Nickel Research Centre

Nickel News Roundup - Week 35

1st September, 2022

Market Overview:

Digital assets traded within a narrow range following a wider market drop in reaction to continued hawkish policies from the US Federal Reserve.

  • Trading declined sharply on Friday, following the Jackson Hole conference and Jerome Powell’s statement that the US economy should expect “some pain” and “Restoring price stability will likely require maintaining a restrictive policy stance for some time”
  • This news led to widespread sell-offs across investment markets, with only five stocks in the S&P 500 performing positively on Friday
  • Bitcoin dropped from a weekly high of $21,760 before Powell’s speech on Friday, to a weekly low of $20,220 less than 12 hours later, before dropping to $19,610 on Monday
  • Following the steep weekend drop, Bitcoin traded predominantly in a relatively narrow range between $19,800 and $20,300
  • Bitcoin’s current price of $19,940 equates to an 8% weekly decline
  • Ether responded to macroeconomic news in a similar fashion, dropping from a weekly high of $1,717 on Thursday, to a low of $1,429 on Monday
  • Current prices of $1,543 reflect a 9.3% weekly decline
  • Overall market capitalisation dropped back below $1tn, to current levels of $980bn
  • Total value locked in DeFi likewise declined to $35.7bn, according to industry monitor DeFi Pulse

Digital assets traded in a relatively narrow range as most investment markets cooled following Federal Reserve intentions to carry on raising interest rates. However, dampened enthusiasm in America doesn’t mean the rest of the world switches off, as Singapore, Japan, South Korea, Thailand, and Indonesia all featured in a bumper crop of Asian adoption news.

What happened: Singapore sovereign wealth fund leads $100m crypto funding round

How is this significant?
  • Temasek, the Singaporean sovereign wealth fund, is a leading investor in a $100m funding round for prominent blockchain firm Animoca Brands
  • Animoca is a key investor in the digital asset space, with a portfolio encompassing many prominent projects, particularly in blockchain gaming
  • According to sources speaking to Bloomberg, Temasek will lead the financing through convertible bonds
  • Temasek have previously stated that rather than directly investing in specific tokens or digital assets, preferring to back service providers in the industry instead
  • This $100m round follows a previous $359m round in January, which featured investors like George Soros and the Winklevoss brothers
  • The institutional-level investment from a Singaporean state-run entity is perhaps a particularly encouraging show of continued faith for the asset class in the face of retail-level restrictions and expanded disclosures currently being considered by national regulators

What happened: Japanese financial regulator proposes tax breaks for crypto assets

How is this significant?
  • Following Japanese prime minister Fumio Kishida’s efforts to stimulate the economy, the nation’s financial regulator proposed several changes aimed at encouraging investors to remain active
  • On Wednesday, the Financial Services Agency published their annual tax code change request, featuring several proposed adjustments for the benefit of the digital asset class
  • Recommendations include exempting companies from owing paper gains on coins or tokens after issuing them—a key fundraising mechanism for many projects in the industry
  • As part of the prime minister’s “New Capitalism” vision, Japan has announced an intention to grow the nation’s Web3 businesses, and these fresh exemptions should help companies use their own issued tokens more effectively for business runway
  • Individual investors will also receive tax breaks, thanks to an expansion of the Nippon Individual Savings Account (NISA) initiative, reducing capital-gains obligations on long-term investments
  • The proposed reforms follow previous lobbying from digital asset industry groups, who previously voiced concern over the potential crypto brain drain due to high corporate taxes

What happened: Contagion latest—Restructuring and Responses

How is this significant?
  • Asian digital asset exchange Zipmex announced plans to hold meetings including regulators and potential investors before moving on to the next stage of their restructuring plan
  • Zipmex was badly affected by exposure to beleaguered lender Babel Finance, but has secured a moratorium from creditors until December, and will now meet with the Thai SEC alongside investors as they seek to remedy their liquidity issues
  • The company also revealed the appointment of a financial advisor for the restructuring process and claimed two investors are in the final stages of concluding an agreement
  • Meanwhile, the leadership of collapsed hedge fund (and catalyst of widespread contagion) 3 Arrows Capital (3AC) responded to recent news regarding their liquidators
  • In a sworn affidavit issued in Bangkok, co-founder Su Zhu claimed that Teneo, the appointed liquidators, were wrong to pursue company records in Singapore, because he claims they ceded operations to their British Virgin Islands entity in September 2021
  • The affidavit claims this could leave 3AC unable to provide or submit all the records sought in Singapore, and leave the founders open to “potentially draconian consequences arising from the Liquidators’ exercise of their wide powers”, including fines or imprisonment if found in contempt of court

What happened: Goldman Sachs and Robinhood veterans secure investment for crypto startup

How is this significant?
  • Sei Labs, a DeFi-scaling project co-founded by former Goldman Sachs, Coatue, and Robinhood engineers, successfully concluded a $5m seed round this week
  • Led by Multicoin Capital, the round also included investment from Coinbase Ventures, Hudson River Trading, and Flow Traders
  • Co-founder and Goldman Sachs alum Jeff Feng says that the blockchain’s infrastructure allows it to complete transactions within 600 milliseconds, addressing a key pain point in popular general-purpose blockchains like Ethereum and Solana
  • In particular, the chain is designed for institutional trading, rather than other smart contract functionalities, and will feature order book capabilities currently absent from most DeFi projects
  • Feng said “Because we’ve built the entire chain around an order book, all of the things that Solana could but won’t do because it has a ton of other games and other use cases, we’re able to do”

What happened: Bitcoin mining difficulty experiences largest increase since January

How is this significant?
  • The mining difficulty of Bitcoin—expressing how much competition there is amongst miners across the network to generate new blocks—reached its highest level in over half a year, indicating a strong surge of enthusiasm from miners at current price levels
  • Mining difficulty dropped off earlier in the summer, partly due to large-scale mining farms in areas like Texas pausing operations for mechanical safety due to widespread global heat waves
  • Mining difficulty is updated on an approximately fortnightly basis, and the latest data showed an increase of 9.26%, the largest leap since January
  • It also marked the third hash rate rise in a row, and research from industry publication TheBlock suggests an even larger rise—around 12%—incoming for the next fortnightly data-set

What happened: South Korean city partners with FTX to bolster digital asset capabilities

How is this significant?
  • Busan, the second-largest city in Korea and a major international trading port, issued a press release this week announcing a collaboration with FTX and an intention to create a “Busan blockchain free regulation zone”
  • The agreement with FTX involves collaboration on developing the “Busan Digital Asset Exchange”, alongside a wider promotion of digital asset education and blockchain businesses on a regional level
  • FTX will develop educational courses and materials centred around blockchain alongside local universities
  • The Busan blockchain special zone already includes several blockchain-based innovations, such as ID services, vouchers for a local currency on a digital ledger, and a seafood logistics service
  • Busan mayor Park Hyung-jun stated an intention to make Busan a “global digital financial city”, adding “With this agreement, we will help establish the Busan Digital Asset Exchange and secure a new growth engine for the local economy”

What happened: VC news—new nine-figure funds enter

How is this significant?
  • Reports in The Information this week indicated that VC firm Seven Seven Six are currently raising capital for a new digital asset investment fund—but unlike most VC funds in the space, they will directly purchase tokens, rather than equity
  • The fund, named Kryptós, is a direct result of the current crypto winter, set up to take advantage of tokens currently trading well below their previous bull market values
  • Seven Seven Six founding partner Katelin Hollow told The Information “This is the best time to buy if you're really long on the industry… It's on sale. Everything is on sale”
  • In April the company registered with the SEC as an investment advisor able to buy tokens, making this their first 100% digital asset fund (although previous generalised funds have invested heavily in the industry) 
  • Aptly given the firm’s name, the current funding target is $177.6m
  • A new SEC filing revealed that executives from Galaxy Digital and Genesis are raising $500m for a new digital asset fund called DBA Crypto
  • The leadership team for DBA includes several industry heavyweights, including Galaxy Digital’s co-head of investments Michael Jordan, Genesis’s head of derivatives Joshua Lim, and former Genesis VP of trading Roshun Patel
  • Former SEC chairman Jay Clayton joined digital asset VC Electric Capital as an advisor, alongside Federal Reserve alum Kevin Warsh and Meta VP Pratiti Raychoudhury
  • This is the latest of several advisory roles in the industry for Clayton, who holds similar roles at crypto custodian Fireblocks, and One River Asset Management
  • Clayton and Warsh will help the firm navigate the regulatory landscape, with a particular focus on regulation regarding privacy
  • Other former regulators with roles at firms in the crypto industry include ex-CFTC commissioner Brian Quintenz, former (Acting) Comptroller of the Currency Brian Brooks, and ex-SEC Director Brett Redfearn
  • Animoca Brands’ new Japan unit raised $45m on a $500m valuation, with half the funding coming from Japan’s largest bank, MUFG
  • Animoca Japan will put some of that funding towards securing potentially-lucrative IP licences with broad mass appeal

What happened: Ticketmaster announces plans for NFT-based ticketing services

How is this significant?
  • Reporting in the Sports Business Journal this week revealed that ticketing giant Ticketmaster have partnered with NFT-centric blockchain Flow (creators of the popular NBA TopShot collection and various other officially licensed collectables) to bring ticketing onto the blockchain
  • NFTs will be tied to live event tickets and can be issued before, during, or even after events, “to unlock unique integrations throughout the fan journey”
  • Ticketmaster and Flow began collaborating after Flow successfully minted “70,000 one-of-one virtual commemorative ticket NFTs, featuring each attendee’s seat location” for this year’s Superbowl, and have since minted over 5 million NFTs for a variety of events
  • As a continuation of the Superbowl collaboration, the NFL will offer Flow-minted NFTs to all spectators at over 100 games throughout the 2022 season
News Roundups