Nickel Research Centre

Nickel News Roundup - Week 38

23rd September, 2021 

Market Overview:

The digital asset market experienced a significant pullback this week, erasing several weeks of growth. This decline echoed drops in wider financial markets, with concerns of possible exposure to Chinese commercial papers as backing assets in stablecoin reserves.

  • Bitcoin traded in a stable range between $47,000 and $49,000 for the first half of the week, before plunging on Monday as the Evergrande crisis undermined confidence across most markets
  • Bitcoin dropped from a weekly high of $48,790 on Saturday to a low of $39,880 on Monday, before rallying to current levels of $43,050 
  • Ether experienced a similar drop, falling from a weekly high of $3,663 to a low of $2,709 on Monday, before recovering above $3,000 to current levels of $3,011
  • The total value of all digital assets dropped below $2tn, recovering from a low of 1.73tn to current levels of $1.91tn
  • Total value locked in DeFi declined due to drops in Bitcoin and Ether value, dropping below $100bn to around $93.5bn

Digital asset markets this week were heavily influenced by fear and uncertainty in more traditional markets, with Evergrande casting a shadow due to concerns over potential stablecoin exposure to Chinese commercial papers and bonds. Outside of the market, regulation was a major theme this week, as the SEC urged more regulation, whilst leading exchange Coinbase sought cooperation, and leading financial trade groups advocated for fewer restrictions integrating digital assets into banking. Despite this week’s market downturn, institutions were still making major investments, with more new crypto unicorns achieving valuations above $1bn.


What happened: Digital asset ETF filings continue

How is this significant?
  • Appetite for traditionally-traded digital asset investment vehicles remains high in the US, with several more companies filing applications for crypto ETFs this week
  • Invesco and Galaxy Digital submitted a joint application to the SEC for a physically-backed Bitcoin ETF
  • Meanwhile, Amplify filed for a broader digital asset ETF, including exposure to Bitcoin futures, Bitcoin trusts, and shares in companies with significant exposure to Bitcoin and digital assets
  • Both filings notably deviate from the recent trend of only proposing Bitcoin Futures ETFs, the stated preference of SEC chair Gary Gensler
  • There are currently well over a dozen Bitcoin and digital asset ETF filings under review by the SEC, with a filing by VanEck expected to be the first to have a final judgement issued in November, a year after it was originally submitted

What happened: Goldman Sachs amongst investors in $40m crypto fund manager Series A

How is this significant?
  • One River Digital—the crypto-focused arm of One River Asset Management, backed by hedge fund billionaire Alan Howard—completed a Series A funding round this week that valued the fund manager at over $185m
  • As well as Alan Howard, the round included investment from the likes of Goldman Sachs, Liberty Mutual, and Coinbase
  • One River Digital currently has funds dedicated to Bitcoin and Ether, with a rumoured third fund dedicated to the rising Solana blockchain reported by Bloomberg
  • Eric Peters, One River Digital’s CEO said that digital assets will become a fixture in the investment landscape; “What’s clear is that asset management is going to make the transition to the tokenized world. And in that world, the opportunity is so much bigger. The question was: How do we capitalize on that?”

What happened: London-based blockchain-friendly banking startup valued above $1bn

How is this significant?
  • TrueLayer, a UK open banking startup achieved “unicorn” status this week, valued at more than $1bn courtesy of a $130m fundraise led by Tiger Global and payments processor Stripe
  • This has significance to the digital asset industry because it provides crypto-related companies easier onboarding through instantaneous bank-to-bank transfers as payment, rather than via intermediaries like debit and credit cards
  • TrueLayer is one of the few companies from traditional finance to build a suite of crypto-specific integration solutions
  • TrueLayer clients already include several companies involved with the purchase, trade, and payment of digital assets, such as e-bank Revolut, and payments processor MoonPay

What happened: Robinhood tests expansion of digital asset facilities

How is this significant?
  • Popular trading platform Robinhood appears to be quietly testing deeper functionality for digital asset trading, according to reports in Bloomberg this week
  • A beta version of its new iPhone app includes the ability to transfer digital assets into external wallets, giving access to a far broader suite of usecases than Robinhood’s current offerings, which are restricted to buying and selling within their app
  • This could introduce millions of users on Robinhood’s trading platform to features such as DeFi, and using digital assets for payment
  • CEO Vlad Tenev recently confirmed this as a crucial part of the company’s expansion into digital assets, saying in an earnings call that “The ability to deposit and withdraw cryptocurrencies is tricky to do with scale, and we want to make sure it’s done correctly and properly”
  • Digital assets accounted for approximately 41% of Robinhood’s revenues in the most recent reporting quarter, despite coming to the platform much later than traditional stocks and shares investing

What happened: Gary Gensler urges more regulation in Washington Post interview

How is this significant?
  • In an interview with the Washington Post this week, SEC chair Gary Gensler once again professed the need for more regulation in the digital asset sector, claiming it was “highly likely” many platforms were trading securities, but fell short of providing clarity on how exactly they might qualify as securities
  • In particular, Gensler took aim at stablecoins, likening them to private money issued in the 19th Century
  • He noted that the SEC is working with banking regulators to secure additional congressional authority in the regulation of stablecoins, preferring government-issued CBDCs

What happened: Financial trade groups urge caution against overly-stringent crypto regulations

How is this significant?
  • The Financial Times this week reported that several financial trade groups have written a letter to the Basel Committee on Banking Supervision, communicating a desire to avoid overly-restrictive regulations that could stifle innovation and lock banks out of the dynamic new asset class
  • According to the letter, there is concern that old standards cannot be applied to the new technology, and requirements are “so overly conservative and simplistic that they, in effect, would preclude bank involvement in crypto asset markets”
  • Signatories of the letter included the Global Financial Markets Association, the Institute of International Finance, the International Swaps and Derivatives Association, the Financial Services Forum, and the Chamber of Digital Commerce
  • Allison Parent, executive director of the Global Financial Markets Association noted that “We think everyone will be better off if regulated banks can meaningfully participate in these markets and provide access for their customers”, and that rather than blanket requirements for crypto assets, requirements should vary according to the individual digital assets in question, and the levels of relative risk they present 

What happened: Coinbase advocates for greater regulatory clarity

How is this significant?
  • Coinbase was involved in several pieces of news regarding regulation and government this week
  • The company secured a million-dollar contract with the US Immigration and Customs Enforcement agency (ICE) to build software for the government
  • Additionally, they voluntarily withdrew their Lend product, which would have allowed customers to earn interest on digital asset and stablecoin deposits, after the SEC pushed back against those plans
  • The SEC declined to comment, but Coinbase wrote “As we continue our work to seek regulatory clarity for the crypto industry as a whole, we’ve made the difficult decision not to launch. We had hundreds of thousands of customers from across the country sign up and we want to thank you all for your interest. We will not stop looking for ways to bring innovative, trusted programs and products to our customers”
  • Industry publication Coindesk reported on Tuesday that Coinbase is taking a proactive stance on regulation, and “is preparing to pitch a proposed regulatory framework to federal officials” in an attempt to build more informed frameworks for digital assets
  • Coinbase also announced on Monday that they were expanding their Coinbase Prime brokerage service for institutional investors, after institutional trading accounted for 69% of their trading volume in Q2 reporting

What happened: Revolut becomes first company to pay for office space in Bitcoin

How is this significant?
  • Digital bank Revolut became the first enterprise client of office sharing provider WeWork to pay for office space using digital assets
  • The bank used Bitcoin to pay for their largest American workspace, a 300-employee office in Dallas, Texas
  • As one of the first banks to integrate digital asset trading into their app, Revolut are now one of the first to demonstrate their viability as payment mechanisms on an industrial scale
  • Rhebecka D’Silva, Revolut’s global head of real estate said “We’re excited to continue on our rapid growth trajectory with an innovative partner like WeWork that affords us the flexibility to pay using cryptocurrency—a technology whose future we vehemently believe in—as Revolut expands in the US and around the world”

What happened: Three Arrows Capital joins $230m digital asset funding round

How is this significant?
  • Avalanche, a rising smart contracts blockchain, announced $230m of investment this week, from sources including Singapore’s Three Arrows Capital, and Polychain
  • The investment was made through a private sale of the blockchain’s proprietary AVAX coin; giving the company a cash injection for future development as the investors bet on the appreciation of the network and subsequently its native coin
  • Avalanche’s value surged following this news, leading to weekly growth despite the challenging overall market conditions
  • As a proof-of-stake protocol, Avalanche is currently (theoretically) more scalable than Ethereum, but is still relatively new and has a much smaller developer community—a fact that Avalanche has tried to address by launching a $180m developer incentive program two weeks ago

What happened: Mastercard issues first NFT

How is this significant?
  • A few weeks after competing payments processor Visa published a report on the potential of NFTs, Mastercard entered the space, issuing their first non-fungible token this week
  • The NFT was created in partnership with Italian Serie A football Club AS Roma and head coach Jose Mourinho, a global ambassador for Mastercard
  • In a press release, Mastercard explained that all UK cardholders could enter into a raffle to win the unique digital asset, marking the first time that a major payments processor has used the technology for customer engagement (a key usecase identified by Visa in their recent report)

What happened: Sports NFT platform becomes latest crypto unicorn with $4.3bn valuation

How is this significant?
  • Sorare, a French blockchain startup dedicated to the use of NFT technology for the creation of sporting collectibles and gaming assets, joined the recent ranks of new crypto unicorns, raising $680m—one of the largest investments ever in a French startup—for a total valuation of $4.3bn
  • Japan’s SoftBank led the funding round, adding to recent investments in the space ranging from digital bank Revolut, to a Brazilian digital asset exchange, to blockchain infrastructure company Blockdaemon
  • In an interview after the fundraise, Sorare CEO Nicolas Julia said “It’s very early and every industry that has a digital appeal will come to NFTs because it’s going to change the way we own things online. It’s going to be as impactful as mobile or any big tech shift”

What happened: Bitcoin miners raise hundreds of millions for infrastructure expansion

How is this significant?
  • Several Bitcoin miners secured major investments to scale up their businesses, as the infrastructure securing digital assets becomes more recognised and valued
  • Cleanspark, a Nasdaq-listed sustainable mining company, announced a new partnership for $145m of capital and human investment, including $132m in hardware and equipment
  • Their mining program will be 100% carbon neutral, and Cleanspark’s new data centre in Atlanta aims to increase the supply of solar power in the state of Georgia
  • On Tuesday, Genesis Digital Assets announced a $431m raise for expansion of mining infrastructure in North America and the Nordic region, as Bitcoin mining grows more centralised following crackdowns in China
  • According to their CEO Marco Streng “the capital raised from this round will be used to expand our bitcoin mining operations in locations where clean energy is easily accessible”
  • press release disclosed several well-known investors, including Paradigm, NYDIG, Stoneridge, FTX, Skybridge, and Kingsway Capital—a previous Genesis Digital investor whose backers “include the family offices of Paul Tudor Jones, Paul Marshall, and Winter Capital”

What happened: SoftBank participates in $155m blockchain infrastructure firm Series B round

How is this significant?
  • Blockdaemon, a blockchain infrastructure firm, announced a successful $155m Series B funding round this week, led by Japanese financial giants SoftBank
  • The raise equates to a current valuation of $1.225bn, making Blockdaemon the latest of several digital asset unicorns to secure investment from SoftBank
  • The capital will be used to grow headcount and finance acquisitions in key markets including Japan, Singapore, the UK, and United States
  • In June, the company raised $28m in a Series A round that included Goldman Sachs

What happened: Bitcoin-based security offering granted approval in Germany

How is this significant?
  • This week the German financial regulators BaFin approved the first security token offering in Germany, as part of a videogame publisher Exordium’s fundraising
  • The EXOeu securities are issued on the Liquid sidechain of Bitcoin, and sold via digital marketplace STOKR
  • STOKR co-founder Tobias Seidl said “The go-ahead from BaFin for Exordium’s STO in Germany marks the beginning of a new era of cross-border blockchain-based issuances of registered securities. We see Bitcoin as a fundamental backbone of the future capital markets, which will be built on blockchains”

What happened: Miami mayor Francis Suarez reveals plans for municipal digital asset use

How is this significant?
  • In an interview with FOX Business this week, Miami mayor Francis Suarez reported a successful trial to fund municipal projects through a proprietary digital asset known as MiamiCoin
  • Built on top of an open-source network using Bitcoin’s blockchain as a programmable base layer, the code included a proviso that 30% of coins mined in every (10 minute) block were automatically sent to a blockchain wallet designated for municipal finances
  • Suarez reported that the value of coins mined and sent to the wallet equated to around $2,000 every 10 minutes, and “over 5 million USD over the last 30 days”
  • Rather than direct custody of the coins, the city voted to sell them and hold the dollar equivalent in their accounts, introducing a new source of funding and leading Suarez to comment “It’s interesting because it’s not an involuntary tax, it’s not philanthropy, it’s something that is completely different and could revolutionize the way governments are funded in the future”
News Roundups