Nickel Research Centre

Nickel News Roundup - Week 37

16th September, 2021 

Market Overview:

Digital assets spent the majority of the week gradually recovering from last Tuesday’s slump, with all major assets posting weekly gains

  • Bitcoin recovered from weekly lows of $43,770 to trade at a weekly high of $48,490 on Wednesday
  • Current values of $48,310 represent a 4.4% gain on last week
  • Ether climbed from weekly lows of $3,341 to a high of $3,673 on Wednesday, with current values of $3,634 representing 4% growth over the week
  • Solana, last week’s strongest performer, suffered losses due to a large-scale network outage that froze their main chain, leading to a 22.1% weekly loss; showcasing the importance of maintaining network decentralisation
  • The total value of all digital assets increased slightly from last week, growing by $80bn to a current value of $2.2tn
  • The majority of the market bounced back from last week’s declines, with 72 of the top 100 digital assets by market capitalisation growing over the week
  • Total value locked in DeFi was boosted by the market recovery, from $101.4bn to $107.1bn

After a short sharp shock last week, the digital asset market experienced steady recovery this week, with most major assets in the green over the week. In the news, there were several major indications that backed up this return to growth; more major financial institutions revealed plans to invest in digital assets, several established names from the world of hedge funds announced their arrival in the space, and big names like Morgan Stanley, Fidelity, and Citigroup built further on their existing involvement.


What happened: ARK Investments signals increased institutional confidence in Ethereum

How is this significant?
  • Cathie Wood, ARK Investments’ CEO, revealed an increased bullishness towards Ether this week, after observing the process of Ethereum’s network upgrade
  • Speaking with CNBC anchor Andrew Sorkin at the SALT conference in New York, Wood revealed that she expects the value of Bitcoin to increase ten-fold over the next five years, and that her company’s conviction in Ether’s value has grown due to the amount of activity in DeFi, NFTs, and the move towards the Ethereum 2.0 upgrade
  • Wood told Sorkin “I'm fascinated with what's going on in DeFi, which is collapsing the cost of the infrastructure for financial services in a way that I know that the traditional financial industry does not appreciate right now”
  • Additionally, she outlined ARK’s current portfolio recommendation, saying “Our confidence in Ether has gone up dramatically as we've seen the beginning of this transition from proof of work to proof of stake. We'd still probably do 60% Bitcoin, 40% Ether”

What happened: Dan Tapiero’s 10T hedge fund has invested over $650m for crypto fund

How is this significant?
  • Since launching 10T in 2019, macro veteran Dan Tapiero has invested more than $500m into equity of companies operating in the digital asset space
  • Across two funds and co-investment vehicles, 10T has invested around $650m, with around 80% of capital in their second fund deployed
  • Tapiero launched 10T as a means for traditional investors to get exposure to high-valuation digital asset firms, reducing risk for organisations like pension funds to invest in the sector; “They're comfortable with private equity and these companies—many of which have $100 million of revenue… They are businesses at scale with moats around them. There isn't any risk that they will disappear."
  • Backed by billionaire Alan Howard, 10T has raised over $750m for their digital asset investment fund, with Tapiero noting “The space is growing so quickly that three years ago there were only a handful of companies that were at scale. There’s a nice pipeline here, too”

What happened: Hedge fund billionaire Steve Cohen dives into digital assets

How is this significant?
  • Steve Cohen—founder of Point72 Asset Management, and owner of MLB team the New York Mets—revealed this week that he recently converted from crypto-skeptic to believer, and has moved into the space in a significant way
  • In a discussion with Skybridge’s Anthony Scaramucci, Cohen declared “Once I decided there were opportunities, and I thought this could be a space like the internet—it could be incredibly transformational—I wasn’t going to miss this”
  • Two pieces of investment by Cohen emerged this week; one into a quantitative trading firm for digital assets, and one into a $50m Series A round for NFT firm Recur, giving them a $333m valuation
  • In addition to the investment, Cohen will serve as director on Recur’s board

What happened: Deutsche Börse’s Eurex launches Bitcoin Futures trading

How is this significant?
  • “Following significant customer demand”, Deutsche Börse launched Bitcoin ETN Futures this week on their Eurex derivatives exchange, calling it “the first step on a product roadmap covering more crypto-related assets”
  • The Euro-denominated derivatives represent “the first regulated market in Bitcoin-related derivatives in Europe” according to Eurex
  • Eurex dubbed the launch significant in terms of providing exposure to institutional investors in Europe, stating “This unique ability to trade crypto derivatives within Eurex's trusted trading, clearing, and settlement infrastructure will advance cryptos as a new asset class”

What happened: SEC tensions continue in United States

How is this significant?
  • Although he faced accusations of regulatory overreach from Republican senators during a Senate Banking Committee hearing on Tuesday, SEC chair Gary Gensler remains publicly committed to enforcing greater regulation on digital assets
  • He told the committee that he expected digital asset exchanges to register with the SEC, in case any coins or tokens they’re trading are deemed to be securities
  • Gensler also conceded that the SEC is not currently equipped or prepared to deal with the asset class, noting that they need to increase headcount in specific regards to crypto; “I think funding wise we could use a lot more people. I just have to be frank with you, I mean there’s 6,000 projects. And while some of those are commodities, many of them are securities under the law”
  • He was however criticised on this point by Pennsylvania Senator Pat Toomey, who noted “I’m frustrated by the lack of helpful SEC public guidance, explaining how you make this distinction. What makes some of them securities, while others are not securities”

What happened: Wall Street firm Jump Trading reveals scale of crypto activity

How is this significant?
  • On Tuesday, notoriously-secretive Wall Street trading giant Jump Trading announced the formation of a new division dedicated to digital assets, called Jump Crypto
  • As well as the trading of digital assets, Jump Crypto announced that they will be involved in “building software infrastructure and tooling for blockchain ecosystems”, following in Jump Trading’s legacy as high speed traders
  • Jump Crypto’s CEO Kanav Kariya told Bloomberg “It’s a natural extension of where we started. The DeFi ecosystem is so young, there are so many hard engineering problems. The work we’ve done at Jump in building complex, high-performance systems lends itself to us being very meaningful contributors to these open-source projects”
  • According to Kaniya, Jump has dedicated billions to digital assets due to their belief in the sector’s potential, with a mandate to “Make sure we’re positioned in the next five years to be a really big player in an industry we think is going to be enormous”
  • David Olsen, president and CIO of Jump Trading Group noted in a press release “The finance industry is undergoing one of the biggest paradigm shifts in its history propelled by innovations in decentralized ledger technologies that will significantly enhance legacy systems and facilitate connectivity across financial service firms, and institutional and retail investors globally”
  • Jump Trading’s sister company, Jump Capital also announced a move into digital assets this week, revealing a $350m early-stage investment fund, with an increased concentration on crypto
  • In a statement on their website, Jump Capital noted “Our conviction in crypto has rapidly grown as we witness the convergence of market adoption with both retail and institutional participants, the speed of entrepreneurs to build and iterate and the collision of traditional & digital worlds”

What happened: Santander/Agricole custody bank is building a crypto custodianship arm

How is this significant?
  • CACEIS, a European custody and asset-servicing bank co-owned by Credit Agricole and Santander, is in the process of creating and launching custody solutions for digital assets, according to reports in the industry press this week
  • A source told Coindesk that the bank aims to provide a multitude of services in the digital asset space, not just custody; “They [CACEIS] are looking for something which is quite integrated… They are not looking for something which is just addressing the custody piece, but something that is comprehensive and addressing various needs”
  • The source also revealed CACEIS is working with Swiss technology firm Metaco to provide the necessary solutions, following Metaco’s previous digital asset development with banks including BBVA, Standard Chartered, and Gazprom’s Swiss arm
  • With nearly $5tn in assets under custody, such a move by CACEIS would represent a significant development in the acceptance of digital assets within traditional European banking infrastructure

What happened: Bitcoin Mining companies go public in America

How is this significant?
  • Bitcoin mining company Greenidge completed a merger on Tuesday that brought them a public listing, thanks to a stock-for-stock transaction with Nasdaq-listed
  • Concurrently, London-listed Argo Blockchain launched an IPO in the United States, via the Nasdaq Global Market
  • In other mining news, Ethereum recorded its highest ever hashrate this week, an indication of the network’s popularity as the hub for the majority of DeFi and NFT developments in the sector
  • These high levels of network activity have ensured that approximately 55,000 Ether was removed from circulating supply over the last week by burning of transaction fees, decreasing overall issuance levels

What happened: Citigroup leads blockchain analytics funding round

How is this significant?
  • Amberdata, a digital asset firm dedicated to data analytics, announced the conclusion of a $15m Series A funding round this week
  • The round was led by Citigroup, and included investments from Franklin Templeton, GoldenTree Asset Management, and Galaxy Digital
  • In a press release announcing the Series A round, Citigroup’s head of American markets strategic investment, Sirish Singh said the move was part of a belief in future growth for the sector; “Data and insights will continue to play a pivotal role in creating transparency and strengthening risk management frameworks for digital assets”
  • Shawn Douglass, Amberdata CEO commented "Blockchain technology enables entirely new financial products to be created and offered at a much lower cost… We see growing institutional interest and demand in crypto assets. Our customer list and investors are a stamp of approval for the value we are creating for institutions”

What happened: Ernst & Young work on Ethereum scaling for enterprise-level usage

How is this significant?
  • Big 4 consulting firm EY announced this week that they plan to utilise scaling solutions developed by Ethereum Layer-2 project Polygon in order to deploy their own blockchain products and services onto Ethereum
  • This will provide EY with the opportunity to run a permissioned, private industry chain, whilst retaining the ability to move transactions onto the public Ethereum chain when they desire it
  • Running the majority of their transactions on a Layer-2 scaling solution will allow EY the benefits of higher transaction volumes and “predictable costs” unaffected by usage levels on the main public Ethereum chain
  • Ernst & Young’s blockchain lead Paul Brody commented “Working with Polygon provides EY teams with a powerful set of tools to scale transactions for clients and offers a faster road map to integration on the public Ethereum mainnet… We discovered our shared priorities around open system and networks and the Ethereum ecosystem would make collaboration in this area much easier”

What happened: Brevan Howard launches new digital asset division

How is this significant?
  • Brevan Howard, the multi-billion hedge fund founded by digital asset advocate Alan Howard, announced the launch of a new division this week dedicated to the rising asset class; BH Digital
  • The Financial Times reported this as a “significant expansion” of the firm’s existing interests in digital assets, with Colleen Sullivan of CMT Digital appointed to lead the new group
  • Aron Landy, Brevan Howard’s chief executive spoke enthusiastically about the potential of digital assets from an institutional investment perspective, referring to the launch being driven by “Brevan Howard’s belief in the huge diversity of opportunities within the digital asset space and the significance of this to long-term macro investors”
  • Landy also said that the decision “underscores the firm’s commitment to rapidly expanding its platform and offerings in cryptocurrencies and digital assets”
  • Earlier this year Brevan Howard announced they would invest in the sector through its master fund, but FT analysis now claims “The move to set up a dedicated unit for digital assets signals that the fund’s push into cryptocurrencies and its underlying technology has picked up pace”

What happened: UK Post Office enables digital asset purchases

How is this significant?
  • This week, the British Post Office announced that their customers in the UK are now able to purchase digital assets through a partnership between Swarm Markets and the Post Office’s EasyID identity app
  • Swarm Markets co-founder Philip Pieper said “By making it easy and safe to buy real Bitcoin and Ethereum, more people now have the option to get started in crypto and enjoy the benefits of DeFi – and not just those who understand crypto jargon”
  • Although it’s unlikely to be a platform used for any institutional investment, the involvement of the trusted British high street institution could provide an indication of rising cultural acceptance and enthusiasm for digital assets

What happened: MicroStrategy buys 5,050 additional Bitcoins

How is this significant?
  • Leading corporate Bitcoin advocates MicroStrategy recently made another major Bitcoin buy, adding 5,050 to their balance sheet
  • On Monday, they announced the purchase was made for $242.9m, bringing their total balance to over 114,000 Bitcoins valued at approximately $5.3bn
  • Bloomberg analysis noted that these Bitcoin holdings “dwarf the traditional corporate treasuries of most members of the S&P 500 Index”, exceeding the cash reserves of major American companies such as Home Depot, Starbucks, and Verizon

What happened: Swiss stock exchange SIX gets regulatory approval for crypto exchange 

How is this significant?
  • In crypto-friendly Switzerland, the SIX stock exchange this week announced approval for trading and custody of digital assets, on the new SIX Digital Exchange (SDX)
  • SDX are keen to recruit institutional investment to their new exchange, saying in a press release that “As this international customer base expands to include banks, issuers, insurance firms, institutional investors, the members of SDX will create a global exchange network for digital assets, unlocking global liquidity based on Distributed Ledger Technology”
  • No specific indications were given as to what assets were traded, but when they first announced plans for SDX in 2018, SIX indicated that it could involve the tokenisation of traditional securities
  • Thomas Zeeb, board member at SIX, stated “The digitalization of financial markets continues apace, and while the final shape of the market is still evolving, this is an important milestone in providing institutional investors with a safe and robust infrastructure meeting all of the core requirements of a traditional exchange and CSD infrastructure. In this regard, the SDX approval process has proven to be an invaluable experience for SIX and for the industry as a whole”

What happened: Fidelity encourages SEC to approve Bitcoin ETF

How is this significant?
  • According to recent SEC filings, asset managers Fidelity campaigned for Bitcoin ETF approval in a private meeting with the commission on a September 8th video-call
  • Tom Jessop, the head of Fidelity’s digital division was present on the call, where the company listed numerous reasons and benefits related to ETF approval
  • Their 29-slide presentation cited reasons such as investor demand, a maturing Bitcoin market, transparency for investors, and the size of the market as key reasons why the SEC should move towards approval
  • In other ETF-related news, ARK investments revised the prospectus for their ARK Next Generation Internet ETF in order to include the possibility of investing in Canadian Bitcoin ETFs, and crypto asset managers Bitwise became the latest to file for a Bitcoin Futures ETF, after Gary Gensler’s recent indications that Futures ETFs represent his preferred vehicle for Bitcoin exposure

What happened: Morgan Stanley recruits leadership for digital asset research team

How is this significant?
  • According to an internal memo seen by Bloomberg reporters this week, Morgan Stanley have appointed a head for their new digital asset research division, promoting Sheena Shah from their Group of 10 Forex operations
  • In the memo, Morgan Stanley leadership wrote that digital assets have simply become too big to ignore; “The launch of dedicated crypto research is in recognition of the growing significance of cryptocurrencies and other digital assets in global markets”
  • Shah will be based out of London for the role, reporting globally to Morgan Stanley MD James Faucette
  • Morgan Stanley has been at the vanguard of digital asset adoption by big banks, offering wealth management clients access to Bitcoin funds back in April, and announcing Bitcoin trust investments in June

What happened: NFT adoption continues

How is this significant?
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