Nickel Research Centre

Nickel News Roundup - Week 41

14th October, 2021 

Market Overview:

Digital assets reached highs not seen since May, before cooling off slightly following last week’s rapid growth
  • Bitcoin bounced off the $58,000 mark this week as it achieved a weekly high of $57,740, before retracing to lows around $54,400, and thereafter recovering to current prices of $57,630 (a weekly growth of 5.9%)
  • At current prices, Bitcoin’s market capitalisation is around $1.1tn, or around 45.4% of the total digital asset market
  • Ether twice bounced off lows in the $3,420 region, before recovering to a weekly high of $3,652, and a current market price of $3,627, equating to 2.7% weekly growth
  • The total market capitalisation of all digital assets experienced moderate growth, rising to $2.37tn
  • Total value locked in DeFi grew by almost $3bn, at $109.8bn

The digital asset market remained positive this week, with Bitcoin leading the way. This week, long-awaited ETF approval in America appeared to inch closer to reality, JP Morgan highlighted Bitcoin’s continued growth against gold, more major names from traditional finance announced support for digital assets, more crypto startups became unicorns (with valuations in excess of $3bn), and several European banks expanded their digital asset capabilities and infrastructure, driven by continued institutional demand for access to all the benefits of decentralised finance.


What happened: SEC approves “Bitcoin exposure” ETF

How is this significant?
  • The United States SEC finally granted approval to a Bitcoin ETF on Tuesday—but not through direct exposure to the asset
  • Instead, the “Volt Equity ETF” is structured around exposure (of up to 80% of the fund’s assets) to “Bitcoin Industry Revolution Companies” rather than directly holding any Bitcoin itself
  • The companies in Volt’s ETF are defined as those that generate the majority of their revenue through Bitcoin-related activities, such as mining, processing transactions, or lending, alongside companies that hold most of their net assets in Bitcoin
  • The new ETF will trade on NYSE Arca, under the BTCR ticker
  • With recent delays to decisions on several “pure” Bitcoin ETFs, this Bitcoin exposure ETF is the most direct representation of the asset currently available in an American ETP, although speculation persists that Bitcoin Futures ETFs will receive regulatory approval before direct custody ETFs

What happened: JP Morgan reports that institutions are allocating towards Bitcoin over gold

How is this significant?
  • In a client research note on Thursday, JP Morgan revealed that institutional investors are increasingly moving into Bitcoin as a favoured inflation hedge compared to gold
  • The report noted that recent assurances against bans by American regulators have helped catalyse recent appreciation of Bitcoin, and that “The reemergence of inflation concerns among investors has renewed interest in the usage of Bitcoin as an inflation hedge”
  • Additionally, JP Morgan analyst Nikolaos Panigirtzoglou cited “the failure of gold to respond in recent weeks to heightened concerns over inflation” as another driver of increased institutional appetite for Bitcoin

What happened: Digital asset lender Celsius closes $400m funding round

How is this significant?
  • On Tuesday, crypto asset lender Celsius announced a $400m investment, led by WestCap and Canada’s second-largest pension fund CDPQ, for a current company valuation of $3bn 
  • The company’s press release revealed the funding would be used to expand their product offering and institutional presence; “building bridges between the traditional finance and cryptocurrencies, with specific emphasis on launching institutional grade products and offerings”
  • The release also disclosed that as of October 2021, Celsius’ total assets under management have exceeded $25bn, with over $850m in interest paid to 1 million customers over the last three years
  • Celsius CEO Alex Mashinksy told the FT that the raise should signal the legitimacy of the sector to regulators, noting “It’s not the $400m. It’s the credibility that comes with the people who wrote those cheques”

What happened: United States overtakes China as leading global crypto miner

How is this significant?
  • According to figures published this week, the United States of America has officially overtaken China as the world’s largest crypto asset miner
  • The swing comes after the recent Chinese government crackdown on digital asset mining, which expanded several regional bans into a national ban
  • Data from the Cambridge Centre for Alternative Finance shows that miners based in the United States are now responsible for 35.4% of global hashpower, reflecting by US mining firms gaining a 35% global market share
  • The decline of China’s majority over mining could have long-term benefits within several narratives facing the mining sector, including decentralisation and carbon emissions

What happened: BlackRock CEO Larry Fink reveals (general) support for digital assets

How is this significant?
  • In an interview with CNBC this week, Larry Fink, the CEO of the world’s largest asset manager, conceded that (drawing a parallel with Jamie Dimon) he is “not a student of Bitcoin” and couldn’t confidently predict its future value—but nonetheless spoke very favourably about crypto assets in general
  • Fink told CNBC “I do believe that there is a huge role for a digitized currency, and I believe that’s going to help consumers worldwide—whether it’s a Bitcoin or something else”
  • He also revealed himself impressed by the burgeoning interest in the asset class, saying “I have more conversations with people in the street about crypto than anything… It’s fantastic seeing how people have become so fascinated about it”
  • Without naming any figures, he was bullish about the potential of the asset class as a whole, stating “I see huge opportunities in a digitized crypto/ blockchain-related currency, and that’s where I think it’s going—and that’s going to create some big winners and some big losers”

What happened: Former UK Chancellor Phillip Hammond moves into crypto asset industry

How is this significant?
  • In the UK, a big name from traditional finance made an entry into digital assets this week, as former Chancellor of the Exchequer Phillip Hammond was appointed senior advisor at crypto custodians Copper
  • His role will relate mainly to advising the company on expansion into North American and Asian markets, following a recent funding round
  • In a statement, Hammond appeared to signal a wish for greater digital asset presence within the UK’s financial infrastructure, saying “If we can bring together the best of Britain—entrepreneurs, industry, government, and regulators—to create and enable a blockchain-based ecosystem for financial services, we will secure the UK’s global leadership in this field for decades ahead”

What happened: Andreessen Horowitz VC step up lobbying efforts in United States

How is this significant?
  • Silicon Valley venture capital group Andreessen Horowitz (a16z) have started a major lobbying push in Washington, seeking more informed regulation on the emerging crypto asset ecosystem
  • A16z policy chief Tomicah Tilleman told CNBC that regulatory frameworks are currently too broad; “Policymakers should focus on calibrating regulatory activities to the specific applications and their associated risks. Treating all digital assets the same is like having a single regulatory framework for stocks, real estate, cars, art, watches, and trading cards. We need policy that’s fit for purpose”
  • Tilleman also stressed the need for proper regulation in order to maintain America’s economic competitiveness; “There are likely few areas that will be more consequential in determining long-term success of a country in the 21st century than the quality of its digital infrastructure… And in the United States right now, we’re not only losing this race, but it’s unclear that many of our policymakers even recognize that there’s a competition underway”

What happened: Centuries-old German private bank integrates crypto asset custody

How is this significant?
  • Bankhaus von der Heydt, a German private bank founded in 1754, announced a collaboration with digital asset unicorn Fireblocks this week, using their technology to expand crypto asset offerings to clients
  • Fireblocks already provides digital asset custody for BNY Mellon, Siam Commercial Bank, and Signature Bank, amongst other organisations
  • In the German financial press, Bankhaus von der Heydt MD Phillip Doppelhammer noted that they could even provide staking yield services to clients now, as Fireblocks provided “a secure and easy-to-use platform to develop complex operational workflows such as moving between asset trading and custody, staking assets in custody or even a direct integration with lending protocols to extend our service portfolio”

What happened: SEBA bank introduces yield-bearing digital asset opportunities to clients

How is this significant?
  • Swiss bank SEBA launched an institutional crypto staking product this week called SEBA Earn, providing institutional clients the opportunity to generate passive income from their digital assets, rather than relying only on price appreciation for returns
  • SEBA CEO Guido Buehler identified the move as a response to growing institutional demand, saying “It is clear that as institutional interest in digital assets accelerates, investors have a broader appetite for crypto assets, with a particular interest in earning services like staking, DeFi and centralised crypto borrowing and lending”
  • SEBA Earn will allow clients to generate yield from a variety of major digital assets, including Bitcoin, Ethereum, Cardano, and Tezos (amongst others)

What happened: Citibank identifies Disney, Robinhood, Electronic Arts as NFT beneficiaries 

How is this significant?
  • Following the recent publication of a report by Visa on the opportunities for NFTs as a vehicle for corporate fan engagement, Citibank weighed in on the concept, identifying key opportunities for major brands
  • In their latest “Disruptive Innovations” report, Citi declared that NFTs open a wide variety of usecases to brands, as the “The advent of NFTs promises significant disruption to any/all sectors with exposure to IP, licensing and merchandise related revenues”
  • Citi analyst Thomas Singlehurst identified a broad range of industries which could benefit from publishing their IP on the blockchain, with the video game and music sectors as likely key beneficiaries, alongside large brands with established fandoms like Disney, Discovery Inc., Formula One, and Viacom
  • In other NFT news this week, Coinbase became the latest major digital asset exchange to announce an NFT marketplace this week, following in the footsteps of competitors Binance and FTX
  • Finally, from the world of Fine Art, news broke that one of the world’s most prolific and successful art forgers,Wolfgang Beltracchi (an estimated $100m of forgeries sold), is launching an NFT collection based on reimagining Leonardo DaVinci’s Salvator Mundi in a variety of classic artistic styles, including High Renaissance, Cubism, Surrealism, and Pop Art  

What happened: Crypto payment startup becomes latest digital asset unicorn

How is this significant?
  • Alongside the earlier mention of lending service Celsius, digital assets payment provider MoonPay was confirmed as a new “crypto unicorn” this week, following a $400m funding round led by Tiger Global and Coatue Management
  • The raise puts MoonPay’s valuation at $3.4bn, comfortably within unicorn status
  • MoonPay primarily acts as a bridge between traditional financial infrastructure and digital asset platforms, allowing users to make purchases with credit cards whilst MoonPay handles the conversions into crypto on their backend
  • Unlike other recent unicorns however, this was MoonPay’s first round of venture capital allocation, providing a significant institutional endorsement for the company three years after their founding
News Roundups