Nickel Research Centre

Nickel News Roundup - Week 23

10th June, 2021 

Market Overview:

Digital assets performed relatively steadily this week, with a short lived dip early in the week that was counteracted with bullish momentum on Wednesday.

  • Bitcoin experienced a sharp decline on Tuesday, briefly dropping as low as $31,500
  • This dip was possibly driven by concerns about the FBI recovering funds from a Bitcoin wallet (further details revealed it was due to sloppy password storage on a centralised exchange, rather than blockchain vulnerability),
  • However, the leading digital asset swiftly recovered as news emerged of Bitcoin becoming legal tender, bouncing back above $36,000, to current levels of $36,800 
  • Ethereum spent most of the week ranging between $2,640 and $2,880, before slumping in line with Bitcoin on Tuesday. It also recovered in line with Bitcoin, crossing $2,600 on Wednesday before retracing slightly to a current price of $2,540
  • The overall market capitalisation of digital assets contracted slightly, to $1.61tn
  • The total value locked in the DeFi sector declined after Tuesday’s dip, to $69.7bn

Digital assets performed steadily this week, with volatility on Tuesday and Wednesday acting as outliers. In the news, Bitcoin had perhaps its most striking piece of adoption yet, becoming accepted as legal tender for an entire country. Enthusiasm for digital assets has seen a flood of applications for business licenses in Singapore, a heavily-oversubscribed bond issue from Microstrategy, and continued efforts at cleaning up the Bitcoin mining energy supply. Digital assets were used in a record property transaction, and Chinese media clarified a great deal of recent uncertainty.


What happened: El Salvador becomes first country to declare Bitcoin legal tender

How is this significant?
  • El Salvador made history this week, as the Central American nation became the first in the world to officially recognise and accept Bitcoin as legal tender
  • The proposal came directly from the Salvadoran president Nayib Bukele, who said it could have wide-ranging impacts such as providing access to financial services for the 70% of the population who are currently unbanked
  • Increased innovation and tourism were cited as other key benefits of the move
  • On Tuesday night, the Salvadoran congress passed the bill with a supermajority, garnering 62 of 84 possible votes
  • The news was in marked contrast to Donald Trump, who spoke out against Bitcoin this week because of concerns over it competing against the US dollar
  • With Bitcoin now accepted as legal tender, every (technologically able) business throughout the country must accept it as payment for goods and services
  • The news was quickly followed elsewhere in Latin America, with Paraguayan congressman Carlos Rejalaannouncing a bill to attract digital asset and crypto mining companies, allowing them to pay in crypto, store digital asset profits in local banks, and take advantage of Paraguay’s cheap hydroelectric energy 
  • Slightly further north, Texas governor Greg Abbott signed into law a bill creating a legal framework for crypto and blockchain, in order to attract more businesses operating in the space

What happened: Major companies revealed amongst more than 300 “crypto license” applicants in Singapore

How is this significant?
  • In a bid to become “Asia’s Silicon Valley”, Singapore has set up a crypto-friendly regulatory landscape
  • According to a recent Bloomberg interview with the Monetary Authority of Singapore (MAS) Chief Fintech Officer Sopnendu Mohanty, there have been over 300 requests for crypto exchange and payment licenses since the authority opened the program last year
  • Amongst the applicants have been major global corporations, including Google, Alibaba, and Ant Group
  • Major global digital asset exchanges have also applied, including Binance, Coinbase, and the Winklevoss brothers’ Gemini
  • Speaking to Bloomberg, Mr Mohanty also noted that whilst the MAS does urge prospective investors to research digital assets and be aware of their volatility, “we know that the world is moving to digital currencies… The first thing which is getting institutionalised are the exchanges”

What happened: Microstrategy bond issue for Bitcoin purchase is heavily oversubscribed

How is this significant?
  • Microstrategy and their CEO, noted Bitcoin bull Michael Saylor, have been consistently “buying the dip” throughout the recent market correction, adding to their holdings as the the publicly-traded company with the largest Bitcoin treasury
  • This week, the company announced another major bond issue to fund additional Bitcoin purchases, with an annual interest rate of 6.125%
  • Originally proposing a $400m issue, anticipated demand increased it to a $500m issue a day later
  • Despite the increase, investor enthusiasm still saw the bond issue heavily oversubscribed, with $1.6bn of interest—four times the initially planned raise
  • Additionally, Volt Equity became the latest company to file for a Bitcoin-related ETF this week, through companies with Bitcoin exposure, such as Microstrategy

What happened: Digital asset exchanges see largest outflows to private wallets in 6 months

How is this significant?
  • Analytics from digital asset industry data scientists GlassNode this week revealed that digital asset exchanges experienced their largest single day net outflow of Bitcoin since December, with over 22,500 Bitcoins being withdrawn
  • The significance of this is that withdrawing digital assets from an exchange and into a personal wallet (i.e. one which the user directly controls the private keys and therefore ownership of) is usually perceived as a signal that the user intends to hold the assets long-term, rather than trade them
  • The data analysis examined 13 major exchanges with large trading volumes, including Coinbase, Binance, and Kraken, thereby providing a representative picture of customer behaviour

What happened: Miami’s most expensive penthouse is sold for cryptocurrency

How is this significant?
  • News emerged this week that a recent record-breaking property deal in Miami was paid entirely through digital assets
  • The purchase was “all cash”, but paid entirely in crypto, closing the deal within 10 days from start to finish
  • Not only did it represent a record for a property transaction in digital assets, it was a record property transaction full-stop for the exclusive Miami Beach area, with the 5,067 square foot penthouse priced at over $4,440 per square foot
  • Although confidentiality agreements mean that neither the buyer nor specific digital assets have been identified, it has been confirmed that the deal represented a record in speed of closing as well as price, indicating the increased utility and convenience of crypto assets

What happened: JP Morgan looks to move into “programmable money”

How is this significant?
  • Since launching their private “JPM” stablecoin last October, JP Morgan have remained busy in the blockchain space, through their dedicated blockchain arm, Onyx
  • According to a recent Coindesk interview with Onyx head Umar Farooq, the company is now looking to leverage the technology of blockchain for increased sophistication and usecases
  • Farooq said; “We are getting into the programmability of JPM Coin… Actually programming what money can do for you, whether it’s conditional payments, whether it’s things like tax assessments”
  • The desire to improve automation was one of the reasons JP Morgan built on a permissioned version of Ethereum; “When we looked at Ethereum versus other options, we were very attracted by the smart contract ability”
  • Additionally, the company is watching the growth of decentralised finance (DeFi) on Ethereum with a keen eye; according to Farooq, “Although it’s very much in the public crypto sphere currently, there is clearly a future for DeFi as other assets start to get put on blockchains”
  • The Onyx chief also cited the impending arrival of staking (and thus passive income generation) on Ethereum as a key area of interest, stating “When it comes to ETH 2.0 staking, that’s going to be a very interesting development… I think that might open more doors for people to interact with the Ethereum ecosystem”

What happened: Invesco becomes latest company to file for digital asset ETFs

How is this significant?
  • Atlanta-based Invesco, an investment management company with $1.5tn in assets under management, became the latest financial firm to enter the race for a digital asset ETF in the United States
  • According to an SEC filing this week, Invesco plans to launch two digital asset ETFs
  • Approximately 85% of each fund would be in crypto-linked equities, with the remainder being from existing external trusts and funds with direct digital asset exposure
  • Invesco’s proposed Galaxy Blockchain Economy ETF is set up to track the returns of the Alerian Galaxy Global Cryptocurrency-Focused Blockchain Index
  • Their other proposed ETF, the Galaxy Blockchain ETF will instead track the returns of the Alerian Galaxy Global Blockchain Index

What happened: Ruffer nets over $1bn profit from Bitcoin purchase

How is this significant?
  • According to a report in the Sunday Times this week, the UK asset manager Ruffer made $1.1bn in profit within 5 months of their Bitcoin investment last year
  • After originally investing $600m in November, the company noted that they took profits for clients after the price had doubled in December and January
  • Ruffer sold off the remainder of their holdings in april, under the belief that easing lockdown restrictions would lead to reduced digital asset trading by young people
  • Although they exited their position in the interests of securing (significant) profit, Ruffer remain interested and optimistic about digital assets in the long term, with a spokesperson saying “Bitcoin has been a successful investment for Ruffer since we initiated our position last November, as an additional protection in client portfolios… At purchase, we saw bitcoin as a diversifier to gold, offering additional portfolio protection. Long term, we remain interested in digital assets and the role they can play in real wealth preservation”

What happened: Blockchain companies increase solar power usage to boost sustainability

How is this significant?
  • One of the catalysts for the recent market downturn has undoubtedly been increased social concern over Bitcoin mining sustainability—and the mining industry continues to address those concerns
  • This week, Austrian companies Wien Energie and Riddle&Code announced the launch of a blockchain-based platform allowing customers to make investments into solar power companies and be rewarded in digital tokens based on power output of solar farms, paying their energy bills with those tokens
  • In a press release, Wien Energie CEO Michael Strebl said “consumers are practically excluded from participating in energy production and settlements. Blockchain has the potential to transform consumers into prosumers and active participants in the energy network”
  • Additionally, the payment processor Square (run by Twitter co-founder Jack Dorsey) announced that they would be investing $5m into a solar-powered Bitcoin mining farm in conjunction with Blockstream, which includes “creating a public-facing dashboard to serve as a transparent case study for renewable energy and Bitcoin mining”
  • Dorsey is a high-profile Bitcoin advocate, speaking at last week’s Bitcoin 2021 conference and saying “Bitcoin changes absolutely everything. I don’t think there is anything more important in my lifetime to work on… if I were not at Square or Twitter, I would be working on Bitcoin. If [Bitcoin] needed more help than Square or Twitter, I would leave them for Bitcoin… But, I believe both companies have a role to play.”

What happened: Solana blockchain raises over $300m for development

How is this significant?
  • This week, Solana—a scalability-focused proof-of-stake smart contract blockchain hoping to challenge Ethereum—confirmed that they had raised $314m to fund future development
  • The raise was led by Silicon Valley veterans Andreessen Horowitz, and structured around a purchase of the protocol’s native SOL tokens, rather than the traditional venture capital approach of company equity
  • As a blockchain designed by maths-savvy engineers, the raise was actually conducted as a very specific figure; $314,159,265.359 (i.e. the mathematical constant of Pi, multiplied by 100m)

What happened: Chinese state media comments on crypto assets and blockchain

How is this significant?
  • Several pieces of news came out of China this week, clarifying recent concerns about the country “banning” crypto, based on misreporting
  • The country’s Xinhua news agency issued a report that did caution citizens against “air coins”—tokens with minimal actual utility—promising certain profits and returns, but did note that “If only virtual currencies such as Bitcoin are bought and sold as virtual commodities, ordinary people have the freedom to participate in transactions at their own risk”
  • China’s Ministry of Industry and Information Technology published a proposal outline this week concerning blockchain development which was very optimistic about the technology’s potential, stating that the country should “promote the deep integration of blockchain and economy and society and accelerate the promotion of blockchain technology for application and industrial development”
  • Within the report, the ministry cited real estate registration, supply chain management, and product traceability as key areas that could benefit from the integration of blockchain
  • The Copyright Society of China (CSC) launched the China Copyright Chain on Tuesday, using blockchain to document proof of digitised asset ownership and copyright infringement
  • According to CSC Chairman Xiaohong Yan, “The blockchain is great for digital copyright protection given its technical features such as immutability, source-tracing ability and distributed consensus… The blockchain can significantly reduce the cost to protect digital copyright, increase efficiency and provide new ways to collect evidence, trade digital assets and protect the rights of these copyrights’ owners”
  • Authorities in China’s Xinjiang and Qinghai provinces reportedly announced restrictions on the mining of digital assets due to energy consumption; analysts say this could have the short-term effect of a decline in Bitcoin’s hash rate as miners are taken offline, but could also have the corollary of increased miner decentralisation and cleaner energy usage with hashrate moving out of China
  • Meanwhile, Hong Kong’s Monetary Authority announced a plan to study CBDCs in order to “future-proof” their economy, saying “The HKMA will also continue to collaborate with the People’s Bank of China in supporting the technical testing of e-CNY in Hong Kong with a view to providing a convenient means of cross-boundary payments for both domestic and mainland residents”

What happened: Auctioneers continue to embrace digital assets

How is this significant?
  • Non-fungible tokens have generated large amounts of new coverage for auction houses as a new way to sell provably unique assets, and a new means of payment with the potential to appreciate in value
  • 225-year old auction house Phillips confirmed that their upcoming auction of Banksy’s “Laugh Now Panel A”(valued between $2.8m-$4.1m) would accept Bitcoin and Ether as payment options, joining Sotheby’s and Christie’s in accepting digital assets
  • Jonathan Crockett, chairman of Phillips Asia said that they had been “inundated with questions as to whether we will start offering this service”, and that “Over the past few years many have made fortunes in cryptocurrency and so it was only a matter of time before cryptocurrency starts to be used as a payment method for art and other collectibles”
  • Meanwhile, Sotheby’s announced the creation of a virtual gallery on the Ethereum VR platform Decentraland 
  • This launch runs in conjunction with Sotheby’s current “Natively Digital” series of curated NFT sales

What happened: Norton integrates Ethereum miner into their software

How is this significant?
  • Norton LifeLock, the company behind the popular Norton Antivirus software, announced the creation of Norton Crypto, a platform allowing users to mine for digital assets
  • Users will be able to join an Ethereum mining pool run by Norton, allowing users of PCs to contribute spare computational power to low-volume mining operations
  • Participants will be awarded Ether in accordance to their time participating in the pool and their share of the contributed hash power, minus a 15% fee paid to Norton
  • In a press release, the cybersecurity giant stated “We are proud to be the first consumer Cyber Safety company to offer coinminers the ability to safely and easily turn the idle time on their PCs into an opportunity to earn digital currency”

What happened: Google amends US ad policies for digital asset companies

How is this significant?
  • Google announced a series of revisions to their ad policies concerning digital assets in America, seemingly aimed at greater regulatory compliance
  • According to an announcement of the new policies, “anyone seeking to advertise those products to U.S. customers will have to be registered with the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) or a federal or state chartered bank regulator”
  • Google also announced that they would be disqualifying DeFi trading protocols, initial coin offerings, and cryptocurrency trading signal groups
  • The company did not announce any revisions to policy outside of the United States

What happened: World Economic Forum publishes whitepaper to explain DeFi to members

How is this significant?
  • On Tuesday, the World Economic Forum (WEF) published a “Policy Maker Toolkit” to help explain and demystify DeFi for its members
  • According to the document “DeFi will raise further questions about whether regulators have the proper tools to address evolving market activity, and how they can assert jurisdiction over a set of technologies and stakeholders that is intrinsically borderless and global”
  • US FinCen director Michael Mosier contributed to the report, and said DeFi represents “a generational expansion of financial opportunity,” but that regulators and policymakers must “level-set….This report helpfully provides us with a thoughtful, clear and comprehensive cartography of DeFi so that we can make the most of truly innovative opportunities for financial expansion and novel risk mitigation”
  • Although the report was meant to help policymakers understand risks and policy approaches for DeFi, it was also optimistic about its potential, noting that “What is clear is that DeFi represents a distinct and potentially significant development, both within the landscape of blockchain and of financial services more generally”
News Roundups