Nickel Research Centre

Nickel News Roundup - Week 16

22nd April, 2021

Market Overview:

The digital asset market experienced a significant pullback after last week’s record highs, catalysed by the liquidation of over-leveraged traders

  • Bitcoin experienced a sharp correction on Sunday due to futures liquidations, briefly falling to a low of $50,390, gradually recovering to a current price of $53,670
  • Bitcoin prices dropped to levels last seen on March 26th, but market cap remained above $1tn
  • Ethereum fell in line with the rest of the market when Bitcoin dropped, but recovered strongly—rising from a weekly low of $2,044 to a current value of $2,442
  • The overall market cap of digital assets briefly dipped to $1.89tn on Sunday and Tuesday, before recovering above the $2tn mark
  • Thanks to the strong rebound of Ether, the value locked in DeFi platforms and applications remained steady, worth a total of $70.1bn 

The digital asset market experienced a sharp and significant correction on Sunday, recovering gradually over the course of the week, with Ethereum bouncing back faster than Bitcoin. Institutional and corporate adoption continued uninterrupted, with major purchase of Coinbase stocks, major hires by digital asset companies, acknowledgement from the PBoC, nine-figure investments into blockchain companies, and Venmo becoming the latest major payment platform to adopt crypto assets.


What happened: Coinbase stock launch sees major institutional purchases

How is this significant?
  • After listing on the Nasdaq last week, Coinbase’s COIN stock has continued to trade above its initial reference price, and attracted the attention of major institutional investors
  • Ark Investment, run by Cathie Wood, purchased $246m of COIN stock on Wednesday, before buying another $110m worth of stock on Thursday 
  • These purchases were split across several of the company’s funds, including their flagship Ark Innovation ETF, Ark Fintech Innovation ETF and the Ark Next Generation Internet ETF
  • On the first day of trading, Coinbase stakeholders and investors sold approximately $5bn of COIN stock, including $292m in sales by CEO Brian Armstrong
  • Analysts began forecasting longer-term price targets, with CRFA Research publishing a note to clients on Friday that predicted a $400 price target for COIN by the end of the year
  • Additionally, on Monday a representative of Nasdaq confirmed that they would begin options trading of COIN this week, launching 

What happened: Digital asset companies make high profile appointments from government and institutions

How is this significant?

What happened: Payment app Venmo adds crypto asset support

How is this significant?
  • On Tuesday, Venmo became the latest major payment platform to integrate crypto assets, following on from PayPal, Square, Visa, and Mastercard
  • Venmo is one of the most popular payment apps in America, with over 70m monthly active users, adding even greater accessibility for digital assets to retail users
  • As well as allowing users to purchase digital assets, they will be able to share their purchases via the app’s integrated social feed
  • Initially, the PayPal-owned company will include support for four major digital assets: Bitcoin, Ether, Litecoin, and Bitcoin Cash
  • Primarily popular among younger users, the move is seen by CNBC as a response to Square’s Cash app integrating crypto assets

What happened: Baillie Gifford invests $100m into crypto asset custodian

How is this significant?

What happened: People’s Bank of China acknowledges the potential of digital assets as “alternative investments”

How is this significant?
  • According to reports from a Chinese journalist, the People’s Bank of China (PBoC), officially acknowledged crypto assets as an investment tool or alternative investment on Sunday
  • Speaking at the Boao Forum for Asia, PBoC deputy governor Li Bo spoke positively on the potential of digital assets in several instances
  • Whilst acknowledging them as an investment option, Li did caution against conflation between digital assets and currencies, particularly with China at the forefront of global CBDC development, stating that “We believe that Bitcoin and stablecoins are encrypted assets. Encrypted assets are an investment option, not currency itself. It is an alternative investment, not currency itself”
  • Former Chinese Central Bank governor Zhou Xiaochuan, at the same panel, agreed, stressing that “everyone has to distinguish between digital assets and digital currencies”
  • Li did speak favourably on the economic potential of digital assets, saying that “We believe that encrypted assets [bitcoin and stablecoins] should play a major role in the future either as an investment tool or as an alternative investment”, and noting “If it is used as an investment tool, many countries, including China, are also studying what kind of regulatory environment should there be for such an investment method”

What happened: Three Ethereum ETFs begin trading in Canada

How is this significant?
  • Within two months of the country’s first Bitcoin ETF, Canadian regulators granted approval for three Ether ETFs in one day
  • The three ETFs all began trading on Tuesday, provided by three separate companies; Purpose Investments, CI Global Asset Management, and Evolve ETFs
  • Som Seif, founder of Purpose, acknowledged the role of ETFs in addressing demand for digital assets beyond Bitcoin; “While Bitcoin tends to get a lot of attention as it was the first major cryptocurrency, what Ether and the Ethereum ecosystem represent is one of the most exciting new technology visions today in society… By launching the first ETF in the world that directly owns and provides exposure to Ether, we are enabling every investor to have access to this unique opportunity and ecosystem”
  • The three funds will charge management fees of between 0.4% to 1%, although Evolve has waived their fee until May 31st in an attempt to secure an early advantage
  • Additionally, in South Africa, the company EC10 announced plans for the first African Bitcoin ETF, to be listed on the Johannesburg Stock Exchange

What happened: Multiple corporations accept crypto assets as payment

How is this significant?
  • As digital assets grow increasingly mainstream, so does the concept of companies accepting them directly as payment—with some companies like Tesla eschewing instant cash-ins in favour of holding digital assets directly on their balance sheet
  • In Switzerland, AXA announced they will be the first insurance provider allowing clients to pay their premiums in Bitcoin, noting their decision was “in response to growing customer demand”
  • Time Magazine followed on from recent moves into digital assets by partnering with to enable crypto assets as subscription payments. In addition, Time will offer customers additional benefits if they choose this payment option
  • WeWork, the shared working space startup, announced on Tuesday that they would begin accepting Bitcoin and Ether as payments, along with the USDC and Paxos stablecoins 
  • They further noted that Coinbase would be their first clients to pay for their membership with crypto, and that “WeWork will also hold the currency on its balance sheet”

What happened: Crypto futures experience record liquidations

How is this significant?
  • On Sunday, a series of cascading liquidations from over-leveraged traders created approximately $10bn of liquidations, exceeding the previous record of $5.6bn from February 23rd
  • Bitcoin futures accounted for over 50% of the total liquidations, leading to a sharp drop in value of the leading digital asset
  • Speaking to industry publication Coindesk, an options trader said “This [downward] move was definitely driven by the vast amount of futures being liquidated… Additionally, it was a weekend, and liquidity was thin during the early Asian hours”, exacerbating the drop further
  • Liquidations and drops in value were largest on the retail-centric Binance and Kraken exchanges, indicating that over-leveraged retail traders lost their positions in a series of cascading liquidations that briefly led to backwardation (futures trading at a discount to the spot price on exchanges) 

What happened: NFT adoption continues to grow as Sotheby’s make multi-million sale

How is this significant?

What happened: Luxury goods manufacturers announce private blockchain consortium

How is this significant?

What happened: Morgan Stanley confirms private wealth clients’ exposure to digital assets

How is this significant?
  • On Friday, Morgan Stanley’s CFO Jonathan Pruzan participated in the company’s quarterly earnings call, where he confirmed that they currently allow their private wealth clients access to two passive crypto asset funds
  • The funds in question are run by Galaxy Digital and NYDIG (in conjunction with FS Investments)
  • The bank is open to widening access in future, with Pruzan noting that “As we see more interest, we’ll work with regulators to provide services we think are appropriate”
  • As of writing, Morgan Stanley allows clients to allocate a maximum 2.5% of their holdings towards digital asset funds

What happened: Brevan Howard Asset Management invests in digital assets

How is this significant?
  • According to reports in Bloomberg, macro investment firm Brevan Howard Asset Management (part-owners of digital asset hedge fund One River Digital), will become the latest institution to make a major investment into crypto assets
  • Brevan Howard currently have approximately $5.6bn in assets under management, and plan to allocate up to 1.5% of their funds towards digital assets 
  • Although they have previously invested in crypto companies, this move will represent their first direct exposure to digital assets 

What happened: Rothschild Investment Corp adds Ether exposure to balance sheets

How is this significant?
  • In recent regulatory filings, Rothschild Investment bought $4.75m worth of shares in Grayscale’s Ethereum Trust, making them one of the first institutional investors to seek specific exposure to Ether
  • In addition, Rothschild added 8,000 shares to the 30,000 Grayscale Bitcoin Trust shares they held as of previous filings in December
  • In filings, they disclosed the total value of their Ether-based holdings exceeded their Bitcoin-based investments, $4.75m to $1.92m

What happened: Digital asset custodian NYDIG secures additional investment from First Foundation

How is this significant?
  • New York-based Bitcoin technology and investment company NYDIG secured investment this week from First Foundation, a financial services firm with nearly $12bn under management
  • Although the terms of investment weren’t disclosed in this case, NYDIG have confirmed fund raises of $450m over the last 6 months from financial institutions including MassMutual, Morgan Stanley, Liberty Mutual, and Soros Fund Management
  • NYDIG’s Patrick Sells said of the investment that First Foundation “understand that Bitcoin is not only mainstream but a critical component of the future of finance and that banks must be able to holistically serve both their customers’ fiat and Bitcoin needs. First Foundation’s investment in NYDIG is a testament to their commitment to Bitcoin and to the strength of the partnership”

What happened: $600m BNB coin burn implies record profits by Binance

How is this significant?
  • Binance, the world’s largest digital asset exchange, announced a record quarterly burn of their Binance Coin (BNB) crypto asset 
  • Historically, they have used 20% of the exchange’s profits to buy back BNB and burn it (permanently removing it from circulating supply on the blockchain)
  • In this case, it appears that they have however burned a larger proportion of their profits, as per previous plans announced in January
  • According to Sam Bankman-Fried, CEO of the FTX exchange, this amount of token burning equates to approximately $750m in total profits for Binance in Q1 2021

What happened: Deutsche Telekom invests in mobile-centric blockchain company

How is this significant?
  • On Tuesday, Deutsche Telekom announced that they have joined the Celo Alliance for prosperity, working with the mobile-first blockchain company Celo
  • Alongside a significant direct purchase of the protocol’s native CELO token, Deutsche Telekom will operate infrastructure in the Celo ecosystem, acting as a validator within the blockchain
  • In a press release announcing their involvement, a Deutsche Telekom board member was quoted as saying “Our investment in CELO, combined with infrastructure operated by T-Systems, allows our company to take a strategic approach to participating in a public blockchain network. We are able to secure the Celo network with our investment and our own cloud infrastructure while facilitating user onboarding and use-case development on top of the Celo network”
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