Nickel Research Centre

Nickel News Roundup - Week 29

21st July, 2022

Market Overview:

Digital assets rallied this week following more precise timelines on Ethereum’s network upgrade and lessened liquidations from beleaguered lenders.

  • Bitcoin returned to bullish momentum, topping $24,000 on Wednesday with a weekly high of $24,200
  • The weekly chart showed a consistent upward trajectory, trading above $20,000 from Thursday onwards
  • Bitcoin did dip on Wednesday evening, when Tesla published their Q2 financial figures, and revealed the sale of $936m in digital assets, equivalent to around 75% of their holdings, marking their first sell in over a year
  • Bitcoin’s current price of $22,930 equates to 14.7% weekly growth
  • Despite Bitcoin’s strong performance, it lagged considerably behind Ether, as more timelines regarding its impending upgrade to proof-of-stake seemingly spurred widespread trading enthusiasm
  • Ether hit a weekly low of $1,077 late on Thursday, before rising throughout the week, boosted by a steep jump on Saturday
  • Ether achieved a weekly high of $1,613 on Wednesday, and current prices of $1,485 translate to a nearly unprecedented weekly growth of 35.5% (albeit after a prolonged period of bearishness)
  • As well as positive market performances across other asset classes and “baked in” expectations of interest rate rises some analysts believed that forced liquidations may have decreased, as firms such as Celsius and 3AC are no longer selling off vast holdings to maintain solvency
  • Overall market capitalisation grew by over $150bn to cross the $1tn mark once more, with a weekly high of $1.08tn and current values of $1.02tn
  • Total value locked in DeFi was boosted by positive market momentum, growing to $42.7bn, according to industry monitor DeFi Pulse

Digital assets experienced a week of major bullish movement, although it remains too early to tell whether this marks a true reversal in momentum, or just a relief rally. Enthusiasm surrounding Ethereum’s impending proof-of-stake network upgrade appeared a key contributor to positive market sentiment, whilst several established institutional names deepened their involvement in the asset class—including the likes of BNP Paribas, Disney, and Christie’s, alongside positive news from venture capital, family offices, and regulators.

What happened: Ethereum “Merge” timelines gain greater clarity

How is this significant?
  • Market enthusiasm returned to Ethereum this week, as the leading smart contract blockchain released some key information regarding its technological evolution
  • “The Merge”—a key stage in the process of upgrading from energy-intensive proof-of-work consensus to the more sustainable proof-of-stake mechanism—is now earmarked for the week of September 19th, according to Ethereum Foundation developer Tim Beiko
  • Ethereum’s Sepolia testnet (a developer “sandbox” to test code before deploying it to the public blockchain) successfully upgraded to proof-of-stake last week, with the Goerli testnet (the third of three major Ethereum testnets) scheduled to do so on August 11th
  • This timeline remains open to change, but is a rare instance of specific dates being provided by the Ethereum foundation, and thus appeared to have an instantaneous market impact as traders moved to secure more Ether for future staking
  • Moving to proof-of-stake is important not just from a scalability standpoint, but from an industry PR aspect as well; the transition is forecast to cut energy usage of the Ethereum blockchain by 99.5%, countering a key criticism of crypto assets
  • Rather than mining new blocks (and thus new Ether) by competing to solve complex computational puzzles, proof-of-stake will “validate” the creation of new blocks, with anyone staking 32 Ether eligible to act as a validator, randomly selected for block generation rewards

What happened: SEC considers waiving some rules to tailor disclosure for digital asset firms

How is this significant?
  • In an interview with Yahoo Finance, SEC chair Gary Gensler said that, whilst he believed many crypto industry companies were “non-compliant” with SEC regulations, it may be possible to improve disclosure processes for their benefit
  • “We do have robust authorities from Congress to use our exemptive authorities that we can tailor… There’s a potential path forward… I’ve said to the industry, to the lending platforms, to the trading platforms:‘ Come in, talk to us”
  • However, many in the digital asset industry believe that there is still no proper pathway for registration that recognises the characteristics of the asset class, and some speculate that Gensler’s invitation to SEC registration may be a response to the Responsible Financial Innovation Act bill, which proposes giving the majority of industry oversight to the CFTC, and could be voted on this year

What happened: Contagion latest—Celsius plans and further 3AC mismanagement claims

How is this significant?
  • Following last week’s late-breaking news about Celsius filing for Chapter 11 bankruptcy protection, there were several more developments from the continuing fallout around crypto industry contagion caused by the collapse of Terra Luna, and hedge fund 3 Arrows Capital (3AC) defaulting on loans
  • Celsius lawyers stressed that they viewed their filing as a reorganisation rather than a liquidation
  • In a presentation regarding the company’s bankruptcy, Celsius aimed to provide customers with several choices for recovering their capital; “the option, at the customers’ election, to recover either cash at a discount or remain ‘long’ crypto”
  • Bankruptcy judge Martin Glenn permitted the lender to pay bills and maintain some operations; including the expansion of a crypto mining facility in Texas
  • The Straits Times newspaper reported on Friday that 3AC’s appointed liquidators in the British Virgin Islands petitioned Singapore’s high court for provisional relief allowing them to secure 3AC’s assets in the city-state
  • If liquidators can prove insolvency resulted from active mismanagement by 3AC leadership, recovery efforts could also include seizure of personal assets, such as co-founder Zhu Su’s recently-purchased $50m mansion in Singapore
  • A list of creditors to 3AC released this week raised some questions; large debts were listed to established digital asset firms such as Genesis Trading ($1.2bn, secured by its parent company Digital Currency Group), and the now-bankrupt Voyager Digital ($625m)
  • However, other listed creditors included Zhu Su himself ($5m), and co-founder Kyle Davies’ wife, Chen Kaili Kelly ($65.7m), leading to further questions about the firm’s conduct
  • The whereabouts of both Su and Davies currently remain unknown
  • Industry publication Coindesk reported that a trading desk known as TPS Capital would likely be included in asset recovery proceedings, as a paper trail connects it to 3AC
  • As a key location in the operations of both the Terra Luna blockchain and 3AC, Singapore announced plans to increase regulatory scrutiny for the digital asset industry 
  • Monetary Authority of Singapore managing director Ravi Mhenon stated “Going forward, in line with international regulators, we’re also going to be broadening the scope of regulations to cover more activities. So, players who are doing some of these activities but are currently not caught may well be caught”
  • APAC-focused digital asset exchange ZipMex became the latest to suspend withdrawals during the crypto credit crunch, citing “a combination of circumstances beyond our control, including volatile market conditions”

What happened: Former SoftBank executive moves to invest in crypto with $2bn family office

How is this significant?
  • Marcelo Claure, former deputy to SoftBank founder Masayoshi Son, recently formed a family office to invest his $2bn fortune—and digital assets represent a key area of interest
  • Six months ago, he departed the Japanese financial giant, and since then has been setting up the strategy for his investments, featuring both traditional asset classes, and nascent ones like crypto
  • In a Bloomberg interview, he confirmed that the Claure Group family office “will be investing in crypto, public, private and seed funding”
  • According to documents seen by Bloomberg, he personally holds crypto assets, alongside more traditional investments like real estate and hedge funds
  • Claure was a speaker at the 2022 Bitcoin Miami conference, where he described Bitcoin as “one of the safest ways to maintain our wealth”, and previously stated that “The more I understand crypto, the more I like it”
  • He also created Claure Capital as a division within his family office focused on both public and private investments, and plans to open a venture fund with co-investment opportunities once his non

What happened: Christie’s launches venture capital fund, invests in blockchain and Web3

How is this significant?
  • Famed auction house Christie’s—a key institution in legitimising NFTs—announced a move into venture capital this week, focusing on companies at the intersection of technology and art
  • Their first investment was in a blockchain interoperability company called LayerZero Labs, although the size of the investment was not disclosed
  • Devang Thakkar, head of Christie’s Ventures, said “We will focus on products and services which can solve real business challenges, improve client experiences, and expand growth opportunities, across the art market directly and for interactions with it”
  • Outlining the fund’s strategy, Thakkar told industry publication ArtNews “We have three pillars we’re looking at, one of which is Web3. One of the other pillars is investing in better ways of viewing art, that is, technology that improves how you consume art. The third pillar is around the financial innovation in the art market, technology that makes it easier to actually acquire art objects”

What happened: BNP Paribas seals partnerships for crypto asset custody

How is this significant?
  • French banking conglomerate BNP Paribas—one of the largest private banks in the Eurozone—became the latest major financial institution to move into digital asset custody this week, following a press release announcing several new partnerships
  • BNP will partner with both Fireblocks and Metaco in order to provide a wide range of solutions and services linked to digital assets
  • Fireblocks will be responsible for developing an infrastructure layer capable of settling regulated tokenised securities, in addition to handling tokenisation and connectivity services
  • Swiss firm Metaco meanwhile will provide bank-grade digital custody solutions to be plugged into the BNP’s existing infrastructure, “allowing institutional clients to store, issue and settle digital securities alongside their traditional assets”
  • This follows similar recent institutional partnerships by Metaco, including Societe Generale and Citi
  • BNP’s head of digital assets, Wayne Hughes said the bank was positioning themselves to be competitive ahead of the regulatory curve; “These partnerships represent a new milestone for us, allowing us to build a multi-asset, multi-provider platform which, once the regulatory framework allows, will offer full connectivity across traditional and digital assets”

What happened: Disney makes first move into blockchain with business accelerator

How is this significant?
  • Polygon—a layer-2 blockchain project developed to improve scalability on Ethereum—was chosen for Disney’s business development accelerator program this week; the first official endorsement of a digital asset firm by the entertainment monolith
  • Described by Disney as a “business development program designed to accelerate the growth of innovative companies from around the world”, the accelerator provides selected teams access to the Disney senior leadership team as well as exclusive mentorship
  • Additionally, with an announced focus on “building the future of immersive experiences”, this year’s accelerator also features several Web3 and NFT startups alongside Polygon
  • Amongst them are Flickplay (A Web3 app focused on geolocation-enabled NFTs), Lockerverse (a Web3 storytelling platform), and Obsess (an e-commerce platform allowing the construction of 3D metaverse storefronts)

What happened: Digital asset security startup raises $90m

How is this significant?
  • Although the 2022 bear market has led to a year-on-year decrease in VC funding, there is nonetheless significant investment available for projects with suitably compelling propositions
  • One such recent project is blockchain security startup Halborn, which just completed $90m raise
  • The Series A round featured investment from major players like Brevan Howard and the Digital Currency Group, as well as Castle Island Ventures and Summit Partners
  • CEO Rob Behnke said that current market values didn’t matter to their funding, as long as the overall industry continues to grow over time; “The price of crypto has nothing to do with our business… What really matters is that the entire industry is growing”

What happened: Dubai reveals plans for 40,000 metaverse jobs

How is this significant?
  • Crypto-friendly Dubai is already the first territory to feature a regulatory presence in the metaverse, and this week its crown prince Prince Sheikh Hamdan bin Mohammed launched a new Metaverse Strategy to officially outline the Emirate’s economic plans for metaverse integration
  • Shaikh Hamdan stated that Dubai already hosts 1,000 blockchain and metaverse-related jobs contributing $500m to the economy, with plans to increase the number of industry companies there fivefold by 2027
  • Additionally, the Dubai Metaverse strategy forecasts 40,000 virtual jobs and an economic contribution of $4bn within the same timeframe
  • The state-run WAM news agency wrote “The strategy emphasizes fostering talent and investing in future capabilities by providing the necessary support in metaverse education aimed at developers, content creators and users of digital platforms in the metaverse community”
  • This move builds on a broader strategy positioning Dubai as a regional (and global) crypto hub, with several major firms having already migrated from Singapore due to the UAE’s more relaxed regulatory environment
News Roundups