Nickel Research Centre

Nickel News Roundup - Week 7

17th February, 2022 

Market Overview:

Digital assets experienced relatively flat performance this week, as renewed tensions over Ukraine sapped investor enthusiasm.

  • Bitcoin hit a weekly peak of $45,600 on Friday, before hitting weekly lows around $41,700 on Monday as concerns over US-Russian tensions escalated
  • Bitcoin moved back into recovery as reports of de-escalation emerged, but performance remained more tentative than the previous week’s double-digit growth
  • Bitcoin currently trades at $44,280, down about 0.5% from last week
  • Ether peaked at $3,270 early in the week, before the macroeconomic uncertainties led to a weekly low of $2,842 on Monday
  • Ether recovered to a current price of at $3,167—a 2.2% weekly decline
  • Total market capitalisation fluctuated around the $2tn mark, with a current value of $1.99tn
  • Total value locked in DeFi declined to $77.1bn, according to industry analytics platform DeFi Pulse

Digital assets performed tentatively this week, amidst global geopolitical tensions and their effects on a variety of markets. Adoption marched on regardless of those headlines though; Fidelity launched a new physically-backed Bitcoin ETF in Europe, Mastercard moved to expand their expertise in the field, Uber confirmed interest in crypto assets as payment, and JP Morgan, DBS, and PwC’s Luxembourg office all looked toward growth potential within the space driven by customer demand.


What happened: Fidelity launches Bitcoin ETF in Europe

How is this significant?
  • Despite a current lack of progress from the SEC on approving them in America, Bitcoin ETFs continue to garner investor demand internationally
  • After launching a physical Bitcoin spot ETF in Canada back in December, Fidelity have now launched a similar product in Europe
  • The Fidelity Physical Bitcoin ETP (FBTC) launched in Germany on the Deutsche Börse this week, with a listing on Switzerland’s SIX exchange planned for the near future
  • A physically-backed product, FBTC is centrally cleared by Eurex Clearing with Fidelity Digital Assets acting as custodian
  • The launch by Fidelity’s follows a similar physically-backed product from Invesco, which debuted on Deutsche Börse late last year
  • Fidelity International’s Europe MD Christian Staub said client demand was behind the new launch: “The underlying Distributed Ledger Technology (DLT) has the potential to revolutionise the financial system… As this technology becomes increasingly accepted, our clients are rightly asking for an efficient way to benefit from this trend. FBTC offers clients an institutional quality solution to enter the market in a familiar, simple and secure way”
  • Fidelity had a busy week in the realm of digital assets, releasing a new report on institutional Bitcoin investmenttitled “Bitcoin first”, which argued that many clients may underestimate Bitcoin’s potential upside due to its significant market capitalisation
  • Fidelity analysts argued that despite this, investors should be wary of underestimating the benefits of Bitcoin’s massively decentralised distribution, which makes it in their words “the best monetary good in the digital asset space”
  • Additionally, Fidelity Charitable, the largest grant-makers in the United States, released data showing that digital asset donations (in the form of donor-advised funds) grew 12-fold year on year
  • The organisation received over $330m in digital asset donations last year, compared to around $28m the year before

What happened: Mastercard embarks on hiring spree to bolster crypto industry expertise

How is this significant?
  • According to an interview with Raj Seshadri, president of Mastercard’s data and services division, payments processor Mastercard are heavily engaged in recruitment efforts to improve their crypto asset capabilities and expertise
  • They aim to make around 500 hires this year in the fields of digital assets, data, and open banking
  •  “When we see a pattern of work and a trend and enough momentum, that’s when we formalise it into a practice… So this is the next three we’re adding to the list”
  • Mastercard, like rivals Visa, offers crypto consultation services for existing clients, helping banks to navigate the implementation of digital currencies and assets, as well as developing loyalty programs and releasing credit or debit cards linked to crypto assets

What happened: Uber CEO confirms plans to integrate crypto as a payment option

How is this significant?
  • Following similar admissions from Airbnb CEO Brian Chesky, the CEO of transport and delivery giant Uber this week admitted that accepting digital assets as payment appears to be an inevitability for the company
  • Dara Khosrowshahi said that the company is not currently ready to accept digital assets, but that they will “at some point”
  • In an interview with Bloomberg TV, he indicated that current technological constraints of scalability and transaction fees, along with PR concerns like Bitcoin mining’s carbon footprint, were key factors delaying immediate implementation
  • “We’re having conversations all the time… As the exchange mechanism becomes less expensive and becomes more environmentally friendly, I think you will see us leaning into crypto a little bit more”

What happened: Crypto asset lenders BlockFi pay SEC and state regulators $100m settlement

How is this significant?
  • This week BlockFi agreed to pay the SEC and various American state regulators an industry record $100m settlement regarding the company’s high-yield digital asset interest products
  • The amount was split $50m towards the SEC, and $50m towards a variety of local state regulatory bodies
  • BlockFi CEO Zac Prince stated that it was “a neither-admit-nor-deny settlement” where they cooperated with regulators throughout, and that the settlement now “clearly lays out a path to registration of a crypto interest-bearing security”; a regulatory path which had been absent previously
  • Prince praised the clarity that the settlement now provides, despite (crypto-friendly) SEC commissioner Hester Pierce calling the size of the settlement “disproportionate” and worrying that it could drive innovation away from the United States
  • Another key aspect of the settlement was that although BlockFi cannot sell the interest-bearing products to new customers, existing customers are allowed to keep earning via those products, rather than being migrated to alternatives
  • Prince said the company is now in the process of developing new interest-bearing options more squarely aligned with SEC requirements; “The crypto industry writ large is at a stage today where it’s becoming part of the national political dialogue… There’s an increasing amount of work being done by regulators and the industry to help create clarity… We intend for BlockFi Yield to be a new, SEC-registered crypto interest-bearing security, which will allow clients to earn interest on their crypto assets”
  • In other regulatory news, there were indications from the US Treasury Department this week that digital asset miners and stakers will be spared from reporting obligations that were feared due to ambiguous language in crypto taxation legislation

What happened: JP Morgan becomes first bank with virtual presence in the metaverse

How is this significant?
  • JP Morgan Chase & Co., an institutions whose lineage can be traced back to at least 1895, became the first major bank with a presence in the metaverse this week, setting up a property in the popular blockchain-based virtual world Decentraland
  • Carrying the branding of the company’s Onyx blockchain division, JPM’s virtual property also includes a portrait of their notoriously crypto-ambivalent CEO Jamie Dimon, and includes spaces where observers can follow expert conversations on crypto asset markets
  • This move follows a few weeks after the company published a report titled “Opportunities in the Metaverse”, which identified the potential of persistent virtual worlds as seemingly “limitless”
  • Their report noted a host of major consumer brands establishing metaverse presences, seemingly catalysing them to become the first financial institution to do so, after concluding “The metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenues”
  • Christine Moy, the global head of Liink, Crypto & the Metaverse for JPMorgan, identified the Decentraland move and the report’s purpose as "help[ing] clients cut through the noise and highlight what we would love to see built or scaled next in commercial infrastructure, tech, privacy & identity, workforce, and social governance"
  • L’Oreal also featured in metaverse news this week, as multiple metaverse-centric trademark filings emergedrelated to a broad range of the beauty conglomerate’s subsidiary companies

What happened: DBS seeks to expand Bitcoin trading to retail customers

How is this significant?
  • Leading Singaporean bank DBS announced during their latest earnings call that they are now looking to increase access to their digital asset exchange, from just institutional investors to retail investors as well
  • CEO Piyush Gupta did clarify that it could take until the end of the year for such an expansion to happen, as all regulatory and compliance safeguards must be undertaken
  • He also noted the increasing institutional appetite for crypto assets, as trading volumes on their exchange reached over $595m in Q4—more than twice the volume of the previous three quarters 

What happened: PwC Luxembourg releases bullish report on digital asset investment

How is this significant?
  • Following on from last week’s news about KPMG Canada adding Bitcoin and Ether to its corporate treasury in order to better serve and advise clients on digital assets, another regional office of the “Big 4” released a report on rising crypto adoption
  • PwC Luxembourg this week published “Crypto-assets: Paradigm shift or short-term trend?”; a report detailing the rising appeal of digital assets within the key European financial services hub
  • Of 123 financial industry professionals surveyed in the Grand Duchy, 61% are “embarking or planning to embark on a crypto journey”
  • 18% already considered digital assets a strategic priority, whilst a further 43% expected them to become a priority within the next 2 years
  • Lack of regulatory clarity was identified as a key limiting factor, but report author Thomas Campione sounded a bullish conclusion overall, writing “It is becoming clear however that 2022 shall be a pivotal year when it comes to crypto-assets management… Taken into consideration that Luxembourg is the second investment funds hub in the world, these results clearly set the tone on what to expect in the market in the very near future”

What happened: Coinbase moves into remittance market

How is this significant?
  • Publicly-listed American digital asset exchange Coinbase this week announced a move into the money-transfer business, through a pilot project allowing the free transfer of digital asset remittances to Mexico
  • Receivers will be able to either convert the assets directly into Pesos, or download them onto a Coinbase account
  • Coinbase estimates that blockchain and digital assets will allow them to provide services “25% to 50% cheaper” than existing companies in the $700bn global remittance market
  • Whilst first implementations are limited to Mexico, the program will be expanded to wherever the company perceives a suitable product-market fit; “We recognize this is a global issue. And while we’re starting in Mexico, over time we’ll consider other regions where customers face similar challenges”

What happened: SoFi CEO confirms personal digital asset investment during “Crypto Bowl”

How is this significant?
  • On Sunday, the Super Bowl—America’s largest media and advertising event of the year—was nicknamed “the Crypto Bowl”, due to the large presence of digital asset companies in the year’s most-expensive advertising lineup
  • In a CNBC interview, Anthony Noto, the CEO of personal finance company SoFi (the sponsors of the host stadium) acknowledged the “Crypto Bowl” perception, and outlined his own personal involvement with digital assets
  • Whilst giving a general disclaimer that digital assets are volatile and can lose value, he did say digital assets could play a role in a small position within a diversified portfolio, and noted that his family “...we’re invested in cryptocurrency. We own Bitcoin, we own Ethereum, we own some of the more obscure cryptocurrencies”
  • He also praised the potential of decentralised finance, stating “I believe if you don’t innovate, if you don’t use cryptocurrency as a technology platform, you’ll get left behind. Your business will be smaller, you’ll be less competitive, you’ll have less innovation, less of a value proposition for consumers, and you’ll lose ground”
  • Coinbase spent $14m for airtime on a one-minute advert that primarily featured a QR code directing people towards their website; they were momentarily victims of their own success as 20 million people scanned it simultaneously and overloaded their servers, but the exposure nonetheless led to a 4% rise in their share value
News Roundups