morning in a sudden 20% flash crash involving widespread cascading liquidations, having traded around $57,000 on Friday afternoon
  • Since then, Bitcoin has recovered back above the $50,000 mark, currently trading at around $50,460
  • Ether also fell sharply from highs of $4,658 to lows of $3,645, but recovered better than Bitcoin, with a current price of $4,381 
  • Total market capitalisation dropped as low as $2.09tn during the weekend crash, before bouncing back to around $2.4tn
  • Total value locked in DeFi declined slightly on the weekly timescale, to $105.3bn according to industry analytics platform DeFi Pulse

Digital assets experienced a weekend flash crash, as new Evergrande default fears were added to wider economic uncertainties concerning the Omicron Covid variant. However, assets did recover subsequently, and the week featured several pieces of encouraging news. Payments giant Visa is actively supporting their clients in the adoption of digital assets, the US edged towards greater understanding of digital assets within political circles, Australia pushed for regulatory clarity, and more partnerships between traditional institutions and crypto asset specialists were confirmed.


What happened: Visa launches crypto asset consultancy services

How is this significant?
  • On Wednesday, Visa announced that they have launched consultancy services to help clients navigate the dynamic (and to many, unfamiliar) world of digital assets
  • Amongst clients already using and benefitting from these crypto advisory services, they named UMB bank, based in the American Midwest
  • Speaking to CNBC about the move, Nikola Plecas (Visa’s European crypto lead) spoke about the drastic rise in adoption of digital assets, noting that $3.5bn was processed by the company through crypto-linked cards in their first year of operation between October 2020 and September 2021
  • After several large retailers recently dropped Visa support due to perceived high fees, the company foresees great growth opportunities from digital assets to help their bottom line; Plecas commented that “Crypto for us is a huge new vertical and growth opportunity… we will be continuing to focus on growing this business moving forward”
  • Announcing the new advisory service, Visa also disclosed that a recent commissioned survey found 94% of respondents had “some” awareness of crypto assets, and that customers can currently spend their crypto at 80 million partnered merchants

What happened: Crypto industry leaders participate in US House hearing on digital assets

How is this significant?
  • On Wednesday, the US House Committee on Financial Services held a hearing about digital assets, for the first time ever involving leadership from several major crypto institutions, including Coinbase, FTX, Circle (issuers of the USDC stablecoin), and former OCC Comptroller Brian Brooks
  • The hearing provided the committee with an opportunity to 
  • Key issues included the possible “challenge to US dollar supremacy as a global reserve currency”, but several of the crypto executives argued that stablecoins choosing to peg their value to the US dollar was a “vote of confidence” for the greenback’s reserve status
  • Bloomberg reported a partisan divide from the start of the hearing (which can be viewed here) between Republican lawmakers supporting free markets, and Democrats raising concerns about perceived manipulation
  • The hearing is indicative of the growth of digital assets, with one lawmaker commenting it was easier to ignore when it was a “B”s in “Billions” issue, but has a “T” (i.e. Trillions) issue now
  • Crypto executives argued in favour of greater regulatory clarity, noting that the SEC’s current positioning didn’t provide much transparent guidance, and that several regulatory bodies (such as the Federal Reserve, SEC, CFTC, and OCC) all appear to be in competition
  • Congressman Tom Emmer of Minnesota noted that “Americans deserve access to a wide range of investment products… But the SEC is not providing Americans access to the same range of crypto products [due to rejection of Bitcoin spot ETFs] for reasons that don’t really make sense”
  • In another forum, CFTC commissioner Dawn Stump in an interview with the Financial Times declared that “US crypto needs clearer rules before punishment” arguing that they cannot bring “enforcement actions without giving [crypto firms] the tools they need to be compliant”

What happened: Australia proposes legislative reforms to address digital assets

How is this significant?
  • Noting that the rise of digital assets represents “significant shifts which we need to be in front of”, Australian legislators proposed crypto-specific legislative reforms that could be passed into law by late 2022
  • Australia’s Treasurer Josh Frydenberg said that the reforms (which also include other aspects of digital payments) “will firmly place Australia among a handful of lead countries in the world”, and represent “the largest reforms to our payments systems in a quarter of a century”
  • The Australian government plans to institute custody requirements to protect people trading on exchanges, as well as laws to govern the crypto-specific corporate governance structures known as DAOs—Decentralised Autonomous Organisations
  • Frydenberg believes the reforms will help grow the digital asset industry in Australia, saying “For businesses, these reforms will address the ambiguity that can exist about the regulatory and tax treatment of crypto assets and new payment methods. In doing so, it will drive even more consumer interest, facilitate even more new entrants and enable even more innovation to take place. For consumers, these changes will establish a regulatory framework to underpin their growing use of crypto assets and clarify the treatment of new payment methods”

What happened: Ritholtz Wealth Management partners with Wisdomtree for crypto exposure

How is this significant?
  • Although Canada saw the launch of a Bitcoin spot ETF by Fidelity last week, the presence of the highly-demanded investment product remains beyond the reach of American investors, after recent SEC rejections of spot ETFs by both VanEck and Wisdomtree
  • The lack of progress regarding spot ETFs has led businesses to get creative with ways to provide the crypto exposure sought by investors, including one launched this week by Ritholtz Wealth Management and Wisdomtree
  • On Friday, they launched the RWM WisdomTree Crypto Index, which involves custody from digital asset exchange Gemini and a technology platform by Onramp in order to access “a modified market cap-weighted index that consists of 36% Bitcoin, 20% Ethereum, and 4% of each of 11 other assets that provide broad crypto exposure” in a “separately-managed account”
  • Ritholtz Wealth Management’s CEO Barry Ritholtz both recognised the depth of demand and criticised the regulatory restrictions that necessitated the unusual product structure, stating “This was really driven by client demand… Gary Gensler could have saved us a year of serious work if there was an ETF for this”

What happened: Facebook removes restrictions on digital asset advertising

How is this significant?
  • Facebook (or rather, its newly-rebranded parent company, Meta) changed its policies this week, making it easier for companies in the digital asset field to advertise across major social platforms like Facebook and Instagram
  • The move appears to indicate a growing acceptance of digital assets by the owner of the world’s largest social networks, allowing holders of any from a list of 27 regulatory licenses to advertise
  • In a blog post announcing the policy reforms, the company stated “This change will help make our policy more equitable and transparent and allow for a greater number of advertisers, including small businesses, to use our tools and grow their business”

What happened: Fidelity Digital Assets teams up with crypto lender Nexo

How is this significant?
  • On Tuesday, leading digital asset lending firm Nexo issued a press release announcing a new partnership with Fidelity’s digital asset arm “to establish an institutional-grade platform for the storage of digital assets”
  • Fidelity will act as custodians of crypto assets used across Nexo’s platform for various financial services such as lending
  • Institutional customers of Fidelity will gain access to Nexo’s Prime Brokerage Platform as part of the deal
  • Christopher Tyrer, head of Fidelity Digital Assets Europe said the partnership would increase access to address growing institutional interest; “We've seen tremendous growth of interest in digital assets from institutions within the European market, and we're committed to implementing sophisticated solutions to match those available with traditional asset classes”
  • Nexo co-founder Kalin Metodiev stated “Our client base will now have full use of our industry-leading credit and trading products with reliance on Fidelity Digital Assets' bespoke custody and security solutions”

What happened: Digital Currency Group launches marketplace for Bitcoin mining hardware

How is this significant?
  • The Digital Currency Group, the industry conglomerate which includes Grayscale and media platform Coindesk, announced the creation of a marketplace for Bitcoin miners this week, via its subsidiary company Foundry
  • The FoundryX platform will allow users to both buy and sell mining hardware, building on a b2b model that has already made $125m in revenues this year
  • According to industry publication TheBlock, “Foundry said it has built relationships with over 200 buyers and sellers, including public mining companies, family offices, and energy companies”
  • Both new and used mining equipment can be sold, but the platform is aimed at medium-to-large sized mining operations, with a minimum threshold of 50 units per order
  • Foundry’s VP of business development is bullish on the revenue potential of the sector, stating “Our goal for 2022 is to be the market leader in the $2.5 billion [crypto mining hardware] market”

What happened: 10T Holdings files to launch $500m late-stage crypto fund

How is this significant?
  • Macro investor Dan Tapiero, along with partners at 10T Holdings, filed with the SEC this week for a half-billion dollar investment fund aimed at mid- and late-stage development digital asset businesses
  • The 10T DAE Fund 3.0 is the third major fund launched by 10T in the crypto asset space, following a $200m fund in February, and $750m fund in September
  • 10T already counts numerous major digital asset companies within its portfolio, including the exchanges Kraken and Gemini, as well as hardware wallet manufacturers Ledger

What happened: Binance Singapore acquires 18% share in private securities exchange

How is this significant?
  • Binance Asia Services, the Singaporean subsidiary of the world’s largest digital asset exchange, announced the acquisition of an 18% stake in regional securities exchange HGX this week, in a move designed to bring more digital asset technology to traditional markets
  • Binance Singapore CEO Richard Teng said “Through this investment, we seek to work with HGX in enhancing offerings of products and services supported by blockchain technology”
  • According to Bloomberg analysts the stake “gives the crypto firm access to a regulated market operator as HGX has a license to trade shares in private companies, as well as tokenized assets including rare whiskey”
  • In other Binance News, CEO Changpeng “CZ” Zhao revealed in a Sunday Telegraph interview that they are focused on ensuring regulatory compliance in the United Kingdom, setting up a UK office with a “number of ex-regulatory staff from the U.K. and a couple of hundred compliance people” 
  • He referred to the move as part of a wider shift in company policy, showcasing “a number of very substantial changes in organizational structures, product offerings, our internal processes and the way we work with regulators”

What happened: FTX seeks $1.5bn in fresh investment on $32bn valuation

How is this significant?
  • FTX, one of the leading global digital asset exchanges in the world, is in the process of undertaking a new funding round, according to Silicon Valley publication The Information
  • The proposed $1.5bn funding round would value FTX at $32bn, and their American subsidiary FTX.US at $8bn
  • The exchange has already secured $1bn in investments this year (with the conclusion of a Series B1 round in October providing a $25bn valuation), from sources including Temasek Holdings, Sequoia Capital, Tiger Global, and BlackRock-managed funds
  • FTX Chairman Sam Bankman-Fried (one of the executives who testified before the House Committee on Financial Services) said that previous funding rounds aimed to finance acquisitions and expand the exchange’s presence into more countries for a greater international presence 

What happened: Silvergate Bank seeks to raise $461m in public stock offering

How is this significant?
  • Silvergate, a federally-regulated American bank providing services to the digital asset industry, filed with the SEC to raise $461m via a public stock offering this week
  • The sale could potentially rise to $530m if the underwriters all take up their full additional share purchase offers
  • According to their filing, the bank intends to utilise the share issue to fund growth and development of additional services; using “net proceeds from this offering to further supplement the regulatory capital levels of the Company and the Bank and for other general corporate purposes, which may include providing capital to support the Company’s growth organically or through strategic acquisitions, and other growth initiatives, including the Bank’s SEN Leverage product, custody and other digital asset services”
  • Silvergate will offer 3.31 million shares with a maximum price of $145
  • As of November 30th, Silvergate’s digital currency deposits amounted to $15.6bn, and the bank was recently endorsed by JP Morgan via an overweight recommendation
News Roundups