Nickel News Roundup - Week 48

2nd December, 2021 

Market Overview:

• Bitcoin plummeted to lows of around $54,000 over the weekend as the 24/7/365 nature of digital asset trading left the market more exposed to concerns and news around the new Omicron Covid variant—but the leading digital asset began a strong recovery on Monday as Jerome Powell forecast high inflation could remain until mid-2022
• Bitcoin reached weekly highs of $59,350, but was unable to sustain above $59,000 and currently trades at $57,130; a flat weekly performance
• Ethereum strongly outpaced Bitcoin this week, approaching the $4,800 mark with a weekly high of $4,780
• Ether is currently trading at $4,599; equating to 7.6% weekly growth
• Overall market capitalisation recovered, with a current value of $2.62tn
• Total value locked in DeFi recovered thanks to Ether’s price appreciation, reaching $111.5bn according to industry analytics platform DeFi Pulse

News:

• Although the SEC remains hesitant to approve a spot-price Bitcoin in the United States, across the border in Canada fidelity Investments launched just such a product this week
• Fidelity (more than $4tn AUM) is a key supporter of digital assets amongst established investment institutions, having told the Financial Times they are “keeping close to the evolution of cryptocurrencies [ . . . ] as part of a wider exploration of the potential for digital assets… As you would expect, Fidelity International is exploring the potential of this technology for the benefit of clients”
• Now, within weeks of launching Canada’s first institutional Bitcoin custody service, Fidelity have launched a Bitcoin spot ETF there, under the ticker FBTC
• According to Bloomberg ETF analyst Eric Balchunas, the move makes Fidelity “easily the biggest asset manager to date with a Bitcoin ETF”

• Global sportswear brand Adidas announced their entry into digital assets this week through both an exchange partnership and a metaverse presence
• Adidas Originals revealed their Coinbase partnership in a tweet, shortly after confirming their entry into the metaverse field via creation of the “Adi-Verse” on blockchain metaverse project The Sandbox
• An Adidas spokesperson confirmed the company’s belief in digital-asset driven online spaces, saying “The Metaverse is currently one of the most exciting developments in digital, making it an interesting platform for Adidas”
• The news also had a significant effect on the value of The Sandbox project as a whole, with their proprietary SAND token rallying more than 50% in value after the announcement

• Invesco launched a physically-backed Bitcoin ETP on Deutsche Börse Xetra, the German equity and ETF stock market
• In an interview with ETF Stream announcing the news, Invesco’s EMEA ETF head Gary Buxton outlined several reasons why they decided to go with a physically-backed product rather than the American futures ETF approach, noting “physical Bitcoin is a more observable marketplace. One of our concerns was the depth of synthetic liquidity as well as what that may do to valuations over time and that is something we were not wholly comfortable with”
• He also revealed the product was created due to demand from institutional investors; “We have been pushed over the last couple of years by institutional clients and had to look at how we can access this space well… In the last two to three years, we have been trying to structure a product that looked, from an institutional point of view, as close as possible to a traditional ETF”
• The move comes around a month and a half after Invesco actually withdrew their application for a Bitcoin futures ETF in the US, citing 100% futures exposure as one of their reasons not to pursue the listing “in the immediate near-term”

• Billionaire Bitcoin advocate Orlando Bravo’s Thoma Bravo private equity firm followed through on an October pledge to invest in blockchain this week, through a new growth investing business centred on digital assets and fintech
• Revealed in a Linkedin post by division head Christine Kang, the practice will “back and empower the very best entrepreneurs in Web3/crypto, SaaS [Software as a Service], and fintech”
• Kang stated that she was particularly enthusiastic about the growth potential of the digital asset field, writing “Web3/crypto and software are *the* most exciting sectors of innovation in today’s global economy, and we’re still in the very early days”
• Thoma Bravo is no stranger to digital asset investments, having previously participated in the largest ever crypto industry Series B, part of FTX exchange’s $900m raise

• Crypto.com, a leading digital asset exchange, have recently made headlines by elevating their brand through a combination of $100m marketing campaigns and naming rights purchases—now they can add “traditional exchange acquisitions” to that list
• On Wednesday, it was reported that Crypto.com successfully purchased the North American Derivatives Exchange (Nadex) and a 40% stake in Chicago-based Small Exchange Inc. from IG Holdings for over $200m in cash
• Small Exchange recently added various digital asset futures to its product list, and according to Bloomberg “counts Citadel Securities, Jump Capital, Interactive Brokers Group Inc. and Peak6 Investments among its investors”, putting Crypto.com in esteemed company with their 40% stake
• Crypto.com CEO Kris Marszalek identified diversification of products and services as a motivator for the deal, stating in a press release that the acquisition “will give our customers access to an entirely new set of financial tools”
• The exchange also announced a partnership with regulated bank Silvergate this week, enabling institutional clients to seamlessly make free US Dollar transfers in and out of the exchange when buying and selling their digital assets

• Ex-Citigroup executive Matt Zhang and Goldman Sachs alum Sam Puerifoy announced a new digital asset investment firm this week, with $1.5bn dedicated to digital asset investments aligned with four key strategic pillars
• These strategies include both regular VC and digital asset trading, alongside use of DeFi protocols for staking and yield generation, and tapping into the rise of blockchain-based games with “play to earn” reward mechanisms (a division to be led by Puerifoy)
• Named “Hivemind Capital Partners”, Zhang told Bloomberg in an interview that the New York-based firm has already attracted interest from “qualified institutional investors including pensions, endowments, sovereign wealth funds and family offices”
• Zhang acknowledged the possibility of a future “crypto winter” like the 2018-2019 bear market that could drive asset prices down, but remains bullish on the industry’s long-term potential; “In the two years, three years horizon, there’s going to be a big trading business opportunity—the market volatility will come up and down”

• Investment continues to flow into the growing digital asset industry, with analysts noting that China’s recent crackdown has had the corollary of more investment into American companies
• Bloomberg noted that the number of investment deals struck in the US is already more than double the figure from 2020, whilst the total value of funding has “climbed more than sevenfold to $10.9 billion”
• Bloomberg also reported that generalist firms like Bain are currently creating dedicated crypto funds, whilst institutions more specialised in digital assets are looking to specialise further; Lightspeed Venture Partners Amy Wu told the publication “In the next few years every partner at Lightspeed will become fluent in crypto… It’s going to be the internet of our generation”
• Endowments from Harvard and Yale universities were recently revealed to be amongst the backers of the record $2.5bn crypto VC fund from Paradigm
• In other recent major digital asset deals;
• Decentralised exchange (DEX) aggregator 1inch raised $175m in a “Series B” funding round, executed through the private sale of 1INCH tokens to institutional investors including VanEck, rather than through traditional equity routes
• Blockchain security auditors CertiK concluded an $80m Series B2 round with investment from firms including Sequoia, bringing their valuation to almost $1bn
• Digital asset lender Celsius Network increased their Series B funding round from $400m to $750m due to oversubscription, bringing their valuation to $3.5bn—a figure which their CEO estimates “could double or triple” next year
• The Winklevoss brothers’ Gemini exchange achieved a $7.1bn valuation after securing $400m of growth capital in a funding round “led by Morgan Creek Digital with participation from 10T, ParaFi, Newflow Partners, Marcy Venture Partners, and the Commonwealth Bank of Australia, among others”
• According to tech publication The Information, leading NFT exchange platform Opensea was offered unsolicited investment that could take their valuation to $10bn, driven by the explosive growth in NFT trading volumes this year
• Digital asset payments processor Moonpay secured $555m of Series A funding for a $3.4bn valuation
• The Digital Currency Group secured a credit facility worth up to $600m, via a debt capital raise following a previous $700m secondary equity transaction led by SoftBank
• Coinbase acquired Israeli crypto asset security firm Unbound for an undisclosed figure, adding to earlier November acquisitions of support platform Agara, and crypto wallet developers BRD

• MicroStrategy, the world’s largest corporate holder of Bitcoin, added more of the leading digital asset to their balance sheet recently
• CEO Michael Saylor announced the purchase of an additional 7,002 Bitcoins for $414.4m, bringing their total holdings to 121,044 Bitcoins
• This balance has been acquired for a total of $3.57bn, and is now worth approximately $7bn—roughly doubling in value since the company began investing in August 2020
• In the same timeframe, MicroStrategy’s share price has risen by 450%, as the company is increasingly identified with their corporate Bitcoin holdings

• Grayscale, part of the Digital Currency Group and custodians of the world’s largest Bitcoin fund (GBTC) challenged the SEC on their recent rejection of a Bitcoin spot ETF this week
• In conjunction with NYSE Arca, they aim to convert their GBTC fund into physical Bitcoin ETFs, arguing that rejection of VanEck’s spot Bitcoin ETF was flawed, as “The Commission has no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not”
• Their 15-page letter to the SEC Secretary noted that the decision against a physical ETF was “arbitrary and capricious” and could violate the Administrative Procedure Act (APA); “Bitcoin futures ETPs registered under the 1940 Act and spot Bitcoin ETPs that are not required or eligible to be so registered are the same in all relevant respects, but based on the analysis in the November 12, 2021 disapproval order, the Commission is treating them differently”
• Also this week, Grayscale published a 19-page report on the rise of the metaverse and its impact on digital assets, highlighting the breadth of it potential; “the Metaverse opportunity extends far beyond gaming. The Metaverse is estimated to be a trillion-dollar revenue opportunity across advertising, social commerce, digital events, hardware, and developer/creator monetization”

• Kevin Kelly, CEO of Kelly Intelligence, announced the creation of an actively managed Ether futures fund this week; called the Kelly Ethereum Strategy ETF (EX)
• He told industry publication Blockworks that Ethereum’s role in the future of finance is simply too important to ignore; “interest in Ether is predicated on the fact that we are at the start of the fourth industrial revolution—what we call the intelligence revolution—where the Ethereum network will be an integral part of our lives going forward”
• According to Seeking Alpha, “EX will achieve its investment objective by capitalizing on standardized cash-settled Ether Futures contracts”, and will avoid any physically-backed investments until SEC approval for such exposure is granted
• However, Bloomberg ETF analyst Eric Balchunas is skeptical on “if the SEC is ready for this next step”, estimating their current odds of approval at around 20%

• US-based Bitcoin mining firm Griid announced plans to become a publicly listed company this week, through an SPAC merger with blank-cheque firm Adit EdTech Acquisition Corp
• The new company will have a valuation of $3.3bn, with Griid receiving $246m in cash from Adit’s trust account after contracts are finalised
• Demand for digital assets has driven up demand for digital asset mining companies, as this deal follows Bitcoin miners Bitdeer closing a $4bn SPAC two weeks ago