Nickel Research Centre

Nickel News Roundup - Week 25

24th June, 2021 

Market Overview:

The digital asset market experienced a challenging week, as a wave of negative news from China, combined with reaction to economic policy in the US, caused major pullbacks before a rally recovered some of the lost ground

  • Bitcoin declined steadily throughout the week, but suffered a major crash when news of Chinese restrictions emerged on Tuesday, sending its price briefly to a year-to-date low under $29,000, before it quickly rallied back above $30,000, hitting highs of $34,610 on Wednesday before its current price of $32,940
  • Ether’s price action followed Bitcoin’s movements, but with even more downside volatility, hitting lows of $1,733 on Tuesday, and struggling to sustain above the $2,000 mark since. Ether is currently priced at $1,923
  • The overall market capitalisation of digital assets declined to lows of $1.15tn, before the rally saw it rise to a current value of $1.34tn
  • Despite heavy losses across almost all digital assets, their current level still represents a 73% year-to-date growth for the asset class as a whole
  • The total value locked in the DeFi sector declined significantly to $53.8bn due to the downtrend of Ether and Bitcoin

This week proved to bring a mixture of bad news and good news for digital assets, with negative coverage and market sentiment arising from China’s crackdown on decentralised digital assets like Bitcoin, and the mining required to generate it. 

This short-term pain could however lead to long-term benefits, as mining power becomes more decentralised—and the Bitcoin network thus even more secure—globally. Despite the news casting a long and dark shadow on the markets, there was plenty of good news to be found elsewhere; including further involvement from PayPal and Visa, deeper adoption from major banks, and continued growth in popularity for digital assets.


What happened: China cracks down on crypto mining and transactions

How is this significant?

What happened: VanEck files application for Bitcoin Mutual Fund

How is this significant?
  • VanEck, one of several institutions in the race for the first Bitcoin ETF in the United States, filed a prospectus for a Bitcoin Mutual Fund with the SEC this week
  • According to their prospectus, the VanEck Bitcoin Strategy Fund will not direct invest in Bitcoin or digital assets, but rather seek exposure through futures contracts, ETPs, and pooled investment vehicles
  • Outside of the US, VanEck have already listed digital asset ETFs and ETPs, such as their DAPP ETF that tracks a digital asset equity index based on companies with direct involvement and exposure to the crypto space

What happened: PayPal and Visa participate in $300m digital asset VC funding round

How is this significant?
  • PayPal and Visa are two of the largest payment processors in the world, and their continued support for crypto assets and blockchain infrastructure indicates long term plans to boost the utility of digital assets
  • Both payments giants participated in a “heavily oversubscribed” $300m raise for digital asset VC Blockchain capital, who additionally provided strategic partnerships for Visa and PayPal within their “Fund V” investment fund
  • According to a press release, Fund V’s investments “will be focused on blockchain infrastructure, DeFi, NFTs and emerging applications of blockchain technology”
  • PayPal commented that “Investing in Blockchain Capital's new fund allows us to engage with the entrepreneurs driving the future of the decentralized economy and the new wave of financial services”
  • Visa stated that their investment was part of “deepening our efforts to shape and support the role that digital currencies play in the future”

What happened: BBVA opens Bitcoin trading services for private wealth clients

How is this significant?
  • Spanish bank BBVA became the latest major financial institution to roll out digital asset investment opportunities for their clients, beginning with Bitcoin trading and custody services for private banking clients in Switzerland
  • Alfonso Gomez, CEO of BBVA Switzerland, said that the move was spurred by growing client demand for exposure to the asset class; “This gradual roll-out has allowed BBVA Switzerland to test the service’s operations, strengthen security and, above all, detect that there is a significant desire among investors for crypto-assets or digital assets as a way of diversifying their portfolios”
  • The bank is treating Switzerland as a testing ground for the service, due to clear regulatory frameworks in place for digital assets, as well as widespread adoption and understanding of the asset class

What happened: BlackRock seeks blockchain strategy for portfolio management service

How is this significant?
  • According to a recent job posting by BlackRock, the world’s largest asset manager, the world’s largest asset manager is seeking to create a blockchain strategy for Aladdin, its portfolio management service
  • Aladdin has been particularly lauded for its benefits in risk management—the FT dubbed it “the technology hub of modern finance”
  • The Digital Asset Engineering Lead will be responsible for integrating blockchain and digital assets into the Aladdin system, including the evaluation of multiple different blockchain protocols and platforms for the task 
  • When asked for comment by industry publication Coindesk, a BlackRock spokesperson indicating that the company is already engaged in blockchain, but increasing their efforts; “We’re hiring an engineering lead for distributed ledger technology to build out our expertise and execution capabilities in the distributed ledger technology space. While we have engineers working in the distributed ledger technology space today, this hire will allow us to increase our focus and capacity”

What happened: Galaxy Digital announced as liquidity provider for Goldman Sachs’ Bitcoin futures 

How is this significant?
  • This week, Mike Novogratz’s Galaxy Digital revealed that they would serve as market maker and liquidity provider for Goldman Sachs’ CME Bitcoin futures trades
  • According to Galaxy’s co-president, Damien Vanderwilt; “We are proud to be a strategic partner of Goldman and look forward to... meet growing institutional demand and pave the way for wider adoption of cryptocurrencies as an asset class”
  • Max Minton, Goldman Sachs’ APAC head of digital assets commented in a press release that “Our goal is to provide our customers with best execution pricing and secure access to the assets they want to trade. This will now include cryptocurrencies in 2021, and we are delighted to have found a partner with a wide range of liquidity spaces and differentiated derivatives capabilities that cover the cryptocurrency ecosystem”

What happened: Goldman Sachs trades tokenised bonds on JP Morgan’s blockchain platform

How is this significant?
  • Bloomberg another move by Goldman Sachs towards deeper integration of blockchain and digital assets, trading digitised treasury bonds for JP Morgan’s JPM stablecoin on the Onyx platform
  • Mathew McDermott, Goldman’s head of digital assets, confirmed the move to Bloomberg, identifying it as a “pivotal moment for the digitization of transactional activity”
  • McDermott particularly stressed the improvements blockchain can offer to repurchase (“repo”) agreements, thanks to smart contracts allowing for instant exchange of collateral and cash, rather than overnight agreements in traditional systems; “We pay interest per the minute. We firmly think this will change the nature of the intraday marketplace”

What happened: Banque du France tests securities settlement on blockchain

How is this significant?
  • France’s central bank announced on Monday that they had successfully concluded a cross-border CBDC trial with the Swiss bank SEBA
  • The experiment used the CBDC to simulate the settlement of listed securities on the European TARGET-2 securities settlement engine
  • According to Nathalie Aufauvre of the Banque du France, the move “paves the way for other alliances in order to benefit from the opportunities offered by financial assets in a blockchain environment”

What happened: Digital asset adoption continues in Texas

How is this significant?
  • Since Texas governor Greg Abbott announced his intention for the state to become a blockchain hub a couple of weeks ago, there has been rapid adoption of digital assets
  • After Texan banks were approved to hold crypto assets last week, news emerged this week that a pilot program in the Houston area will see crypto kiosks widely installed in supermarkets across the city
  • The machines will be operated by Coin Cloud installed in H-E-B supermarkets; the oldest supermarket chain in Texas, with over 400 locations across the state, and offer access to 30 different digital assets, including Bitcoin, Ethereum, and Litecoin  

What happened: New research reveals scale of retail interest in digital assets

How is this significant?
  • Survey results released this week showcased the rising popularity of digital assets as an investment in the UK and Australia
  • An FCA research note based on public questionnaires estimated that 2.3 million UK adults now owned crypto assets—up from 1.8m last year 
  • Furthermore, their research also found that 78% of adults had now heard of digital assets, 50% plan to buy more, Bitcoin remains by far the most recognised asset, and investors’ median holdings have increased by about 15% since
  • Meanwhile in Australia, digital asset adoption is even more widespread, with a survey finding that 17% owned some crypto assets; an increase of 5 percentage points since January

What happened: Bank for International Settlements encourages CBDC development

How is this significant?
  • This week, the Bank of International Settlements supported the concept of central bank digital currencies—and their ability to coexist with decentralised stablecoins
  • The FT reported this makes it a case of “when, not if” CBDCs become mainstream
  • However, the BIS report was less enthusiastic about decentralised digital assets, particularly as their recommendation for “most promising” design for CBDCs would involve them being built directly on top of an identity scheme to directly link transitions to individuals

What happened: Morgan Stanley amongst participants for $48m Securitize funding round

How is this significant?
  • Securitize, a firm dedicated to the creation of securities on the blockchain, raised nearly $50m in Series B funding this week, with investors including Morgan Stanley, Sumitomo Mitsui Bank, and Blockchain Capital
  • Securitize will launch a marketplace for the trading of securities as digital assets, with investors receiving their shares as digital securities created on the Securitize platform
  • As part of the move, Securitize announced that they appointed Pedro Teixeira, the co-head of Morgan Stanley Tactical Value, to their board of directors

What happened: Stronghold Digital Mining raises over $100m for low-impact Bitcoin mining

How is this significant?
  • Concerns about the environmental impact of Bitcoin mining were a key catalyst for recent negative news cycles—now another mining company is committing to cleaning up the Bitcoin energy chain
  • Stronghold Digital Mining in Pennsylvania announced a $105m investment this week, helping them to mine Bitcoin through the use of waste coal
  • Waste coal is a material byproduct of the coal mining process, and classified as a Tier II alternative energy source, with an environmental impact equivalent to a hydropower plant
  • According to Stronghold, each Bitcoin they mine could eliminate 200 tonnes of waste coal from the environment, reducing resultant hazards like forest fires

What happened: More companies join Paxos’ blockchain-based stock settlement system

How is this significant?
  • Wedbush Securities ($2.4bn AUM) became the latest firm to join the Paxos settlement service, joining the likes of Credit Suisse, Societe Generale, and Bank of America
  • Built on a permissioned version of the Ethereum blockchain, Paxos’ system allows parties to directly conduct and settle stock trades with each other, allowing for same-day settlement
  • Wedbush CEO Gary Wedbush foresees a compelling future for digital assets in the financial space, saying that “It’s crystal clear that blockchain technology is destined to completely modernize securities settlement and custody”
  • In addition to their stock settlement service and status as a federally-regulated “crypto bank”, Paxos are now seeking to apply for a clearing firm license with the SEC

What happened: Professional sports continues to align with crypto assets

How is this significant?
  • Sports provide a massive global platform for raising awareness of digital assets, whether it be from individual players, teams, or even entire arenas
  • The German national football team announced the creation of NFTs to commemorate the ongoing European championships, the first time a major national squad has used the non-fungible token format for fan outreach
  • In the NBA, the Philadelphia 76ers joined the Socios fan platform, a tokenised means of giving fans voting rights on certain aspects of how a team is run
  • The most striking move this week was likely the digital asset exchange FTX being revealed as a long-term global partner of Major League baseball, following on the heels of their recent sponsorship

What happened: Sotheby’s expands digital asset integration

How is this significant?
  • After being at the vanguard of NFT auctions and adoption of digital assets for art sales, Sotheby’s made another step forward by announcing the acceptance of crypto for non-artistic auctions
  • In this case, Bitcoin and Ether will both be accepted for the auction of the 101-carat Key 10138 diamond, estimated to sell for at least £10m
  • It will be offered as a single-lot sale in Hong Kong, with Yu Wenhao of Sotheby’s Asia saying “"This is a truly symbolic moment… The most ancient and emblematic denominator of value can now, for the first time, be purchased using humanity's newest universal currency”
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