Nickel Research Centre

Nickel News Roundup - Week 52

29th December, 2022

Market Overview:

Digital assets traded within a relatively narrow range this week, amidst reduced activity during the festive period. 

  • Bitcoin remained steady throughout the week, trading entirely within a range from $16,950 to $16,500 
  • Bitcoin’s current price of $16,550 equates to a 1.7% weekly drop 
  • Ether traded in a narrow range between $1,209 and $1,186 
  • Ether’s current price of $1,192 represents a 1.9% drop 
  • Total Ether supply maintained similar performance to recent weeks, with a current annual issuance rate flat at 0.01% 
  • Overall market capitalisation dropped to $793bn 
  • According to industry monitoring site Defi llama, total value locked in DeFi this week across all blockchains and platforms declined slightly to $38.9bn 

Revelations on FTX executive misconduct hit the headlines in a slow news week, as markets calmed down across the festive season. International developments (including statistics on Bitcoin developers) continued despite relaxed activity in Europe and the US, with significant new recognition and policies showcased in Brazil, Japan, and even officially-crypto-sceptic China. 

What happened: FTX latest—Sam Bankman-Fried expected to enter plea 

How is this significant? 

  • Following last week’s news of Sam Bankman-Fried’s extradition to the US, and guilty pleas to fraud charges by former colleagues Caroline Ellison and Gary Wang, Reuters now reports that the former FTX CEO is expected to enter a plea as soon as next week 
  • On Thursday, SBF was released into house arrest on a $250m bail package, after the judge ruled he wasn’t a flight risk; “The notoriety also goes to risk of flight and it would be very difficult for the defendant to hide without the risk of being recognized” 
  • The bail was secured by his parents’ home in Palo Alto, California 
  • Ex-Alameda CEO Ellison was criticised by the SEC for numerous misleading public statements, including attempts to correct industry publication Coindesk’s initial exposé of Alameda’s unhealthy balance sheets 
  • The New York Times secured an early transcript of Ellison’s statements to the judge, in which she admitted conscious wrongdoing, deliberate obfuscation, and acknowledged that “Alameda was borrowing funds that FTX's customers had deposited on the exchange” 
  • Despite previously denying any special treatment for Alameda, Ellison told the judge “Alameda [had] access to an unlimited line of credit without being required to post collateral, without having negative balances and without being subject to margin calls on’s liquidation protocols” 
  • Her plea agreement included a $250,000 bail, forfeiture of assets, and confiscation of travel documents 
  • Former chief engineer Gary Wang likewise admitted deliberate manipulation, saying “I knew what I was doing was wrong” when he changed the platform’s code to provide special privileges and liquidation protections for Alameda 
  • To add more drama to proceedings, judge Ronnie Abrams recused herself from the case on Christmas Eve, due to her husband’s law firm previously advising FTX 
  • Manhattan judge Lewis A Kaplan will now oversee the case, following previous high-profile trials of Prince Andrew and Donald Trump 
  • The FTX Group asked a federal bankruptcy judge to intervene over the ownership of a $440m stake in stock trading platform Robinhood, after SBF attempted to take control of the shares shortly before his arrest (possibly to help finance legal fees) 
  • The 56 million shares are currently owned by Emergent Fidelity Technologies, a corporate entity created by Bankman-Fried and domiciled in Antigua & Barbuda 
  • Court papers revealed that Bankman-Fried and Wang financed their 8% stake in Robinhood via a $546m loan from Alameda; now the assets are at the centre of an ownership tussle between FTX, SBF, and crypto lender BlockFi, who claim Ellison pledged them the shares as backing for a loan 
  • On Tuesday, it was reported that the Department of Justice has launched an investigation into the theft of $372m from the exchange during the chaotic day it filed for bankruptcy 
  • Currently, there’s no conclusive evidence whether the exploit was an inside job (as suggested by SBF) or undertaken by an opportunistic hacker taking advantage of a fraught situation as FTX was publicly melting down 

What happened: Google hires former BlockFi executive to lead Web3 push 

How is this significant? 

  • Former BlockFi Asia VP Rishi Ramchandani joined tech giant Google this week, in the role of ‘APAC Web3 Lead’ 
  • A Google spokesperson recently disclosed that “Google Cloud aims to enable the Web3 ecosystem—which encompasses companies looking to build new web uses and applications on blockchain technology—by supporting development, transactions, storage and deployment of new products” 

What happened: MicroStrategy increases Bitcoin holdings despite tax loss harvesting 

How is this significant? 

  • Michael Saylor’s MicroStrategy, a key exponent of corporate Bitcoin investment, sold Bitcoin for the first time this month—but subsequently bought back more to increase their overall holdings 
  • On Wednesday, they published an SEC 8-K form, detailing the net acquisition of 2,500 Bitcoin in November and December 
  • The company sold 704 Bitcoin on December 22, intending to carry back capital losses from the transaction against previous capital gains 
  • On December 24, they purchased around 810 bitcoin for approximately $13.6M in cash, at the same average price as the previous sale 
  • The purchase brings MicroStrategy’s current total corporate holdings to 132,500 Bitcoin 

What happened: Contagion latest—Celsius secures multiple asset bids 

How is this significant? 

  • Troubled digital asset lender Celsius disclosed multiple interested parties for their retail platform and mining operations, according to recent court presentations 
  • The potential pool of buyers for the above assets (either separate or in combination) is around 30 different entities, a lawyer told US Bankruptcy Judge Martin Glenn 
  • Advisors have yet to decide whether to sell the business as a whole, or attempt to maximise returns by breaking it into separate entities; Celsius lawyer Chris Koenig said they “intend to work with potential buyers in the coming weeks to improve existing bids and announce in mid-January whether a sale will occur” 
  • Despite market downturns—and especially mining downturns (as dropping Bitcoin prices are compounded by rising energy costs)—interim CEO Chris Ferraro revealed “Celsius mining operations have generated positive operating cash flow every month this year” 

What happened: Bitcoin technological development continues despite limited developer pool 

How is this significant? 

  • Institutional Bitcoin firm NYDIG published a report on Bitcoin protocol development this week, outlining Bitcoin’s evolution from a software development perspective 
  • As an asset rather than a company, Bitcoin runs on a small but highly dedicated pool of developers, with NYDIG only finding 40 to 60 active developers currently working on the core protocol 
  • As a decentralised technological protocol, these developers are the closest proxy to employee numbers found in more traditional business structures 
  • In terms of overall market capitalisation, the difference compared to established payment and tech firms is stark; Bitcoin’s market capitalisation is comparable to Mastercard (24,000 employees), and more than thrice that of PayPal (10,000 employees) 
  • Bitcoin’s code contributions are testament to its decentralised status; approximately 84% of official GitHub commits (i.e.suggested software changes) come from 20 different countries 
  • Since inception, over 1,100 different developers have contributed to the project, with monthly active developers exhibiting a constant and steady uptrend since launch (albeit including some predictable peaks and troughs aligning with bull and bear markets) 

What happened: Brazil approves legal framework for digital assets 

How is this significant? 

  • Outgoing Brazilian president Jair Bolsonaro signed a national framework for crypto assets into law, providing clarity on ground rules and local usage for the asset class 
  • Brazil’s central bank will assume responsibility for oversight and regulatory enforcement 
  • Lawmaker Expedito Netto said that the bill had broad support, including from the incoming government of Lula Da Silva 
  • The law brings AML and KYC requirements to Brazilian digital asset brokerages, and is expected to feature amendments including capital segregation rules (which are not currently required by Brazilian banks) 
  • Julien Dutra, of local exchange Mercado Bitcoin, declared the law “something we all wanted, not only the crypto industry but investors as well” 

What happened: Japan continues to liberalise digital asset industry 

How is this significant? 

  • Bloomberg reported this week that Japan’s digital asset regulators pushed through new rules—effective immediately—removing lengthy pre-screening requirements for new token listings, provided that said tokens are already trading on at least one Japanese exchange 
  • Prime Minister Fumio Kishida’s government has declared Web3 a key area of interest in their new economic strategy, and recent policy shifts have undertaken efforts to provide a less restrictive environment for local digital asset business 
  • Earlier this month, lawmakers approved policies to eliminate corporate taxes on paper gains of digital assets, allowing more startups to remain within Japan 

What happened: China launches national digital asset marketplace 

How is this significant? 

  • China, despite an official ban on digital assets, is set to launch its first NFT marketplace on January 1st 2023 
  • Industry publication Coindesk cited a report by local newspaper China Daily, revealing that “The platform will be run by a trio of state-owned and private entities: China Technology Exchange and Art Exhibitions China, both of which are government-backed, and Huban Digital, a private company” 
  • The paper wrote that the “China Digital Asset Trading Platform” will run on a proprietary blockchain named the “China Cultural Protection Chain” 
  • NFTs are popular in China, but with behaviours adapted to the country’s official ban on digital assets; they cannot be purchased with digital assets like Ether, and are officially referred to as “digital collectibles” 
  • As well as the more widely-seen iteration of digital collectibles trading, the platform will also feature copyright and property rights trading 
  • A Chinese court earlier this month ruled that digital assets have the same property rights as items sold on e-commerce platforms, a decision seen as a significant milestone in their legal protection 
News Roundups