Nickel Research Centre

Nickel News Roundup - Week 9

1st March, 2024

Market Overview:

Digital assets experienced perhaps their most profitable week ever, as Bitcoin experienced its best monthly performance since launching over 15 years ago.
  • Bitcoin traded in a very narrow range between $50,900 and $51,800 over the weekend, before breaking out and showcasing unprecedented performance, achieving a new year-to-date record of $53,000 on Monday, rapidly rising above $55,000 by Tuesday, and ascending from $57,000, above $60,000, up to $64,000 on Wednesday
  • This represents Bitcoin’s highest value in over two years, since mid-November 2021
  • The surge to $64,000 involved large scale liquidations both on the rise, and a rapid pull-back below $59,000 amidst widespread profit-taking (and Coinbase downtime)
  • From its Saturday low of $50,590 to the Wednesday high of $64,000, Bitcoin underwent a 26.51% increase
  • At its $64,000 high, Bitcoin delivered a year-to-date return of more than 50% (before the end of February!)
  • In terms of momentum, Bitcoin’s performance had it on course for its best month since the bull mania of October 2021, delivering a $43.7% return over February
  • In dollar terms, February was the biggest monthly candle in Bitcoin history, rising by $18,630; more than the $17,978 appreciation in October 2021
  • Due to changes in exchange rates, Bitcoin reached a new all-time high when denominated in Pound Sterling, rising above its 2021 high of £48,000 to hit around £49,500
  • Bitcoin also surpassed the Russian Ruble in terms of overall circulating value
  • Ether likewise broke through numerous long-held price barriers on the way to its highest point since April 2022
  • Ether rose somewhat more steadily than Bitcoin, from a Saturday low of $2,909 to a Thursday high of $3,519
  • Surging trading in Ether and across the Ethereum blockchain also led to a rapid rise in supply burn from transaction fees; based on the last seven days of network activity, Ethereum turned twice as deflationary compared to the previous week
  • As of data published by CoinShares on Monday; year-to-date inflows of digital asset investment funds hit $5.7bn; although given this week’s ETF performance, the next update will likely showcase a significant rise
  • Overall digital asset market capitalisation rose above $2tn for the first time since January 2022, rapidly reaching a weekly high of $2.35tn before pulling back slightly to current levels of $2.28tn
  • According to industry monitoring site DeFi Llama, total value locked in DeFi grew nearly 20% to $90.4bn, driven by Ether’s strong appreciation

Digital assets experienced an historic week, bringing to an end Bitcoin’s greatest monthly performance in history, featuring the largest-ever dollar gain. This was backed by spot Bitcoin ETFs not only breaking trading records, but breaking them multiple times—even briefly breaking Coinbase’s servers as trading traffic overwhelmed them. There was good news for firms with exposure to digital assets, Gemini reached a conclusion to its long-running prosecution saga that will fully compensate customers of its Earn program (and leave them in handsome fiat profit), several platforms moved towards revenue shares via blockchain, and VC activity matched market momentum.

What happened: ETF news—a record-breaking week

How is this significant?

  • Spot Bitcoin ETFs broke record after record this week, feeding into Bitcoin’s rapid ascent amidst increasing investor interest—we hope you’re sitting comfortably, because there’s a lot to cover
  • On Wednesday, when Bitcoin ran from $57,000 to $64,000, ETFs recorded (understandably) massive inflows
  • Summing up sentiment and momentum around spot Bitcoin ETFs, Bloomberg ETF analyst Eric Balchunas commented “I get that the coverage is relentless and probably annoying to some, but these numbers are absurd, highly rare stuff here... it would be like asking a scientist not to get obsessed with Haley's Comet or something”
  • On Monday, the “New Nine” (i.e. Bitcoin ETFs excluding Grayscale’s converted GBTC fund) set a new volume record of $2.4bn, beating their opening day trading activity
  • BlackRock’s IBIT ETF accounted for the majority of volume, trading $1.3bn—beating its own single-day trading record by 30%
  • As Balchunas pointed out earlier in the day’s trading; “$IBIT has traded $1b worth of shares today so far.. which ranks it 11th among all ETFs (Top 0.3%) and Top 25 among stocks. Insane number for newbie ETF (especially one with ten competitors). $1b/day is big boy level volume, enough for (even big) institutional consideration”
  • This was just the tip of the iceberg however, as Bitcoin’s midweek momentum shattered Monday’s freshly-minted record
  • On Wednesday, the New Nine more than doubled their volume record, trading $6bn
  • Including GBTC trading, total volumes exceeded $7.5bn
  • Adding in leading Bitcoin Futures ETF BITO (which also broke its record), overall volumes reached around $10bn
  • Of the New Nine, both IBIT ($3.3bn) and Fidelity’s FBTC ($1.4bn) more than doubled their previous records on Wednesday
  • Bloomberg’s James Seyffart pointed out that this volume also meant record inflows of $673m, despite $216m outflows from GBTC; indicating that purchases still outstripped profit-taking despite the “ridic” performance of the ETFs thus far
  • Balchunas was impressed by both, revealing that Bitcoin ETFs account for 9% of all net ETF inflows this year, tweeting; “More wild stats: $IBIT makes up 0.2% of BlackRock's ETF lineup but has accounted for 42% of its net flows this year. $FBTC makes up 2% of Fidelity's ETF lineup but has accounted for 64% of its net ETF flows this year“
  • Additionally, IBIT on its own registered daily inflows of $520m on Tuesday, $612m on Wednesday, and chalked up 33 consecutive days of inflows
  • Speaking on the correlation between ETF performance and Bitcoin price, FRNT Financial CEO Stephane Ouellette, supported a direct (and continuing) correlation “The rally does appear to be majorly influenced by the BTC ETFs. Some estimates suggest that less than 20% of investment advisers have been approved by their firms to put their clients into the product. That’s a process likely to play out over the course of a year”
  • JP Morgan/Chase analysts including Kenneth Worthington agreed, saying “We think this Bitcoin appreciation is contributing to better spot Bitcoin ETF [exchange-traded funds] flows, which is in turn driving Bitcoin prices higher, and pulling other tokens higher as well”, believing that breaking above marks like $60,000 “further inspire ETF sales as a milestone threshold”
  • Commenting on the metrics since launch, Balchunas said that their performance (especially BlackRock’s) is nigh-unprecedented in the ETF sphere; “Only one or two other ETFs on the planet are taking in cash as fast as $IBIT right now. Gonna hit $10b tomorrow [Friday] probably. Easily fastest ever at 7 weeks. For context it took $GLD over two years to hit 10bn, $VOO [Vanguard’s S&P 500 ETF] over 3 years”
  • Although Thursday could not match Wednesday’s record-breaking pace, it nevertheless recorded volumes that would have led the ledger previously; clocking in a total (including GBTC) trading volume of $4.7bn, which beat launch day’s $4.6bn
  • Bitcoin’s price performance on Thursday was more range-bound than on Wednesday, with analysts speculating that a sharp spike in daily outflows from GBTC (from $216m to $600m—its second-largest day of outflows ever) may have indicated court-approved sales of the fund from bankrupt lender Genesis
  • At the end of trading on Wednesday, four of the New Nine stood at over $1bn AUM; and more impressively, three of them stand at over $2bn AUM; BlackRock ($9.1bn), Fidelity ($6.2bn), and ARK 21Shares ($2bn)
  • ARK decided this week to leverage the transparency of the blockchain, disclosing its reserves via crypto oracle project Chainlink’s Proof of Reserves platform
  • 21Shares co-founder Ophelia Snyder commented “This collaboration allows us to offer an unmatched level of insight and safety for our investors' holdings for ARKB”
  • CoinShares head of Research James Butterfill told industry publication TheBlock that spot ETFs appear to have caused a “supply shock” in the market
  • He points out “While 900 Bitcoins are produced daily, the newly-issued US ETFs are demanding 2,800 Bitcoins per day. This has led to a 28% reduction in exchange holdings since 2020, indicating a market experiencing a significant demand shock”
  • This supply shock could be intensified not just by the upcoming Bitcoin halving (reducing new Bitcoin issuance), but by new players entering the field
  • Butterfill also revealed the scale of change brought by spot ETFs, noting that Bitcoin ETPs went from trading an average daily volume of $34m in 2023 to $2bn in 2024
  • This week, Morgan Stanley’s Europe Opportunity Fund added language to allow investment in spot Bitcoin ETFs (up to a maximum 25% threshold)
  • Additionally, Merrill (owned by Bank of America) and Wells Fargo are now offering spot Bitcoin ETF investments to wealth management clients with brokerage accounts, following in the footsteps of firms like Charles Schwab and Robinhood
  • On Thursday, Grayscale lobbied the SEC to allow options on its GBTC ETF, potentially kicking off another legal battle as the SEC previously allowed options on futures ETFs
  • Grayscale CEO Michael Sonnenschein said that refusal would “unfairly discriminate” against shareholders, and “It is vital to the interests of GBTC and all spot Bitcoin ETF investors to access exchange-listed options on GBTC and other spot Bitcoin ETPs”
  • Speaking of the SEC, the House Financial Services Committee voted to advance a motion aimed at repealing SEC regulations preventing (or at the very least complicating) banks from providing custody for crypto assets
  • This SEC resolution could also affect the ability of banks to hold spot Bitcoin ETFs, according to congressman Mike Flood who proposed the resolution
  • The SEC also faced an amicus brief from eight separate state attorney-generals late on Thursday, arguing the regulator exceeded its authority in filing a new lawsuit against American exchange Kraken

What happened: Gemini reaches settlement and reimbursement plan for Earn customers

How is this significant?

  • On Wednesday, reports emerged that digital asset exchange Gemini (founded by the Winklevoss brothers) had agreed a $37m fine with the New York Department of Financial Services, as well as returning “at least $1.1 billion to customers though the Genesis Global Capital bankruptcy”
  • This should conclude another case of contagion fallout that rocked the industry in 2022, following the emergence of Celsius from bankruptcy, and FTX planning to repay customers in full
  • In a post on X (formerly Twitter), Gemini confirmed “we have finally reached a settlement in principle with Genesis and other creditors in the Genesis Bankruptcy that will, if approved by the Bankruptcy Court, result in all Earn users receiving 100% of their digital assets back in kind… if the Bankruptcy Court approves the settlement in principle announced today, Earn users can expect to receive approximately 97% of their assets in kind within about two months. And they can expect to receive their remaining asset balance within the next 12 months”
  • As Bloomberg’s James Seyffart notes, the fact that customers should receive their digital assets back in-kind (rather than cash value at time of service suspension, a la FTX) is “huge”
  • Since Gemini shut down its Earn program in the wake of FTX’s collapse (bankrupted Gemini’s lending partner Genesis Global), Bitcoin has risen from $20,000 to $61,000, and Ether from $1,500 to $3,300
  • Thus, despite the opportunity cost, Earn customers could find themselves profiting from a handsome windfall as a result of the “forced hodl” (to put it in crypto parlance)

What happened: Binance recovers over $4bn in mishandled user funds, launches VIP program

How is this significant?

  • Binance, the largest digital asset exchange in the world, revealed in a new report on Thursday that it had recovered $4.4bn in mishandled user deposits over the last two years
  • Due to the nature of blockchains, mishandled funds can occur for “a variety of reasons including entering wrong wallet addresses, depositing incompatible tokens and problems from blockchain upgrades”
  • This equals around 381,616 resolved cases of user error, allowing customers to access their funds after making mistakes in the deposit process
  • In the report, Binance wrote “To nurture the ecosystem’s growth in its still-early period, industry leaders like Binance should use their reach and resources to lend support to other participants of the emerging marketplace, protecting users and upholding the integrity of the space”
  • Additionally, chief security officer Jimmy Su warned that as positive momentum returns to the market, users should beware the corollary of “rug pulls” returning (crypto slang for projects which sell tokens without any intention to realise their intended goals or promises)
  • Su said “We certainly had seen a downtrend in the number of rug pulls, as we were going through the bear market. Right now we are definitely seeing another uptick as the market is warming”
  • Binance is also launching a VIP program as part of an active recruitment drive for new users
  • The VIP program will offer perks like reduced trading fees and event access
  • Previously, users required $1m of monthly trading volume on Binance to qualify, but they are now casting their net wider, and allowing “aggregated monthly trading volume combined with both crypto and traditional assets from up to two trading venues outside Binance”
  • Catherine Chen, head of Binance VIP and institutional commented “The successful listing of Bitcoin spot ETFs and their inflows not only demonstrates that there is clear market demand for cryptocurrencies, it also shows any gap between traditional and digital assets is closing… we aim to help high-volume users of traditional assets platforms reduce their entry barriers to cryptocurrencies”
  • e-Bank Revolut also recently moved to recruit more “advanced traders” into its crypto offering, with a spokesperson telling industry publication Coindesk “We're launching a new crypto exchange, built with advanced traders in mind. You'll find deeper analytical tools and lower fees (0% to 0.09%) than the [standard Revolut]app”
  • In other Binance news, the FT reported on Thursday that two Binance executives were arrested in Nigeria, as part of a wider series of crackdowns due to central bank concerns of tax revenue losses

What happened: Leading decentralised exchange Uniswap proposes fee-sharing for users

How is this significant?

  • Uniswap, the largest decentralised exchange (DEX) on the market, published a new governance proposal this week, aiming to distribute Uniswap's trading fees (pro-rata) collected by the exchange to all users staking their UNI and delegating votes to governance
  • The proposal believes this should strengthen user participation in guiding the exchange's development, and further decentralisation of control within a democratic DAO (decentralised autonomous organisation) structure
  • The exchange’s native UNI token (airdropped to exchange users in 2020) underwent a significant appreciation, rising from just over $7 on Friday to a high of $12.60 on Saturday, with 24h trading volume up 1,200%
  • Other DEXes and DeFi applications soon followed suit with similar plans for their governance tokens; Frax Finance CEO told Coindesk “We are going to follow Uniswap's lead in proposing it. It will be up to the community to pass it”
  • A key aspect of interest to the wider market is the fact that Uniswap is a US-based exchange essentially setting up a system to reward users for holding and interacting with its token
  • This seemed unfathomable last year, prior to the SEC's numerous court defeats undermining its perceived authority on the legal status of digital assets and securities
  • In fact, a proposal last year to allocate trading fees to liquidity pool (LP) provider was voted down by the community, indicating higher concerns over legal status at the time
  • Some posit that Uniswap may have moved towards this proposal after hearing early news of US-based centralised exchange Coinbase winning a dismissal of the SEC's current lawsuit against them—note that no such verdict has been confirmed publicly, but for a US-based firm to act this way certainly started speculation
  • A corollary of increased activity around DEXes also benefits the blockchains those DEXes are built on, as unlike CEXes, all trading takes place on-chain, powered by a network's native token for transaction fees—this week alone, increased activity on the Ethereum blockchain decreased its current annual issuance rate by more than 0.35%

What happened: Coinbase taken offline by trading surge

How is this significant?

  • Frenzied trading activity on Wednesday during Bitcoin’s run from $57,000 to $64,000 took many market observers by surprise—and evidently also surprised the servers of digital asset exchange Coinbase, which was briefly taken offline by the sheer volume of traffic
  • Coinbase CEO Brian Armstrong took to Twitter to announce “We are dealing with a LARGE surge of traffic - apologies for any issues you encounter”
  • These issues included users’ balances showing up as 0 (zero) due to the overwhelmed servers
  • Armstrong revealed that the company had tested simulations up to a ten-fold increase in traffic, but that Wednesday’s spike surpassed even such a surge
  • Due to their storage on the blockchain however, assets were safe, even if the website’s servers were too overwhelmed to correctly display this information
  • However, Coinbase Prime, “which services institutional clients such as those tied to newly launched exchange-traded funds investing directly into Bitcoin” faced no downtime issues
  • These issues don’t seem to have impacted the exchange’s standing too much though; Coinbase shares (COIN) gained on Wednesday, taking COIN back above $200 for the first time since January 2022, valuing the exchange above $37bn
  • JP Morgan Chase analysts also upgraded their COIN rating to “neutral”, explaining “Given the acceleration in recent days of flows into Bitcoin ETFs and the significant price appreciation of Bitcoin and now Ether… we see the higher cryptocurrency prices not only sustaining, but improving, activity levels and Coinbase’s earnings power as we look to [the first quarter of 2024]”
  • According to TheBlock data, Coinbase’s $8.6bn Wednesday trading volume (including downtime) “represents the equivalent of 5% of the total volume in Q4 2023 and 10% of the volume in Q3 2023”

What happened: Sam Bankman-Fried appeals for leniency in sentencing

How is this significant?

  • Sam Bankman-Fried, former FTX CEO and architect of the exchange’s multi-billion fraud, appealed for leniency ahead of his sentencing hearing in March
  • His family and lawyers have asked for a sentence of around six and a half years, rather than the 110 year maximum available for all his charges, citing philanthropy, character, and the fact that FTX clients will receive the majority of their funds back
  • Those same family and lawyers appear to ignore the fact that this fund recovery is not in-kind, but in cash value at the time of FTX’s failure, and that the market only truly moved into recovery mode (from the crash caused by FTX’s collapse) once SBF was safely behind bars awaiting trial
  • His lawyers argued that Bankman-Fried was more Michael Milken than Elizabeth Holmes—somebody who peddled dishonest investment practices, but didn’t directly place anybody in harm’s way
  • Bankman Fried’s arguments included 29 letters of support from various personae including family and psychiatrists, expressing concern that his poor interpersonal skills could place him at elevated risk in a prison environment

What happened: Messaging platform Telegram to share ad revenue with TON blockchain users

How is this significant?

  • Popular messaging app Telegram revealed plans this week to share advertising revenue with channel owners from March onwards, paid via the TON (The Open Network) blockchain
  • TON was previously developed directly by Telegram, but maintained by an independent team since 2020
  • As a privacy-focused app, Telegram has found widespread usage amongst many crypto asset communities, particularly for new altcoin projects—thus payments via blockchain could have more cut-through with the target audience than on other messaging apps
  • Last year, Telegram reported 800 million monthly active users, potentially broadening the participant based in the TON blockchain massively once payouts begin
  • After the announcement of the revenue-share plans, the network’s proprietary TON token increased by over 40%

What happened: Hong Kong crypto developments

How is this significant?

  • Hong Kong continues its push to become a global crypto asset hub, with numerous advancements and developments this week
  • The city’s Financial Services and Treasury Bureau began a consultation on OTC trading, likely to bring about a “consolidation and a reduction in the use of these [physical crypto-to-cash exchange] platforms as on-ramps into crypto”
  • Hong Kong is currently believed to host about 450 such shops, ATMs, and website, part of a thriving OTC market within the city
  • Legislation wouldn’t ban such OTC shops outright, but the owner of one chain acknowledges that stringent licencing requirements means many “will either have to stop the crypto business or apply for the new licence”
  • Crypto advisor Vince Turcotte says “Bringing OTC transactions into the regulatory structure is a natural extension of the regime. The primary impact will be to further legitimise the market in Hong Kong”
  • The OTC arm of licenced exchange Hashkey meanwhile received in-principle approval for a major payment institution licence (MPIL) from the Monetary Authority of Singapore, the city-state’s central bank
  • This licence brings HashKey OTC “a step closer to our vision of providing a comprehensive and regulated OTC trading solution that supports a wide range of digital payment tokens and fiat currencies for our clients” according to its CEO Li Liang
  • Additionally, Hong Kong’s finance secretary Paul Chan announced an expansion of cross-border digital yuan testing in his budget speech, alongside imminent commencement of its e-HKD phase two
  • Chan also announced development of a sandbox environment for stablecoin testing, under the principles of “same activity, same risks, same regulation”

What happened: US government transfers over $900m in seized digital assets

How is this significant?

  • According to data from blockchain analytics firm Arkham Intelligence, the US government made several major digital asset transfers out of its wallets on Wednesday, perhaps seeking to take advantage of rapid appreciation in crypto asset prices (although government officials did not respond to requests for comment from industry media)
  • In total, $922m worth of Bitcoin was transferred from government-owned wallets on Wednesday, the same day that Bitcoin hit $64,000 for the first time since 2021
  • The wallets held funds acquired from a hack of centralised exchange Bitfinex in 2016, subsequently recovered from hacker Ilya Lichtenstein and his wife Heather Morgan

What happened: VanEck launches NFT-based luxury goods trading platform

How is this significant?

  • Asset ETF issuers VanEck this week announced the launch of SegMint GmbH, a “digital assets management platform aimed at revolutionising the digital assets landscape by improving accessibility and security”
  • According to their press release, SegMint’s “Lock & Key Model is a foundational step towards democratising digital assets management, starting with a focus on crypto-native users—both those who own digital collectibles such as NFTs and tokenized watches, and others who want access to them”
  • By issuing virtual “keys” to other users, they can partake in shared ownership without compromising security
  • Initial focus will be on fractionalised ownership of “blue chip” NFT projects, alongside fractionalised tokens representing ownership of luxury items like watches and fine wines, followed by real-world assets through approved providers

What happened: JP Morgan analysts warn of possible post-halving Bitcoin pullback

How is this significant?

  • A Wednesday research note by JP Morgan analysts, led by Nikolaos Panigirtzoglou, believe that Bitcoin’s upcoming halving could potentially lead to large pullbacks in price
  • The paper posits that “The Bitcoin production cost has empirically acted as a lower bound for Bitcoin prices… The central point of our estimated production cost range stands at $26,500 currently, which would mechanically double post halving event to $53,000”
  • However, since they also assume the exit of less efficient mining rigs as mining rewards dwindle, the analysts see the ultimate (estimated) production cost at around $42,000
  • Analysts wrote “This $42,000 estimate is also the level we envisage bitcoin prices drifting towards once bitcoin-halving-induced euphoria subsides after April”
  • Crypto billionaire Mike Novogratz of Galaxy Digital may not be anticipating a return to $42,000, but he did warn this week that “I wouldn’t be surprised to see some corrections and some consolidation”, before adding “if it corrects, it might correct to the mid-$50,000s, before taking off to the new high”
  • He views the current rally as “the first time in Bitcoin’s history we have true price discovery… anybody who wants to buy it can easily buy it [via ETF exposure for TradFi crowed]” but says prices are currently at “very frothy” levels

What happened: VC news

How is this significant?

  • Several startups raised new funds or completed funding round this week, as renewed interest in the broader digital asset sector appears to include a thawing of VC winter as well
  • Crypto fund Asymmetric Financial announced a $21m funding target to invest in Bitcoin-based DeFi opportunities; the figure being symbolic of Bitcoin’s upper limit of 21 million supply
  • Hedge fund Pantera Capital announced an (undisclosed) investment in decentralised lending platform Morpho, which previously raised $18m in an a16z-led funding round in 2022
  •, a liquid restaking protocol, concluded a Series A round worth $23.5m, led by Bullish Capital and Coinfund, with participation from other industry players including Consensys, Amber, and OKX Ventures
  • Blockchain development firm Initia raised $7.5m in a seed round, aimed at simplifying the construction and deployment of cross-blockchain interoperability solutions
  • Layer-1 blockchain Flare closed a $35m private round involving Kenetic and Aves Lair, which included agreements on extended vesting from the funding parties
  • Cryptographic security startup Silence raised $4.1m in a new funding round, committing the funding to team expansion as it works on privacy and authentication infrastructure using multi-party computation
  • Backpack, a crypto exchange created by former Alameda and FTX employees, raised $17m in a Series A round at a $120m valuation
  • The exchange was launched in October 2023 and holds a VARA licence in Dubai, “is popular among Chinese-speaking users” and now aims to expand into select US states
News Roundups