Nickel Research Centre

Nickel News Roundup - Week 50

16th December, 2021 

Market Overview:

Digital assets continued their recent correction from recent all-time highs this week, as uncertainties regarding Wednesday’s FOMC meeting loomed large over financial markets. Following the decision on interest rates however, the market began to rally.

  • Bitcoin briefly breached $50,000 on several occasions this week, but couldn’t sustain above those levels, mainly trading in a range between $47,000 and $49,500
  • Bitcoin currently trades at $48,770, down 1% from last week
  • Ether dropped below $4,000, falling further than Bitcoin after outperforming it last week 
  • Ether declined steadily throughout the week, twice bouncing off lows around $3,690, before recovering to a current value of $4,029
  • Total market capitalisation remains above last week’s flash crash, but declined to around $2.25tn
  • Total value locked in DeFi declined in line with the rest of the market, to $96.6bn according to industry analytics platform DeFi Pulse

Digital assets experienced another tough week in terms of price performance, with uncertainty surrounding Wednesday’s FOMC meeting in the United States keeping markets on edge. American lawmakers sounded a more critical note on stablecoins than the previous week’s digital asset hearing, but this week also witnessed a record-equalling funding round for a digital asset company, Germany’s largest banking group declaring interest in crypto services for clients, Nike joining Adidas in the NFT and Metaverse space, and both SoftBank and a UAE sovereign wealth fund declaring their bullishness on this new asset class.


What happened: Morgan Stanley-backed NYDIG raises record $1bn in funding round

How is this significant?
  • Institutional Bitcoin brokers NYDIG announced a record-equalling $1bn funding round this week, giving the company an overall valuation of $7bn
  • The funding round equalled digital asset exchange FTX’s $1bn Series B raise earlier this year
  • Morgan Stanley participated in the Westcap-led funding round, which also included investments from MassMutual, FIS, and Bessemer Venture Partners
  • NYDIG’s current corporate clients include the private wealth divisions of major American banks Wells Fargo, JPMorgan Chase, and Morgan Stanley, as well as large insurance firms like MassMutual and Liberty Mutual
  • Founded as a subsidiary of Stone Ridge Asset Management, NYDIG will use the funding for increased client onboarding and further development of their Bitcoin platform
  • NYDIG’s Patrick Sells told Bloomberg he expects over 1,000 banks and financial firms to use their institutional Bitcoin services by the end of 2022

What happened: Sparkasse group of German banks discloses plans to offer crypto services

How is this significant?
  • On Wednesday, news emerged in the German press that the largest group of public banks in Germany—known as Sparkasse—is planning a pilot scheme allowing customers to directly hold and invest in digital assets through their bank accounts
  • The Sparkasse group currently holds over $1tn in assets across than more than 50 million bank accounts in Germany
  • According to reports, many banks are eager to add these services for customers: “A corresponding pilot project should start first with individual savings banks. In the end, each of the around 370 institutes independently decides whether to introduce crypto trading or not. This is a consequence of the regional principle of the savings banks. However, it was said that the banks were already showing interest"
  • Due to the trust and breadth of the Sparkassen banks, integration into their infrastructure could widely increase access to digital assets within Europe’s largest economy

What happened: US Congress holds hearing on stablecoins

How is this significant?
  • Following on from last week’s session with executives from digital asset exchanges and firms, the Senate Banking Committee this week held a hearing on stablecoins, with a notable partisan split in the narratives
  • Whilst Republican politicians looked towards the potential benefits of stablecoin usage, their Democrat counterparts were more likely to raise concerns over issuance methodologies or possible challenges to the US dollar
  • Leading Republican digital asset advocate Pat Toomey of Pennsylvania proposed that “to promote innovation in the rapidly evolving global digital economy”, stablecoin issuers should “have the ability to choose from three different regulatory models, including operating under a bank charter”

What happened: Bank of England recommends “cautious and prudent” digital asset approach

How is this significant?
  • The Bank of England’s Financial Policy Committee advocated a cautious approach to digital assets this week, noting that they have experienced rapid growth, but still lack regulatory clarity
  • Although the Committee noted that crypto assets are becoming more interconnected with established financial infrastructure, their financial stability report for December recommended a “cautious and prudent approach” until a specific regulatory framework has been devised
  • On Monday, BoE deputy governor Jon Cunliffe urged patience for the new asset class, saying in a press conference that “It takes time to develop regulatory standards… We’ll need to make sure we have regulation in place before it becomes a problem”

What happened: Coinbase launches range of yield-bearing DeFi products (outside of USA)

How is this significant?
  • Publicly-listed American digital asset exchange Coinbase announced the launch of DeFi products allowing customers to earn yield on their digital assets in over 70 territories—but US customers remain excluded as the SEC hasn’t yet produced any clear guidelines for crypto assets
  • Coinbase customers will be able to deposit the algorithmically-secured stablecoin DAI, earning between 2.8% and 5.4% APY
  • The offering is notably different from their proposed Coinbase Lend product, which was cancelled before launch after SEC objections. Instead of lending their assets directly to Coinbase, they will be lent to popular DeFi protocol Compound, providing a more variable APY, but freeing Coinbase from suspicions of controlling the return and offering securities

What happened: Nike acquires NFT fashion firm in wider metaverse push

How is this significant?
  • Nike Inc. followed the recent lead of their rival Adidas when it was announced this week that they acquired NFT fashion brand RTFKT in order to bolster their metaverse presence
  • Terms of the acquisition were not disclosed, but Nike CEO sounded a bullish note on the importance of a persistent digital presence; “This acquisition is another step that accelerates Nike’s digital transformation… Our plan is to invest in the RTFKT brand, serve and grow their innovative and creative community and extend Nike’s digital footprint and capabilities”
  • In late October, Nike filed seven applications with the US patent office, seeking to protect their brand and “downloadable virtual goods” in the metaverse space

What happened: Polygon makes $500m acquisition in Ethereum scaling push

How is this significant?
  • Ethereum blockchain scaling solution Polygon made another major move towards promoting the mainstream adoption of the world’s leading smart contract platform with a half-billion dollar acquisition
  • The move to acquire the Mir blockchain protocol (and its developer Predicate Labs), bolsters Polygon’s expertise in the field of zero-knowledge rollups, which effectively reduce transaction pressure and costs on the Ethereum blockchain by collating and compressing much of the data involved in transactions
  • Polygon have committed $1bn to improving Ethereum’s scaling capabilities, and according to Bloomberg the new acquisition will be deployed alongside previous strategic purchases, “Mir will be integrated into the Polygon ecosystem under its new name, Polygon Zero, alongside existing solutions including Polygon PoS, Polygon Hermez and Polygon Miden”

What happened: S&P Dow Jones to launch tokenised crypto funds

How is this significant?
  • On Wednesday it was reported that S&P Dow Jones partnered with digital asset firm Securitize to launch tokenised funds tracking S&P crypto indices
  • The two funds tracked will be S&P’s Cryptocurrency Large Cap Ex-MegaCap Index, and the Kensho New Economies Composite Index
  • Both funds will charge 0.5% management fees, with the former giving accredited investors exposure to 30 different digital assets
  • In a press release, Securitize Capital’s Wilfred Daye said they were built for convenience with institutional investors in mind; “The new tokenized funds provide investors exposure to a diverse blend of cryptocurrencies and emerging technologies… In particular, they are a new, efficient option for family offices, institutions and accredited investors looking for exposure to promising cryptocurrencies”

What happened: $5bn SoftBank fund reveals 10% digital asset exposure

How is this significant?
  • In a webcast last Wednesday, SoftBank’s Latin America fund MD Paulo Passoni announced that the $5bn fund held $500m of digital asset exposure, and that it is currently the most compelling investment opportunity for the company
  • Whilst acknowledging that the digital asset market does have “some froth” and token overvaluation, he nevertheless stated “I do believe it’s the most relevant thing going on around the globe right now”
  • Passoni noted SoftBank’s recent push into digital assets; “There’s an old saying in investing—follow the talent—and the most talented people around the globe are going into crypto-related projects… I’d say we’re running a crypto school for our team here, because we sense that there’s a big discrepancy in knowledge—even within our team”
  • SoftBank isn’t the only major Japanese financial institution to identify and back the potential of digital assets; their former subsidiary SBI Holdings has also been on a major crypto investment drive this year, including a recent joint venture with Switzerland’s SIX digital asset exchange

What happened: Hedge fund billionaire Robert Citrone joins high-profile Bitcoin investors

How is this significant?
  • Noted hedge fund manager Robert Citrone, co-founder of Discovery Capital Management became the latest major money manager to move into Bitcoin, following the likes of Alan Howard, Paul Tudor Jones, Steven Cohen, and Ray Dalio
  • At an event this week, Citrone told investors that he sold Bitcoin at $45,000 earlier this year after an initial purchase at $15,000, before buying back at around $30,000 following the major market dip in July
  • Even with Bitcoin’s recent drop from a new all-time high in November, Citrone has still gained more than 50% on his most recent Bitcoin investment within less than half a year

What happened: UAE sovereign wealth fund investing into “crypto ecosystem”

How is this significant?
  • Khaldoon Al Mubarak, CEO of the United Arab Emirates Mubadala sovereign wealth fund, gave an interview to CNBC this week where he declared himself fundamentally bullish on digital assets
  • Mubadala is one of the largest sovereign wealth funds in the world, with a current $243bn in assets under management
  • Al Mubarak told CNBC “This is a business [the digital asset industry] that had $200 billion worth of value two years ago, and is $2.5 trillion value today and growing. So while many people are skeptics, I do not fall in that category”
  • He didn’t provide details on specific investments, but confirmed Mubadala was betting on the “ecosystem” around crypto assets; “From our perspective, I think we look at the ecosystem around crypto. And I think we are investing in that ecosystem. That could be that's in the block-chain technology, energy usage, etc”
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