Nickel Research Centre

Nickel News Roundup - Week 49

8th December, 2023

Market Overview:

Digital assets posted one of the strongest weeks in history, buoyed by Bitcoin surging above $44,000 amidst continued ETF anticipation.
  • Bitcoin hit its highest levels since early April 2022 this week, breaking through the $39,000 mark… followed by the $40,000 price point, all the way up to a weekly high of $44,410 on Tuesday
  • This high capped a week of steady growth, following a low of $37,910 on Friday
  • Overall, the weekly high represented a year-to-date appreciation of more than 160% for the leading digital asset, with continued ETF anticipation, next year’s halving, and anticipation of less quantitative tightening
  • According to a report from S3 partners, traders shorting publicly listed crypto firms such as Coinbase (and Bitcoin proxy MicroStrategy) currently face more than $6bn or paper losses
  • Ether posted similarly strong weekly performance, growing from a Friday low of $2,079 to a Thursday high of $2,379
  • This strong performance led to an uptick in DeFi activity, which in turn increased activity across the Ethereum network, burning significant amounts of Ether from transaction fees, turning the annual issuance rate much more deflationary
  • Overall digital asset market capitalisation increased by nearly $160bn to $1.61tn
  • Digital asset investment products experienced a 10th consecutive week of inflows, worth $176m—making this the largest run of inflows since October 2021, when the first Bitcoin futures ETF was launched
  • The crypto industry fear/greed index grew significantly to 81/100; denoting “extreme greed” in the market, and the highest levels since 2021
  • According to industry monitoring site DeFi Llama, total value locked in DeFi this week crossed the $50bn mark for the first time since April, currently worth $51.8bn (the highest valuation since November 2022)

Digital assets experienced an early Christmas present this week, as the market experienced one of its best ever weeks historically, with leading assets posting double-digit growth. Major European banks and institutions further embraced stablecoins and tokenisation, Switzerland moved further into municipal acceptance of crypto, a top UAE crypto firm gained 50% on its first day of public trading, ETF progress continued, and the Korean Won overtook the US Dollar as the most popular fiat trading pair. Asian appetite for digital assets stands in opposition to the US, where certain politicians and bank CEOs railed against the industry, and the SEC was once again censured by a federal judge for materially misrepresenting arguments against a crypto firm.

What happened: Société Générale becomes first major bank to list stablecoin

How is this significant?

  • On Wednesday, the FT reported that French banking giant Société Générale (SocGen) became the first bank “to offer digital tokens tracking the price of hard currencies”, via issuance and listing of their own proprietary stablecoin
  • The bank’s Euro-pegged EUR CoinVertible (EURCV) stablecoin began trading on Bitstamp, a regulated exchange headquartered in Luxembourg
  • Jean-Marc Stenger, CEO of SocGen’s Forge digital asset arm, told the FT that they were addressing a gap in the market for stablecoins outside USD hegemony; “The crypto ecosystem is highly concentrated on a few existing stablecoins, 90 per cent denominated in US dollars . . . we definitely think that there is a place for a bank in this field and there is a place for a euro [denominated] stablecoin”
  • Bitstamp CEO Jean Baptiste-Graftieaux agreed, calling the listing “the next step in building markets beyond the current dominance of USD-backed stablecoins”
  • On Tuesday, industry publication Coindesk reported the appointment of crypto firm Flowdesk as market makers for the new EURCV coin
  • In a press release, Flowdesk CEO Guilhem Chaumont commented “Looking ahead as we approach 2024, we envision a transformative impact where compliant blockchain-based operations by institutions will drastically increase in volume”
  • Stenger hopes that EUR CoinVertible will be used for payments across a variety of TradFi assets on blockchain (such as digital bonds and tokenised funds)
  • He added that they chose a public listing (rather than institutional access limitations like JP Morgan’s JPM Coin) because “The best way to channel [investors’] interest is to grow in the usual route and venue which you use in the crypto industry, which is to have your product listed on a crypto exchange”
  • Stenger also touted the coin’s compliance with forthcoming EU-wide MiCA (Markets in Crypto Assets) regulations, as the coin is fully-backed and holders “have direct recourse on the collateral assets of the stablecoin”

What happened: Swiss city of Lugano accepts digital assets for municipal tax payments

How is this significant?

  • On Tuesday, Lugano—the largest city in Switzerland’s Italophone region—announced that it would henceforth accept crypto assets for taxes, fines, and all other forms of municipal invoices
  • In a statement, the local government revealed that both businesses and individuals can pay such bills via Bitcoin or Tether, through scanning a QR code
  • The technology behind the process is handled by local firm Bitcoin Suisse AG, and Armin Schmid, Chief Product Officer at Bitcoin Suisse, commented: “We are delighted to support the City of Lugano in accelerating the use of Bitcoin technology as the foundation to transform the city’s financial infrastructure. It is great to see that more and more Swiss municipalities are offering payments in crypto assets as an option available to both citizens and companies”
  • This launch makes Lugano by far the largest Swiss city to accept crypto for government services, following previous provision of such facilities to the cantons and municipalities of Zug and Zermatt
  • Whilst Zug lies at the heart of Switzerland’s “crypto valley”, Lugano is less indelibly-linked with the industry; but the city has recently embarked on Plan B; “a collaborative effort with Tether to use Bitcoin technology as the basis for transforming the city’s financial system”, assisted by Tether CEO (and Lugano resident) Paolo Ardoino
  • Switzerland isn’t the only Alpine state to embrace digital assets on a government level; earlier this year, Liechtenstein’s prime minister Daniel Risch said the country planned to accept Bitcoin as payment for state services

What happened: UAE crypto firm Phoenix surges on stock market debut

How is this significant?

  • Phoenix Group, an Emirati firm running operations of Bitcoin miners and the M2 digital asset exchange, experienced massive demand on its first day of public trading, leading to a 50% increase in share value
  • This reinforced demand initially shown in its $370m IPO last month, which was 33 times oversubscribed
  • Abu Dhabi’s largest conglomerate, International Holding Co. (partly owned by the royal family), secured a 10% stake in Phoenix back in October, prior to their initial share issue
  • The UAE has positioned itself as a global crypto hub in the face of increased regulatory hostility within the USA, and some analysts believe that Phoenix’s performance indicates continued appetite for regulated exposure in the market; Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital said “The outstanding performance of the issue is due to the shortage of public market proxies for this sector”
  • According to a prospectus from Phoenix, the firm is already wildly profitable, despite only recently launching its exchange; they advertise $144m profit from $230m revenue across the first three quarters of 2023

What happened: Elizabeth Warren, Jamie Dimon, big bank execs criticise crypto in Congress

How is this significant?

  • During the Senate Banking Committee’s annual Wall Street oversight meeting, both Senator Elizabeth Warren (a noted digital asset sceptic who’s boasted of “building an anti-crypto army”) and CEOs of major banks including JP Morgan, Citi, BoA, and Goldman Sachs seemingly decided that digital assets present a much more serious economic threat than any banking malfeasance
  • Whilst the heads of America’s largest banks baulked at the suggestion that—following a banking crisis earlier this year ignited by “safe” government bonds—they should carry more cash reserves under Basel III guidance, they unilaterally agreed with Warren’s suggestion that crypto presents a national security threat
  • Of particular note was the reaction of JP Morgan CEO Jamie Dimon, who said “If I was the government, I’d shut it down”, criticising crypto as a means of money laundering and illicit financing
  • Crypto commentators were quick to point out apparent hypocrisy, noting that JP Morgan has its own permissioned (i.e. non-transparent) blockchain, its own proprietary digital token, and has paid $39.3bn in fines across 272 separate violations since the year 2000
  • Meanwhile, IRS criminal investigation chief Jim Lee says that whilst money laundering used to represent the majority of his agency’s crypto investigations, it is now tax-related violations that constitute the majority of crypto transgressions in the US
  • In other political news, Financial Committee chair (and digital asset supporter) Patrick McHenry said he will retire at the end of his term in January 2025, potentially losing the industry a powerful ally in Congress
  • Industry lobbying group Crypto Council for Innovation called him an “unparalleled leader” who “will be missed”

What happened: Korean crypto trading influence rises as US wanes

How is this significant?

  • In another indication of Asia embracing digital assets as US regulators flounder, the South Korean Won (KRW) overtook the US Dollar as the most popular fiat trading pair for digital assets this week
  • According to industry analytics firm CCData, KRW-denominated trading overtook the USD in terms of fiat trading pairs for the first time in November, accounting for 42.8% of fiat trading activity for Bitcoin across the month
  • This data did come with a few caveats, notably that it concerns only direct crypto-fiat trading pairs, rather than crypto-stablecoin pairs, which remain dominated by USD-denomination
  • Additionally, it speaks to the lack of KRW-denominated stablecoins, and a greater tendency in Korea to trade directly from fiat
  • CCData also points out the growing influence of broader Asian trading; “South Korean-registered exchanges produced the highest total daily volumes (1.4 billion USD) overtaking Maltese-registered exchanges (1.2 billion USD), while the highest quantity of top exchanges (relatively high volume) are registered legally in Hong Kong (10) and Singapore (11)”
  • As an example, regulated Hong Kong exchange HashKey recorded daily trading volume of $4.5bn on the 1st of December, despite only being around a month old
  • Since September, overall KRW market share on fiat pairs has increased from 24% to 41%, whilst USD has decreased 11% to approximately 40%

What happened: Robin Hood launches zero-fee crypto trading in Europe

How is this significant?

  • Popular stock (and subsequently crypto) trading app Robin Hood rolled out commission-free digital asset trading across the EU this week, following a recent UK debut for its stock trading capabilities
  • Robinhood Crypto’s general manager Johann Kerbrat revealed that the firm will provide European customers with access to over 25 digital assets, including Bitcoin, Ether, and Solana
  • Additionally, users will earn “cashback” on some of their trading volume in the form of Bitcoin
  • In a recent investor update, Robin Hood disclosed that they’re benefitting from recent market movements; notional trading volume of digital assets increased 75% in November compared to the month prior
  • Although trades are commission-free, Robin Hood will generate revenue by taking a rebate from market makers worth “about 65 basis points”
  • This represents almost twice the rebate that the firm earns from US trading, alongside listing almost twice as many tokens in the less-hostile EU market

What happened: BlackRock confirms seed funding for spot Bitcoin ETF

How is this significant?

  • In a recent SEC filing, asset management titan BlackRock showcased further progress on the road of their planned spot Bitcoin ETF journey, confirming the necessary commitment of $100,000, in return for which they received 4,000 shares in October
  • Reuters reported that talks between regulators and potential ETF issuers “have advanced to key technical details”, according to industry sources
  • The SEC is believed to be pushing issuers towards cash redemptions for the ETFs, rather than in-kind settlement mechanisms
  • Bloomberg analysts maintain their 90% approval estimate for ETFs in January, contributing to bullish market movements for Bitcoin this week
  • 13 issuers are currently in the race for a spot Bitcoin ETF, and several (including BlackRock) amended their filings this week based on SEC feedback, indicating that institutions are “working hard to iron things out” according to Bloomberg ETF analyst James Seyffart
  • Meanwhile, in other ETF news, the SEC delayed ruling on Grayscale’s spot Ether ETF application, continuing its trend of delaying decisions on digital asset ETFs until the final permissible deadline

What happened: Deloitte partners with blockchain firm for digital shipping logistics

How is this significant?

  • According to reports from India Blockchain Week, Big 4 accounting firm Deloitte are working with blockchain project KILT and supply-chain firm Nexxiot to create a new logistics service called KYX
  • KILT founder Ingo Rube told industry publication Coindesk that “Using decentralised and open-source solutions 'Built on KILT,' any entity could create a service built on a blockchain without having to deal with cryptocurrencies or needing blockchain experience”
  • KYX provides reusable digital credentials for KYC and KYB processes, drastically improving efficiencies above existing single-use paper-based certificate systems, building on a partnership originally established in May this year
  • Shipping giant Hapag Lloyd is scheduled as the first client of the service, followed by Vodafone
  • In order to implement the technology, Hapag Lloyd will equip 1.5 million containers with devices that provide evidence of activity onto the blockchain

What happened: Real World Asset tokenisation boosted by big banks in Europe

How is this significant?

  • Société Générale (SocGen) made advances in the field of tokenisation as well as stablecoins this week, issuing a 10m Euro digital green bond on the public Ethereum network
  • This represents the latest of several Real-World Asset tokenisations, which have gained steam amongst institutions in the second half of the year
  • SocGen’s Forge digital asset arm issued the tokens, and identified the issuance as “a first step towards using blockchain as a data repository and certification tool for issuers and investors to foster transparency on ESG and impact data on a global scale”
  • The bonds can be settled on-chain via SocGen’s new stablecoin, and provide information on their carbon footprint publicly 24/7 directly via their smart contract, illustrating improvements in transparency available via tokenisation
  • The digital green bonds were jointly purchased by AXA and Generali; AXA’s head of innovation Laurence Arnold commented “The aim of this initiative, carried out in collaboration with SG-FORGE, was to enable us to experiment the use of a stablecoin as a settlement asset to purchase a digital bond”

What happened: Franklin Templeton CEO confirms crypto asset holdings in personal portfolio

How is this significant?

  • Jenny Johnson, president and CEO of $1.5tn investment manager Franklin Templeton is a staunch public advocate of digital assets, tokenisation, and blockchain; and in a recent interview with Fortune she revealed that she herself holds several crypto assets
  • As well as Bitcoin, Johnson proved herself to be somewhat of a DeFi connoisseur, holding governance tokens associated with multiple popular decentralised exchanges (DEXes)
  • In the interview, she stated that digital assets represent a small portion of her overall investments, and views her token holdings as “all standard: Ethereum, a little Bitcoin, SushiSwap, Uniswap. I have a couple of different things like that”
  • Regarding Franklin Templeton clients, she stated “there’s obviously a demand for Bitcoin”, and notes that she’s “been impressed to see the various platforms and how quickly they’ve matured, and the innovation that’s happened in various companies that are being created on these layer-1s”
  • She however said that she steers clear of NFTs, since she deems their value proposition (in the form of the common digital art format) as too reliant on subjective taste, rather than performance mechanisms; “I tend to make investments in things that I think are anchored in having financial returns, because I think that you have better chances of success there”

What happened: Judge threatens SEC with sanctions over misrepresentations in crypto case

How is this significant?

  • The SEC could close out 2023 with yet another legal setback, after a federal judge declared this week that the agency had made “materially false and misleading accusations” in order to freeze the funds of a digital asset firm
  • The case concerns little-known lending platform DEBT Box, and the SEC now has a two week period to respond to court concerns regarding the accuracy of their allegations
  • Utah’s leading federal judge, Robert J Shelby, wrote he was “ ...concerned the Commission made materially false and misleading representations”
  • The SEC had claimed they needed emergency permission to freeze the firm’s funds in August, as DEBT Box was allegedly moving user funds to the UAE “for the express purpose of evading the federal securities laws”
  • The agency also alleged “the defendants had closed 33 bank accounts in 48 hours” ahead of their filing
  • However, Shelby vehemently disagreed after reviewing the facts, reversing the asset freeze and stating that “There was no evidence that any bank accounts closed in the 48 hours preceding the ex parte hearing”, and indeed that no bank accounts were closed through the entirety of June and July
  • Shelby thus threatened sanctions which “shall be limited to what is sufficient to deter repetition of such conduct”, and could include fines or “directives of a nonmonetary nature”
  • DEBT Box has now moved to dismiss the SEC’s motion entirely, stating “The SEC should not be allowed to continue to spin a false narrative to avoid dismissal. Not only are such allegations false, but they also fail to meet the basic pleading standard”

What happened: El Salvador enters profit on its Bitcoin holdings

How is this significant?

  • After becoming the first country to accept Bitcoin as legal tender back in 2021, El Salvador president Nayib Bukele announced this week that the investments were back in the black
  • According to a website dedicated to tracking the (publicly-announced) Bitcoin purchases of Bukele, El Salvador’s Bitcoin portfolio currently stands at around 2.3% profit, benefiting from several purchases below the $20,000 mark
  • The government’s Bitcoin advisor (and author of The Bitcoin Standard) Dr Saifedean Ammous commented “It is significant that Bitcoin and El Salvador's investment have recovered after two years under water, because politicians, economists and international organisations had repeatedly branded Bukele and his Bitcoin policy failures because the price had dropped. Bitcoin offers a compelling alternative to national currencies and government bonds, which [have] constantly declined in value”
  • However, it should be noted that measures of Bitcoin on the Salvadoran balance sheet remain reliant on announcements of purchases by Bukele, as no blockchain addresses holding the Bitcoins have been publicly disclosed
  • A more reliable and transparent Bitcoin balance sheet however can be attributed to MicroStrategy, the largest corporate Bitcoin holder, who are bound by SEC disclosure regulations
  • At the time of writing, the unrealised profit on MicroStrategy’s holdings stands at nearly 43%, worth $2.27bn
News Roundups