Nickel Research Centre

Nickel News Roundup - Week 48

1st December, 2022

Market Overview:

Digital assets recovered some of their recent losses, bringing them back to levels from the day of FTX’s collapse.

  • Bitcoin hit a weekly high of $17,190 on Wednesday, up from lows of $16,090 on Monday
  • Bitcoin’s current price of $17,100 represents 3.5% weekly growth
  • Markets saw particularly positive performance on Wednesday, breaking out of range-bound trading after Jerome Powell indicated that smaller interest rate hikes were likely from December onwards (although overall policy will remain restrictive)
  • Ether briefly topped $1,300 on Wednesday, with a weekly high of $1,302 after lows of $1,159 on Monday
  • Ether’s current price of $1,282 represents a 6.7% increase
  • Total Ether supply returned to its pre-merge levels, as less market panic contributed to lower transaction fees and burn rates, leading to a current 0.14% annual supply growth
  • Overall market capitalisation increased by $30bn, to $863bn
  • According to industry monitoring site Defi llama, total value locked in DeFi this week across all blockchains and platforms was worth $39.1bn


Although FTX still features prominently in most media reporting, there was a greater proportion of unrelated news than in the last few weeks. Binance launched cryptographically-verifiable on-chain Proof of Reserves and entered the Japanese market, BlackRock CEO called digital asset technology “very important” and forecast a future full of asset and securities tokenisation, India became the latest nation to trial a retail CBDC, Fidelity also appealed to retail, and FTSE added the asset class to its benchmarking systems.


What happened: FTX latest


How is this significant?

  • Coverage around the FTX collapse continued this week, albeit at lower volumes than in the immediate aftermath of the incident
  • One of the key developments was former CEO Sam Bankman-Fried (SBF) appearing as advertised—albeit remotely—at the New York Times dealbook summit on Wednesday
  • In a wide-ranging interview (which he claimed his lawyers advised him against), Bankman-Fried outlined the internal workings of FTX and its downfall from his own perspective
  • Speaking to New York Times and CNBC journalist Andrew Ross Sorkin, SBF denied any deliberate fraud in terms of relations between FTX and his Alameda Research trading firm; stating “I didn’t knowingly commingle funds… It was, in effect, tied together substantially more than I would have ever wanted it to be”
  • On-chain data paints a slightly different story; according to reports by industry publication Decrypt and blockchain analytics firms Nansen and Glassnode, Bankman-Fried should have been aware at least since the demise of the Terra Luna blockchain ecosystem earlier this year
  • Nansen researchers said the data “revealed a deep flaw between Alameda and FTX’s muddled relationship…. There were significant FTT [FTX’s proprietary self-issued token, used as collateral] outflows from Alameda to FTX around the Terra-Luna/3AC situation”
  • An earlier interview with Vox also included Bankman-Fried acknowledging that before FTX had official banking relationships, customers would be instructed to wire funds towards Alameda instead, contributing to extremely messy bookkeeping procedures
  • When asked about widely-reported (and sizeable) donations to both politicians and media organisations, Bankman-Fried claimed the former was primarily dedicated to pandemic prevention efforts “across both aisles”, and the latter was intended “to support journalists doing great work because I think what they do is really important”
  • SBF was candid about leadership failings: “A lot of what we ended up doing and focusing on was a distraction from one extremely important area… risk. There absolutely were management failures…I think a lot were on the risk management side”
  • On certain other issues however, he was less forthcoming or definitive; regarding multimillion dollar real estate being bought in the names of employees (and even his parents) with company funds, he stated “It was not intended to be their long term property… I don’t know how that was paid for”
  • Bankman-Fried expressed regret for his failings, whilst maintaining his previous attitude that filing for bankruptcy hinders FTX’s ability to make users whole. He claims certain geographic subsidiaries like and FTX Japan remain fully solvent due to local regulatory requirements and processes (that the Bahamas-domiciled FTX didn’t fulfil)
  • LedgerX, a derivatives-based subsidiary of is reportedly contributing $175m “for use in FTX’s bankruptcy proceedings”, indicating that at least some of the group companies do remain highly solvent and profitable
  • Although he attended the New York Times interview remotely, Bankman-Fried may have to visit the USA soon; Texas regulators called him to a hearing for February 2nd


What happened: Binance launches on-chain Proof of Reserves system

How is this significant?

  • Leading digital asset exchange Binance (and its CEO, Changpeng “CZ” Zhao) has been at the forefront of proposed improvements to industry practices in the wake of FTX’s collapse
  • One of the key revelations behind FTX’s downfall was the co-mingling and lending of user funds to cover loans by Alameda Research, creating a liquidity crunch when users began withdrawing en masse
  • This week, Binance launched their Proof of Reserves (PoR) system for Bitcoin held on exchange wallet addresses, allowing users to verify that their deposited assets remain where they should be, and that the exchange thus remains liquid
  • Binance leverages one of the key benefits of blockchain technology in this system; the transparency of open and public ledgers
  • Users can use cryptographic tools such as Merkle Trees and root hashes to verify the presence of their specific individual funds within snapshots of customer balances
  • The first asset in the PoR system is naturally Bitcoin, which currently exhibits a 101% reserve ratio, excluding any exchange-owned funds (held on a separate ledger)
  • CZ stated “Given recent events, it is understandable that the community will demand more from crypto exchanges, far more than what is currently required of traditional financial institutions”
  • In other Binance news, CZ confirmed in a Bloomberg interview that there was widespread interest in their “Industry Recovery Initiative”, a fund aiming to disperse between $1bn and $2bn to contagion-affected firms over the next 6 months
  • He also believes that despite current pain the industry is “fine” overall, and even though there could be more contagion victims, he anticipates less impact from such episodes; “each time that contagion causes cascading effects, the effects become smaller”
  • Additionally, in an effort to provide compliant products and services in Japan, Binance paused new user registrations there, but swiftly announced the 100% acquisition of locally-registered digital asset exchange Sakura for an undisclosed amount
  • The acquisition announcement noted that the move was part of an effort by Binance “to enter Japan under regulatory compliance”


What happened: BlackRock CEO declares crypto technology “will be very important”

How is this significant?

  • Despite confirming exposure to FTX via one of its investment funds, BlackRock CEO Larry Fink remains optimistic about digital assets and blockchain technology going forward, according to comments at the New York Times Dealbook conference this week
  • Although he believes many crypto firms “will not be around” in the future, he believes that same future will still feature the “very important” technology of blockchain and asset tokenisation
  • “I believe the next generation for markets and next generation for securities will be tokenisation of securities”
  • He also noted that recent wider macroeconomic conditions haven’t been favourable to anyone, saying “We're actually going to enter a period of what I would call malaise. We're just not going to have an economy that is based on real growth that we were accustomed to"


What happened: Contagion latest—BlockFi Bankrupt


How is this significant?

  • Digital asset lender BlockFi became a major confirmed casualty of FTX, officially filing for Chapter 11 bankruptcy whilst citing “significant exposure” to the exchange
  • The FT reported that BlockFi is suing Bankman-Fried for his shares in stock trading company Robinhood, after loan documents seen by the paper pledged them to BlockFi as collateral on November 9th
  • According to FT sources, Bankman-Fried “was still trying to sell his Robinhood shares after entering into the collateral agreement” as part of last-ditch fundraising efforts before FTX failed
  • BlockFi will attempt to recover “around $680m” owed by FTX and Alameda, as part of an effort to “maximise client recoveries”
  • BlackRock CEO Larry Fink confirmed the world’s largest asset manager had invested $24m in FTX through a billionaire fund they manage
  • Speaking at the New York Times Dealbook event (separately from Bankman-Fried’s interview), he said “We’re going to have to wait to see how this all plays out… It looks like there were misbehaviours of major consequences”
  • Several major personae in the digital asset field declared possible interests in certain FTX assets as part of bankruptcy procedures, including Brad Garlinghouse of XRP developers Ripple Labs, and entrepreneur Justin Sun, who voiced an especial interest in FTX’s Venture arm and their portfolio companies
  • Creditors of institutional lender Genesis (who recently paused withdrawals and new loans) “are organising with restructuring lawyers and seeking options that would keep the firm out of bankruptcy”, according to Bloomberg sources on Tuesday
  • Genesis themselves claim “Our goal is to resolve the current situation in the lending business without the need for any bankruptcy filing”
  • Digital asset exchange Kraken announced 1,100 layoffs, equivalent to around 30% of their workforce, citing the ongoing crypto winter and a previous large-scale bull market hiring push


What happened: FTSE 100 provider launches digital asset index


How is this significant?

  • FTSE Russell, producers of the FTSE 100 index, confirmed the creation of a new FTSE Global Digital Asset Index Series, intended to help “define the investable universe”
  • The series will cover eight indices (from large to micro cap), monitoring data from hundreds of digital asset exchanges
  • FTSE Russell CEO Arne Staal said in a press release “We are pleased with the progress the FTSE Global Digital Asset Index Series launch represents for our digital asset capability, as transparency in this asset class becomes more important than ever. FTSE Russell has built a rigorous and transparent framework, underpinned by robust governance and comprehensive data to meet investor needs”
  • This move makes FTSE the latest of several major market monitors to provide indices for digital assets, following the likes of Bloomberg Galaxy and S&P


What happened: India pilots retail CBDC


How is this significant?

  • On Tuesday, the Reserve Bank of India (RBI) announced that following wholesale e-Rupee trials, a new retail-focused CBDC trial would kick off on Thursday, amongst a closed group of merchants and customers
  • The trial will begin in four cities (Mumbai, New Delhi, Bengaluru and Bhubaneswar) with the participation of four local banks
  • More banks and cities (including Ahmedabad, Hyderabad, and Lucknow) will join the pilot program “subsequently”, according to the RBI
  • RBI officials hope that a retail CBDC could lessen reliance on physical cash and improve international settlements, according to RBI officials


What happened: Fidelity opens retail digital asset trading


How is this significant?

  • After announcing a waiting list earlier this month, financial services giant Fidelity confirmed the launch of their retail digital asset offering on Monday
  • The company created a commission-free trading solution for anybody with a Fidelity brokerage account, although the proposition is funded by taking a 1% spread on every trade execution price
  • New users will have to read an acknowledgement text concerning “a variety of risks that are not presented by investing in, buying, and selling products in other, more traditional asset classes” before they can open their Fidelity Crypto trading account


What happened: Bitwise files application for new Bitcoin futures ETF 


How is this significant?

  • Fund issuer Bitwise applied for a new ETF this week, offering “managed exposure to Bitcoin futures contracts traded on the CME, and investments in short-term debt securities”
  • Bloomberg Intelligence analyst Eric Balchunas said “This is as much a signal as a filing —Bitwise is telling their clients and the rest of the world that despite the dark days, Bitcoin is alive and well and they still believe in the future”
  • Although the SEC has denied all applications to date for Bitcoin spot ETFs, Bitwise may find more joy given their filing is in the well-trodden field of futures


What happened: Digital asset VC news


How is this significant?

  • After an understandably-quiet few weeks in the direct aftermath of FTX, some activity did return to the VC space, with news of several large raises and valuations
  • Keyrock, an institutional market maker raised $72m in a Series B round that included participation from Ripple Labs and SIX Fintech Ventures
  • CEO Kevin de Patoul told industry publication Coindesk “We had the vision to create a system that would allow us to provide liquidity at a very large scale to all digital assets. Today, digital assets equal crypto. In our minds, down the line, every single asset will have a digital representation”
  • Digital asset lender Matrixport Technologies, founded by mining hardware billionaire Jihan Wu, has secured $50m commitments (half of its ultimate $100m goal) on a $1.5bn valuation, according to sources
  • This valuation is higher than the $1bn cited when they raised $100m in a Series C last year
  • Matrixport currently “handles $5 billion of trades each month and has tens of billions of dollars of assets under management and custody”, according to an investor deck seen by Bloomberg
News Roundups