Nickel Research Centre

Nickel News Roundup - Week 19

13th May, 2021

Market Overview:

The digital asset market experienced several new records and milestones this week, before experiencing a slight retrace on Wednesday evening
  • Bitcoin’s performance was in line with last week’s, primarily ranging between $55,200 and $59,400. However, late on Wednesday it experienced a decline when Elon Musk announced that Tesla was suspending vehicle purchases in Bitcoin, due to environmental concerns over mining, briefly dropping the price as low as $47,000 before recovery to a current price of $50,940
  • Ethereum once again outpaced Bitcoin, reaching new records as it surpassed the $4,000 milestone and hit a high of $4,362, before retracing to a current price of $3,980
  • This growth saw Ether achieve a market capitalisation of over $500bn for the first time
  • The overall market capitalisation of the asset class was boosted to a new record high ov $256tn thanks to bullish performance by Ether and other altcoins
  • Ether’s growth was reflected in the performance of the Defi sector. The total value locked in DeFi applications and protocols rose to almost $99bn, just short of a landmark $100bn figure 

Ether rose above $4,000 for the first time as Bitcoin performed steadily throughout most of the week, leading to another record market capitalisation for digital assets. This week’s news was dominated by big names from traditional finance announcing support for digital assets; whether in the form of institutions like UBS, Citi, or Goldman Sachs, corporations like eBay and Square, or even individuals like Stanley Druckenmiller and Cathie Wood.


What happened: UBS becomes latest major bank to move into digital assets 

How is this significant?
  • According to reports in Bloomberg, Swiss bank UBS are the latest major financial institution to move into digital assets due to client demand, following the likes of JP Morgan, Morgan Stanley, BNY Mellon, and Goldman Sachs
  • Given the global status of UBS in private banking and wealth management, this move represents another major endorsement of legitimacy for this rising asset class 
  • In a statement, UBS proclaimed an interest in both the asset class, and in the blockchain technology underpinning most digital assets; “We are monitoring the developments in the field of digital assets closely...Importantly, we are most interested in the technology which underpins digital assets, namely the distributed ledger technology”
  • As with Morgan Stanley’s recent foray into digital assets, the offering would initially be restricted to private wealth clients, with only a small portion of their net value allocated towards crypto assets

What happened: eBay launches NFT sales 

How is this significant?
  • One week after first being rumoured, eBay officially announced the sale of non-fungible tokens (NFTs) on their ecommerce platform
  • In a statement released on Tuesday, America’s second-largest online marketplace (after Amazon) confirmed that they recognised the potential of NFTs as digital assets, and wish to be at the forefront of their growth
  • Initially, all sellers will be vetted by eBay, and limited to certain categories; “trading cards, music, entertainment, and art”
  • eBay said that “In the same way digital publishing brought more exposure for writers, digital collectibles bring greater opportunity for artists and creators. We plan to double down on this idea—combining eBay’s global reach with the principle that anyone can find almost anything on our platform”
  • Additionally, they announced plans to increase the scope of blockchain-based collectibles on their platform, to “ensure eBay remains the preeminent marketplace for collectibles of all kinds”

What happened: Bitcoin significantly boosts Square payment app’s earnings

How is this significant?
  • Jack Dorsey’s Square app published their Q1 shareholder letter this week, illustrating the degree to which Bitcoin’s growth and proliferation has benefitted the payment processor
  • Despite the company charging only minimal fees for Bitcoin purchases in order to remain competitive, they saw significant growth in revenues from this offering
  • According to the shareholder letter “Cash App generated $3.51 billion of bitcoin revenue and $75 million of bitcoin gross profit during the first quarter of 2021, each up approximately 11x year over year”
  • This was also twice their Q4 2020 Bitcoin revenue, indicating a sustained growth in retail investor demand over the last three months
  • Bitcoin revenue accounted for approximately 70% of the app’s total revenue, and the letter further stated that their total $220m investment into Bitcoin across Q4 2020 and Q1 2021 was worth $472m by the end of the first quarter, more than doubling in value on their balance sheet
  • In an earnings call, CEO Jack Dorsey was adamant that the company was focused on Bitcoin as a future pillar of their business, stating “Our focus, first and foremost, is on enabling ... Bitcoin to be the native currency… It removes a bunch of friction for our business. And we believe fully that it creates more opportunities for economic empowerment around the world”

What happened: Decentralised exchange Uniswap surpasses Bitcoin in daily fee revenues

How is this significant?
  • Uniswap, the largest decentralised exchange—and key driver behind the growth of DeFi applications—achieved a new milestone this week when it exceeded Bitcoin in both daily and weekly average network revenues
  • High transaction revenues (not to be confused with general Ethereum transaction fees) are indicative of large trading volumes, with each trade subject to a 0.3% fee
  • In one day, transactions on Uniswap accounted for over $9.1m in revenues—a figure which would have been even greater if the aggregator accounted for Uniswap’s recent v3 protocol upgrade
  • In comparison, Bitcoin’s transaction fee revenues were worth $5.7m over 24 hours, with a 7-day average fee nearly $400,000 below Uniswap

What happened: Coinbase tops App Store rankings

How is this significant?
  • Following its public listing, Coinbase’s profile as the largest American digital asset exchange was further boosted by large volumes of app installations
  • This week, Coinbase topped the iOS App Store rankings for the most-downloaded app in the United States, surpassing the popular social video app Tiktok, as well as Facebook, Instagram, and the stock trading app Robinhood 
  • In total, Coinbase was downloaded more than two million times over the last month

What happened: Pro-crypto legislation passes in Europe and USA

How is this significant?
  • Several pieces of legislation passed this week indicated an increasing desire by lawmakers to work with, rather than against, individuals and businesses operating in the digital asset space
  • According to reports from Hungary, legislators there have proposed a halving of taxes on crypto assets from 30.5% to 15%, in order to encourage more Hungarians to keep their digital asset wealth in the country, and aid post-COVID economic recovery
  • Meanwhile, in Nebraska, state senators passed the first stage of a bill enabling state banks to hold and offer services related to digital assets
  • If this bill passes, it would make Nebraska the second state after Wyoming to formalise a charter for banks to provide access to crypto, with senator Mike Flood proclaiming it “a once-in-a-lifetime opportunity not only for my district but the state of Nebraska”

What happened: Citigroup considers digital asset services due to client demand

How is this significant?
  • Citi has become yet another major financial institution to consider digital asset access for clients, reported the Financial Times this week 
  • Speaking to the FT, global head of foreign exchange Itay Tuchman said that client demand was driving them into the exploration of digital assets
  • According to Tuchman, client interest began picking up when Bitcoin crossed the $12,000 threshold in August 2020, a figure which it has since more than quintupled en route to several new record highs
  • Tuchman said that they were adopting an enthusiastic but cautious approach to the asset class; “We will jump in when we are confident that we can build something that benefits clients and that regulators can support”
  • Despite the lack of specificity regarding what form their digital asset exposure will take, Tuchman was very clear regarding the company’s overall attitude towards crypto assets and their long-term potential; “I don’t have any FOMO [fear of missing out], because I believe that crypto is here to stay and that we are just at the very beginning of the market”

What happened: Goldman Sachs offers clients Bitcoin derivatives

How is this significant?
  • Bloomberg reported on Thursday that Goldman Sachs are moving deeper into digital assets through use of derivatives; offering non-deliverable forwards exposure to clients with a view towards mitigating the risks associated with Bitcoin’s volatility
  • Goldman’s futures will be offered in block trades through the CME Group, executed with Cumberland DRW as a trading partner
  • Max Minton, Goldman’s Asia-Pacific head of digital assets, told Bloomberg that “Institutional demand continues to grow significantly in this space, and being able to work with partners like Cumberland will help us expand our capabilities… paving the way for us to evolve our nascent cash-settled crypto-currency capabilities”
  • Speaking about the partnership, Justin Chow, global head of business development for Cumberland DRW, said that “Goldman Sachs serves as a bellwether of how sophisticated, institutional investors approach shifts in the market… We’ve seen rapid adoption and interest in crypto from more traditional financial firms this year, and Goldman’s entrance into the space is yet another sign of how it’s maturing”

What happened: Stanley Druckenmiller sees potential for crypto to supplant US dollar as global reserve asset

How is this significant?
  • Legendary forex trader and hedge fund manager Stanley Druckenmiller was scathing this week in commentary regarding the US dollar, and the Federal Reserve’s effect on its value proposition
  • Druckenmiller’s comments on the potential of digital assets made him one of the most high-profile investors to align with the “digital gold” argument provided by the guaranteed issuance levels of assets like Bitcoin
  • On Monday, he penned an Op-Ed in the Wall Street Journal decrying recent Federal Reserve policy, noting that the level (and duration) of quantitative easing employed by the Fed risks the US dollar’s status as a global reserve currency
  • Speaking to CNBC on Tuesday, Druckenmiller repeated these assertions, and commented that debt monetisation was at dangerous levels; “I can’t find any period in history where monetary and fiscal policy were this out of step with the economic circumstances, not one”
  • He also believed that “the most likely replacement” for the dollar would be a “crypto-derived ledger system”, although he didn’t specify any specific digital asset for that role, noting that it might not yet exist, and instead be “invented by some kids from MIT or Stanford”
  • Druckenmiller said “Five years ago, I said crypto was a solution in search of a problem. Well, now the problem has been clearly identified; it’s Jerome Powell and the rest of the world’s central bankers. There’s a lack of trust” 

What happened: NFTs register more multi-million sales

How is this significant?

What happened: Peter Thiel’s Palantir accepts Bitcoin for payments (and considers it for balance sheet)

How is this significant?
  • Software company Palantir became the latest corporation to voice support for digital assets on balance sheets 
  • Founded by noted Bitcoin bull Peter Thiel, the company recently noted that they accept Bitcoin for payments, and believe in their long-term potential
  • Speaking in an earnings call this week, the company’s CFO stated that Bitcoin and other digital assets are “definitely on the table”
  • Said CFO David Glazer; “we’re thinking about it, and we’ve even discussed internally. Take a look at our balance sheet, $2.3 billion in cash at quarter end, including $151 million in adjusted free cash flow in Q1. So, it’s definitely on the table from a treasury perspective, as well as other investments, as we look across our business and beyond”

What happened: ARK Investment’s Cathie Wood joins board of digital asset ETF provider

How is this significant?
  • Cathie Wood became the latest big name from the world of traditional finance to formalise an interest in digital assets this week, joining the board of crypto ETF issuer 21shares, following a personal investment in their parent company
  • Wood recently hit digital asset headlines when her ARK investments bought $580m of Coinbase stock within the first two days of their IPO
  • Speaking about her new role on the company’s board of directors, Wood said “21Shares is forging a new path for crypto ETPs, by leading with research and a keen understanding of this developing asset class. I am thrilled to support its efforts”

What happened: Institutional Bitcoin firm NYDIG recruits CFO from Ray Dalio’s Bridgewater Associates

How is this significant?
  • Another significant appointment from traditional finance to the world of digital assets was made by NYDIG, who followed up a recent $300m funding round by appointing Bridgewater’s John Dalby as CFO
  • Speaking about the appointment, NYDIG’s founder Ross Stevens said “Yesterday, employers of choice recognized that supporting 401ks and health insurance was table stakes to attract and retain top talent. Today, employers of choice also recognize the importance of supporting Bitcoin... John's move to NYDIG showcases an increasing trend of top talent voting with their feet to propel Bitcoin's inclusionary role as the De(Central) Bank, and its dual mandate as ultimate risk-on asset and the ultimate risk-off asset”
  • Dalby noted the momentum of digital assets as a key reason for making the move, saying “Every day, more industries come to understand Bitcoin’s potential and more clients seek ways to safely access it”
  • Dalby’s move from traditional finance into digital assets follows in the footsteps of other major names like Brian Brooks, Christopher Giancarlo, and Dick Parsons

What happened: Israel joins global CBDC race

How is this significant?
  • The Bank of Israel became the latest central bank to declare interest in issuing a CBDC on Tuesday
  • In a press release concerning the possibility of a Digital Shekel, the BOI disclosed that they have been investigating and researching CBDCs since 2017
  • The Bank of Israel announced the formation of a steering committee to further investigate the subject, noting secure digital payments and efficient and inexpensive cross-border transactions as key potential benefits

What happened: Bloomberg analysts tout optimism about potential Bitcoin ETFs this year

How is this significant?
  • On Tuesday, a leading Bloomberg ETF analyst predicted that this would be the year where the first Bitcoin ETF is approved in the United States, saying his team of analysts are “more optimistic of an approval than we’ve ever been”
  • Explaining this stance, Eric Balchunas cited several reasons, including their recent approval in Canada, which he claims “has a history of being six months to a year ahead of the United States” when it comes to such matters
  • Institutional appetite would also be a key driver for ETFs according to Balchunas, who said “The institutional adoption of crypto is much greate… You have the intense growth of ‘default’ crypto products like (Grayscale’s Bitcoin Trust) which are not ideal for retail investors and the SEC (U.S. Securities and Exchange Commission) knows this”
News Roundups