Nickel Research Centre

Nickel News Roundup - Week 6

12th February, 2021

Market Overview:

The digital assets market saw unprecedented growth this week, with new records set across a variety of crypto assets, including market leaders Bitcoin and Ethereum.

  • Bitcoin hit a new all-time-high, accelerating past the previous record of $42,000 to reach a high of $48,745 in the wake of adoption by Tesla, Mastercard, and BNY Mellon. At the time of writing, the price sits at $47,530—a weekly increase of 27%
  • Ethereum followed Bitcoin’s lead, surpassing its previous record of $1,680 en route to a new all-time-high of $1,827, a move which took its total market cap above $200bn for the first time. Ether subsequently retraced slightly in line with Bitcoin’s movements, for a current value of $1,773
  • Bullish momentum continued across the entire market, with none of Coinmarketcap’s top 40 assets (excluding stablecoins) declining in value over the last week. At the time of writing, only 5 coins or tokens in the top 100 performed negatively over the last 7 days
  • The overall crypto asset market cap again climbed to new all-time highs, reaching a value of $1.46tn, exceeding Google’s $1.4tn GOOGL share value
  • The DeFi sector experienced increased growth, with a Total Value Locked of $48.3bn, a weekly increase of over $8bn

Digital assets gathered even more bullish momentum this week with record performances across the board, sparked by Tesla news. After Elon Musk declared his support for Bitcoin last week, the world’s most valuable car maker officially adopted it for investment and payment. Meanwhile, Mastercard announced infrastructural integration of digital assets, China accelerated CBDC trials for Lunar New Year, America’s oldest bank announced crypto custody, Ethereum futures launched, Asian banks bought stakes in digital asset exchanges and set up Venture funds for blockchain, and the mayor of a major American city announced plans to formalise digital assets within its financial infrastructure.


What happened: Tesla announces $1.5bn investment in Bitcoin and plans for payment support

How is this significant?

  • Tesla is the most valuable automobile manufacturer in the world, and Elon Musk one of the most high-profile and influential CEOs (as well as the world’s richest man)
  • In an SEC filing, Tesla disclosed that it had purchased $1.5bn worth of Bitcoin for about 11% of it’s cash reserves, in order to “diversify and maximise” returns on cash
  • Alongside adopting Bitcoin from a store-of-value investment standpoint, Tesla plans to make use of its medium-of-exchange properties as well, accepting Bitcoin as a means of payment “subject to applicable laws and initially on a limited basis”
  • Whilst the last 6 months have seen a wave of institutional investors moving into digital assets and adding crypto to their portfolios, Tesla represents the first major consumer-facing corporation from outside the financial services industry to officially endorse crypto assets
  • The Financial Times noted that this is likely the “most significant corporate endorsement yet” for Bitcoin, and called it a “game-changing move for the use of Bitcoin from a transactional perspective”
  • Since the news catalysed an upward price movement for Bitcoin, it has actually overtaken Tesla by market value
  • Former acting Comptroller of US Currency, Brian Brooks, in response to the news, noted that it made sense for corporations to diversify into digital assets as a hedge against inflation in times of economic stimulus programs worldwide; "That would explain why a lot of institutions want to have Bitcoin sitting in their treasury because it's a lot more stable source of value over the long haul, potentially”

What happened: Mastercard announces digital asset integration within payment infrastructure

How is this significant?

  • Following on from Visa and PayPal, Mastercard’s announcement that they will be integrating crypto into their payment network adds another of the world’s largest payment processors to the list of digital asset supporters
  • According to a blog posted on Mastercard’s homepage on Wednesday, their data has shown that “the trend is unmistakable” in terms of people both buying and converting crypto assets for payment, 
  • This year, Mastercard will begin supporting a select group of digital currencies directly on their network, declaring “we are here to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want”
  • Rather than existing partnerships with firms such as Wirex or Bitpay where crypto assets would be converted to cash before sending onto Mastercard’s payment system, Mastercard now plans to transact directly with crypto on its network 
  • Mastercard say they’ve been active in the space for some time, with 89 blockchain patents granted, alongside “actively engaging with several major central banks around the world, as they review plans to launch new digital currencies, dubbed CBDCs, to offer their citizens a new way to pay”

What happened: BNY Mellon adds digital asset custody

How is this significant?

  • BNY Mellon is the oldest bank in America, and holds over $2tn in assets under management, signalling approval of digital assets from perhaps the most traditional institution in traditional finance
  • On Thursday, the bank announced their move into digital asset custody, where they “will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients”
  • In the statement on their website, Roman Regelman, CEO of Asset Servicing and Head of Digital at BNY Mellon outlined their motivation behind the move, saying "BNY Mellon is proud to be the first global bank to announce plans to provide an integrated service for digital assets… Growing client demand for digital assets, maturity of advanced solutions, and improving regulatory clarity present a tremendous opportunity for us to extend our current service offerings to this emerging field”
  • BNY noted that this development was driven by a surge of customer interest; “We’re experiencing heightened interest from current clients who are seeking exposure to digital assets… We are also seeing new demand from prospective clients, particularly digital native companies in the digital asset space, who are looking for BNY Mellon’s core investment services”
  • Rather than holding them in separate infrastructure, BNY plans to store their digital assets in “the industry's first multi-asset digital custody and administration platform for traditional and digital assets”

What happened: SEC Commissioner Hester Peirce forecasts Bitcoin ETP

How is this significant?

  • With blockchain professor Gary Gensler as incoming chair of the SEC, crypto-friendly SEC Commissioner Hester Peirce believes that the likelihood of a Bitcoin ETP in the United States has substantially increased after all ETF proposals were rejected in the previous administration
  • Peirce cites investor demand as a key catalyst for a potential ETP, saying in an interview with Coindesk TV that “If we don’t give them a natural way, which I think would be an ETP, they are going to look for other ways to do it”
  • Although they haven’t yet been granted in the USA, digital asset ETPs do exist in Europe; on Thursday it was announced that the ETPs of Zurich-based 21Shares have just hit $500m in assets under management 
  • Analysis in the Washington Post backs up her forecasts, noting that “with the world’s largest digital coin rallying to new heights and a change of leadership at the Securities and Exchange Commission, the prospect of a first U.S. Bitcoin ETF appears to be rising”

What happened: Ethereum CME Futures launch with over $30m in volume

How is this significant?

  • CME Ether futures began trading on Monday, providing a new means of digital asset exposure to institutional investors
  • At the end of the first day of Ether futures, there was $33.6m in volume, with 388 contracts traded
  • Speaking about the launch, Stefan Coolican, chief financial officer of Ether Capital, said “This is a big milestone for Ethereum and Ether from several different angles...First, it provides clarity on Ether as a commodity like Bitcoin; second, it gives institutions a well-known and accessible way to access ether exposure; third, it provides another tool for price discovery that helps investors and regulators better assess market dynamics”
  • A particular advantage in Ethereum’s value proposition is its smart contract capabilities, allowing other crypto asset businesses to build on top of Ethereum’s infrastructure. According to Lior Messika, founder and managing partner at EU venture fund Eden Block; “With the Ethereum network enabling tens of new ‘crypto unicorns’ in the last year, ETH is poised to become a clear focal point for investors seeking exposure to the broader innovation enabled by crypto, and its now numerous use cases”

What happened: Ethereum accounts for 80% of weekly institutional inflows

How is this significant?

  • Ethereum is the second-largest crypto asset in the world, and over the course of the last few months has been outpacing market leader Bitcoin in terms of growth
  • According to data analysis by crypto asset manager Coinshares, we are now seeing significant diversification within the institutional space, citing nearly $200m of inflow into Ether products last week, ahead of the CME Ether futures launch this week
  • This accounted for 80% of weekly inflows into crypto asset investment products, and in the 6 weeks of 2021, the crypto investment product market has already reached 39% of the total institutional capital invested into crypto funds in 2020
  • According to the Coinshares report, as investors grow more comfortable with crypto assets through Bitcoin, the appeal of other established crypto assets grows too; “We believe investors are looking to diversify and are growing increasingly comfortable with Ethereum fundamentals”.

What happened: Miller fund files with SEC for $400m Bitcoin investment 

How is this significant?

  • Noted value investor Bill Miller submitted an SEC filing for his flagship fund, Miller Opportunity Trust, to gain up to 15% exposure to Bitcoin, equating to a $400m investment
  • Miller has been proven correct in past predictions regarding digital assets, personally holding Bitcoin since 2014, and noting in November last year that “ the current relative trickle into Bitcoin" would “become a torrent"
  • The current 5 year returns of Miller Opportunity Trust place it within the top 2% of all funds, according to Bloomberg data
  • Previously, Miller and his son Bill Miller IV had brought Bitcoin into their Income Strategy Fund, explaining in a letter to investors that “Not owning any bitcoin has been a massive mistake, and we expect that will continue to be true”

What happened: Mayor of Miami wants to attract digital asset companies and integrate crypto into local economy by passing “the most progressive crypto laws”

How is this significant?

  • Francis Suarez, mayor of Miami since 2017, is perhaps one of the most powerful regional crypto advocates in the United States
  • Speaking to Forbes, he said “We're working on making sure that our incentives are in place and that our legislation promotes crypto and blockchain and is forward-thinking”, citing the sparsely-populated US state of Wyoming as “smart” for being an early adopter of digital asset-friendly legislation 
  • Suarez has wide-ranging plans on integration of crypto assets into the financial infrastructure of Miami, stating “There are three things that I want to do with Bitcoin and crypto generally. One is I want to be able to give my employees the ability to take a percentage of their salary in Bitcoin and crypto. Two, I want our residents to have the ability to make payments of taxes and fees in crypto. And the third thing is including Bitcoin as a part of the city’s investment portfolio”
  • A few weeks ago, Suarez made Miami the first major American city to hire a Chief Technology Officer, in a bid to increase its fintech and digital asset capabilities
  • Meanwhile, in the New York City mayoral race, leading candidate (and former Democratic presidential candidate) Andrew Yang has sounded his unambiguous support for digital assets as part of the global financial hub’s future, declaring “As mayor of NYC —the world’s financial capital—I would invest in making the city a hub for BTC and other cryptocurrencies”

What happened: China extends CBDC trial for Lunar New Year

How is this significant?

  • As one of the world’s economic powerhouses, China’s plans to roll out a national digital currency could influence other countries to follow suit
  • With the Lunar New Year Festival—the most significant public holiday in the Chinese calendar—the People’s Bank of China has an ideal opportunity to test CBDC usage and infrastructure
  • Lunar New Year will mark the first opportunity for Beijing to trial the digital yuan, with 50,000 residents selected via a lottery system to be awarded a total of $1.5m in digital currency
  • Recipients will be able to spend their CBDC at a variety of offline locations, alongside major online retailer over the course of the holiday as China’s digital yuan trials accelerate ahead of an anticipated launch this year
News Roundups