Nickel News Roundup - Week 17

29th April, 2021

Market Overview:

• Bitcoin declined below $50,000 over the weekend amidst concern over increased capital gains taxation in the United States, but bounced back at the start of the week recovering to a high of around $55,000
• Bitcoin is currently priced at $54,420, representing an 0.5% weekly growth
• Bitcoin dominance—the proportion of the total digital asset market capitalisation derived from Bitcoin—dropped below 50% for the first time since January 2018, indicating bullish momentum for altcoins
• Ethereum demonstrated this altcoin momentum, experiencing double-digit growth over the week as Ether achieved a new record value of $2,757, with a current spot price of $2,729
• The overall market capitalisation of digital assets returned to near-record levels, with a total value of $2.1tn
• Ether’s appreciation elevated DeFi values to record levels, with a total of $76.2bn locked in platforms and applications 

News:

• Since Q4 of 2020, numerous major financial institutions have made moves into digital asset investment, and now JP Morgan has joined them in offering a Bitcoin fund
• JP Morgan’s moves are perhaps the most indicative of sweeping changes in institutional sentiment towards digital assets, as CEO Jamie Dimon had previously been an outspoken critic of the asset class
• Although they have made several moves in the space over the last year, including setting up a blockchain division, developing their own stablecoin for international settlements, and developing a basket of crypto-related stocks, this marks the first time they will provide direct digital asset exposure to clients
• According to sources, JP Morgan will offer their private wealth clients to their actively-managed Bitcoin fund, starting this summer, with NYDIG providing custody for the assets
• This move seems to be actively driven by client demand, after co-president Daniel Pinto revealed at an event in February that “If… an asset class develops that is going to be used by different asset managers and investors, we will have to be involved”
• On Tuesday, JP Morgan moved their focus into other digital assets, publishing a report on Ether’s recent momentum titled “Why is ETH outperforming?”, concluding that the growth of DeFi and better liquidity conditions were key factors
• On Wednesday, JP Morgan joined forces with Singaporean bank DBS, and the Singaporean sovereign wealth fund Temasek, to create a new company called Partior, dedicated to using blockchain technology for interbank settlements
• In a statement announcing the company, the CEO of DBS said that “ The open platform will enable banks around the world to provide real-time cross-border multi-currency payments, trade finance, foreign exchange and DVP securities settlements... with programmability, immutability, traceability built into its suite of services”

• News emerged on Tuesday that the European Investment Bank plans to launch a sale of “digital bonds” created on the Ethereum blockchain
• Bloomberg reported that the bond issuance would take the form of “a two-year 100-million Euro digital bond [represented as a CBDC], with the sale to be led by Goldman Sachs, Banco Santander, and Societe Generale”
• Societe Generale in particular has a history of using blockchain for secure issuance of bonds, first issuing a covered bond security token valued at €100m over three years ago
• However, whilst previous bonds issued on blockchain were sold to associated entities, the EIB bond will be sold to third parties, representing a more significant milestone in financial instruments on the blockchain
• In their announcement on Wednesday, the EIB said that blockchain brought numerous benefits to finance; “the digitalisation of capital markets may bring benefits to market participants in the coming years, including a reduction of intermediaries and fixed costs, better market transparency through an increased capacity to see trading flows and identity asset owners, as well as a much faster settlement speed”

• On Monday, Tesla posted its quarterly earnings, which rose to new record levels boosted by Bitcoin
• As part of the reporting, Tesla disclosed that they had made a $101m profit on the sale of 10% of the company’s Bitcoin holdings
• Elon Musk noted that this sale didn’t indicate a change in heart on Tesla’s long-term view on Bitcoin, but rather that it was a proof-of-concept for corporate Bitcoin holdings; “ Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet”

• Over the last year, open interest in the trading of Ether options has increased 80-fold over the last year, from $50m to a current value of over $4bn
• According to a report by crypto advisory firm Two Prime Digital Assets, this growth has been driven by an increased institutional presence in the market
• Two Prime’s research notes that “Ethereum is, by far, the most widely used development platform for blockchain technology, with over 90% market share in application development and transaction volume… Institutional money managers have moved in to start hedging net long portfolios against outsized volatility events”
• Meanwhile, Friday will see the expiry of $4.1bn in Bitcoin options, spread across 77,000 contracts

• China continues to push ahead with plans for its digital Yuan CBDC, and this week saw several major Chinese corporations clarify their commitment to its integration
• JD.com, a major Chinese e-commerce site has previously participated in localised digital Yuan trials, and announced on Sunday that it has begun paying some employees using the CBDC
• According to a report in the South China Morning Post newspaper, Ant Group (an affiliate of Alibaba) have worked alongside the government on the CBDC since 2017, and Tencent have been involved since February 2018
• Recently, China announced plans for foreign athletes and tourists to use the digital Yuan during the 2022 Winter Olympics

• Binance, the world’s largest crypto asset exchange, continues its move into new asset formats, adding tokenised shares of Microsoft, Apple, and Microstrategy to their platform
• This marks the second wave of their move into tokenised shares, after launching Tesla and Coinbase stock tokens a few weeks ago
• Furthermore, the company this week announced plans to launch its own non-fungible token (NFT) marketplace in June, with a press release promising “a packed lineup of premier NFT exhibitions and collaborations, along with Binance’s industry-best liquidity”

• According to paperwork filed with the SEC, Morgan Stanley’s private wealth clients have invested $29.3mn in the company’s Bitcoin fund within the first two weeks
• The filings show that 322 clients have thus far allocated assets to the fund
• This growth is in the context of Morgan Stanley allowing their clients to allocate a maximum 2.5% of their net worth towards Bitcoin, and requiring investment firms to hold at least $5m in assets at the bank to qualify

• On Monday, trading platform eToro created a portfolio named “BitcoinWorldWide”, designed to give investors exposure to both Bitcoin, and companies in the wider Bitcoin value chain
• Dani Brinker, eToro’s Head of Portfolio Investments, said that “New all-time highs might make headlines, but the most significant change surrounding the world's largest crypto is not its price, but the companies building the value chain around it”
• Now, eToro’s 20 million users will have access to a portfolio featuring 25% Bitcoin exposure, as well as 26 companies including Visa, PayPal, ING, Coinbase, and Nvidia
• This strategy of wider value chain investment was echoed by Goldman Sachs on Tuesday, as an investor note found companies with high blockchain and crypto asset exposure “dramatically outperform” the market
• Goldman analysts identified 19 stocks with both high digital asset industry exposure and market capitalisations above $1bn, and found that “the companies have averaged a 43% return this year—more than three times the S&P's 13% gain over the same period”

• Nexon is one of the largest game producers in the world, with a strong presence in the lucrative online gaming market
• On Tuesday, the South Korean-Japanese conglomerate announced that they had purchased $100m in Bitcoin, joining the likes of Tesla and Meitu in adding Bitcoin to their balance sheet
• Explaining the move, Nexon CEO Owen Mahoney promoted the long-term value proposition of the asset; “Our purchase of Bitcoin reflects a disciplined strategy for protecting shareholder value and for maintaining the purchasing power of our cash assets… In the current economic environment, we believe Bitcoin offers long-term stability and liquidity while maintaining the value of our cash for future investments”

• As the largest payments processor in the world, Visa has significant ability to increase the scope and utility of digital assets
• In their Q2 earnings call on Tuesday, CEO Al Kelly elaborated on their plans for digital assets, announcing a five-pronged approach
• Kelly repeated their previous policy that digital assets like Bitcoin are to be treated as investments or “digital gold”, whilst CBDCs and stablecoins can be used directly as payment
• He said that Visa have identified five key opportunities for the company: “enabling consumers to make a purchase of these currencies or Bitcoins”, “enabling digital currency cash outs to fiat...converting a digital currency to a fiat on a Visa credential, which then makes that those funds available for shopping”, “enabling financial institutions and FinTech partners to be able to have a crypto option for their customers”, “supporting digital currencies as an additional settlement currency on our network”, and finally “working with central banks”

• On Tuesday, Time Magazine published its list of the 100 most influential companies in the world; featuring companies from the digital asset space for the first time
• The magazine recognised Digital Currency Group (DCG) as one of the most influential Disruptors (alongside the likes of Airbnb, Tesla, and Huawei), thanks to a portfolio of businesses ranging from asset management to industry media and education 
• Leading digital asset exchange Coinbase was recognised as a Titan, placing them amongst the ranks of Facebook, Microsoft, GM, and Disney
• Time noted that these inclusions are indicative of a wider shift towards digital assets: “It’s been a huge year for cryptocurrencies, but nothing’s been as validating as the April 14 direct listing of Coinbase, which operates an exchange where 56 million users buy and sell Bitcoin and more. Coinbase ended its first day of trading worth nearly $86 billion—making it the most valuable U.S. financial exchange, and giving cryptocurrencies a boost of Wall Street cred”

• Bison, the crypto trading app developed by Germany’s second-largest stock exchange released figures this week detailing a dramatic growth in popularity
• Since the beginning of the year, the number of active users has increased by 83%, to a total of 400,000
• Additionally, they revealed that from November to January, trading doubled from €35m per day, to around €70m
• According to the app’s developer, these metrics “reflect the current high momentum in the crypto market and the increasingly broad interest in cryptocurrencies”, despite Germans traditionally being viewed as very conservative investors

• Valkyrie Digital Assets could become the first American company with a Bitcoin ETF, as the New York Stock Exchange filed with the SEC on their behalf, beginning a 45 day review process
• The SEC is currently in the review process of at least three other ETFs (and recently delayed ruling on VanEck’s application), but this is the first one filed by the NYSE
• Valkyrie’s Chief Investment Officer Steven McClurg believes that the world of finance has now evolved enough to make long-awaited digital asset ETFs a reality: “This is something that I’ve wanted to do for five years now. It wasn’t until recently that I believed that the SEC would probably approve a bitcoin ETF. So we started working on that in earnest probably in August”

• Securrency, an institutional crypto infrastructure company dedicated to custodianship of digital assets, completed a $30m Series B funding round this week 
• Contributors in the Series B included American banks State Street and US Bank, as well as Abu Dhabi Catalyst Partners and WisdomTree Investments
• State Street announced plans to create its own crypto asset trading platform earlier this month, so this marks a second major endorsement of the asset class by America’s second-oldest bank
• Industry commentators focused on the involvement of US Bank—not only is it the fifth-largest banking institution in the United States, but it’s headquartered in Minnesota, thereby representing an increasing institutional interest from far beyond Wall Street 

• One of the key factors cited for the growth of Bitcoin and digital assets over the last year is their hard-coded monetary policy, providing investors with predictable issuance during periods of wider economic inflation
• An investor survey released by Deutsche Bank this week found that inflation remains the top concern of global investors; “A vast majority (81%) agree that inflation is more likely after the pandemic while only 10% thought we would see deflation”
• Additionally, a majority of investors surveyed in the US believed the Federal Reserve would be unable to meet its long-term 2% inflation target, with 3% deemed more likely

• Professional sports in the United States remains an industry full of early adopters for crypto assets, both in terms of accepting and creating them
• The Golden State Warriors of the NBA became the first professional team in America to release officially-licensed NFTs, auctioning off a series of digital memorabilia commemorating championship successes
• The New York Times reported that quarterback Trevor Lawrence, the presumptive #1 NFL draft pick, will be the first professional athlete sponsored by a digital asset company (the portfolio tracking app Blockfolio), with endorsement fees paid entirely in crypto
• Also in the NFL, Kansas City Chiefs player Sean Culkin became the first player to convert his entire salary into Bitcoin
• Culkin provided a lengthy rationale for his choice, telling ESPN “"I want to do this with the thought it would continue to rise over the long term… This for me is a long-term play, a generational play. The more research I did and the more I zoomed out, I didn't necessarily link volatility to risk. I saw Bitcoin was growing at such an exponential rate... Long term, it's a stored value. What makes Bitcoin so intractable is its scarcity. Over time, it's deflationary by nature”

• Iran’s Central Bank has given approval for financial institutions—banks, lenders, and licensed moneychangers—to use digital assets to pay for imports
• There is a caveat—digital assets can only be used if they originate from state-sanctioned mining operations within Iran
• Previously, the country’s Central Bank had only given itself permission to use digital assets for imports, so this move represents a wider integration across the country’s financial infrastructure
• According to analysts, Iran’s official mining operations can currently produce up to $2m in value every day