Nickel Research Centre

Nickel News Roundup - Week 25

June 21st, 2024

Market Overview:

Digital assets experienced mixed performance this week, as macroeconomic challenges continued to cool investors on risk assets.
  • Bitcoin continued last week’s bearish momentum, albeit at a slower rate, as traders continued reacting to a hawkish Federal Reserve
  • Bitcoin declined from a Friday high of $67,290 to a Tuesday low of $64,180, unable to sustain any rallies during the week
  • Ether bucked the trend, increasing thanks to positive news around the SEC dropping investigations into the blockchain
  • Its weekly peak of $3,647 happened on Monday, before a Tuesday low (mirroring Bitcoin momentum) of $3,379 was followed by a rally after the SEC news
  • Overall digital asset market capitalisation dropped down to $2.36tn
  • According to industry monitoring site DeFi Llama, total value locked in DeFi dropped remained around the $100bn mark, as Ether’s modest growth made up for declines across the majority of other DeFi blockchains

Digital assets experienced mixed performance this week, as Ether was buoyed by positive news concerning regulatory scrutiny, whilst Bitcoin continued to feel pressure from Federal Reserve interest rate policy. MicroStrategy added to its considerable Bitcoin coffers, Tether revealed new stablecoins backed by tokenised gold, Deutsche Telekom announced a move into Bitcoin mining, VC raises passed a historic milestone, and much more.

What happened: ETF news

How is this significant?

  • Bitcoin ETFs experienced consistent outflows this week, as concerns over Federal Reserve interest rate policy(and considerable post-launch profits) led investors away from perceived risk assets including Bitcoin
  • Hawkish Fed positioning led to $621m of outflows in Bitcoin investment products last week, according to CoinShares data
  • Fidelity’s FBTC led the way in outflows this week, after several weeks of strong inflows previously
  • In terms of (relative) positive performance, BlackRock’s IBIT posted modest weekly inflows and managed to avoid any daily outflows, whilst Franklin Templeton’s EZBC, Valkyrie’s BRRR, and WisdomTree’s BTCW all posted a week of complete net-zero flows
  • According to CF Benchmarks lead research analyst Gabriel Selby, spot ETFs have had a dramatic effect on open interest
  • He told industry publication TheBlock “Spot Bitcoin ETFs have contributed to an 80% increase in open interest on the CME bitcoin futures market year-to-date… way above the record prior to spot Bitcoin ETF approval in October 2021 of approximately 6,200 short contracts”
  • Australia’s main ASX stock exchange launched its first Bitcoin ETF on Thursday, more than three years after the idea was first proposed
  • The VanEck Bitcoin ETF launched with around $1m in seeded assets, although the ETF will invest in VanEck’s existing US-based HODL spot Bitcoin ETF, rather than directly purchasing any Bitcoin itself
  • The company’s APAC chief executive Arian Neiron told Bloomberg “Notwithstanding that crypto investing is a polarising topic, we recognize Bitcoin is an emerging asset class that many advisers and investors want to access”
  • ASX confirmed negotiations with several other issuers for other Bitcoin ETFs, and Bloomberg Intelligence senior ETF analyst Rebecca Sin forecast “The Asia-Pacific region’s potential for virtual-asset ETFs [split between Hong Kong, Australia, and South Korea] may hit more than $3 billion in the next few years”
  • Regarding spot Ether ETFs, Bloomberg analysts Eric Balchunas and James Seyffart revised their estimated launch date for the funds to July 2nd, citing a lack of major comments on issuer-submitted S-1 forms
  • Potential issuers Bitwise began the marketing race for Ether ETFs, contrasting the blockchain’s 24/7/365 nature to the limited opening hours of “Big Finance”
  • Pantera Capital Management has already indicated an interest in purchasing $100m of shares in Bitwise’s prospective Ether ETF
  • Crypto asset managers Hashdex signalled a potential next stage of industry ETFs, submitting an application for a dual Bitcoin and Ether ETF, weighted by market cap, with a decision deadline of March 2025

What happened: SEC drops investigation into Ethereum

How is this significant?

  • Ethereum ecosystem developers Consensys (headed by Ethereum co-founder Joseph Lubin) announced on Wednesday that the SEC notified them that the agency was dropping its investigation into “Ethereum 2.0” (i.e. Ether following the blockchain’s switch to Proof-of-Stake consensus)
  • In March, news about SEC scrutiny against Ethereum hit the news, despite several previous agency statements commenting that Ether was not considered a security—leading some to speculate that SEC chair Gary Gensler was attempting to leverage Ethereum’s staking functionality as a vector of attack
  • Consensys tweeted “Ethereum survives the SEC… the SEC will not bring charges alleging that sales of Ether are securities transactions”
  • The firm however also confirmed that it would not drop the lawsuit it filed against the government agency, which seeks clarification and confirmation that the browser-based crypto wallet Metamask, and staking Ether do not violate securities laws
  • Lubin personally commented “The SEC's decision to close this inquiry marks a significant victory for Ethereum and the web3 community as a whole… While we welcome this development—it's not enough. We must remain vigilant and continue advocating for clear and fair regulations that enable innovation to flourish. The fight for a transparent and supportive regulatory environment is far from over”
  • Markets responded positively to the news, leading to a recovery for Ether despite sluggish performance by industry bellwether Bitcoin

What happened: Tether announced gold-backed stablecoin

How is this significant?

  • Stablecoin giant Tether this week announced its latest innovation; an Ethereum-based token-minting platform enabling users to create digital assets (over-)collateralised by Tether's tokenised gold (XAUT)
  • According to a press release, the new “Alloy” platform “introduces a novel category of digital assets known as tethered assets, designed to track the price of reference assets through stabilisation strategies like over-collateralization with liquid assets and secondary market liquidity pools…. providing consistent value and stability between the reference asset and its tethered counterpart”
  • The first tethered asset will be aUSDT, designed to track the value of the US dollar whilst over-collateralised by Tether Gold (tokenised gold backed by bullion held in Switzerland)
  • Alloy by Tether tweeted that aUSDT “provides long-term holders the opportunity to maintain exposure to gold, while in parallel obtaining a dollar-referenced Tethered Asset for payments and day-to-day economy”
  • Tether CEO Paolo Ardoino revealed that Alloy will launch “later this year”, sharing an image of Doc Brown and Marty McFly from “Back to the Future”, ready to “travel back to 1971, when fiat currencies were backed by gold”
  • 53 years after the US abandoned the gold standard with the so-called “Nixon Shock”, we could thus be on the precipice of a “tokenised-gold standard”

What happened: MicroStrategy completes $786m Bitcoin acquisition

How is this significant?

  • MicroStrategy, one of the largest Bitcoin holders in the world, swiftly moved on its recent ambitions to increase its exposure to the asset
  • According to founder and chairman Michael Saylor, the firm completed a total 11,931 Bitcoin purchase for around $786.0M “using proceeds from convertible notes & excess cash for approximately $65,883 per Bitcoin”
  • This represent an increase of more than 50% compared to a $500m convertible senior note offering “to acquire additional Bitcoin and for general corporate purposes” announced last week
  • In fact, it exceeded an increase to a $700m note issuance communicated by the enterprise software firm last Friday, just a day after the initial $500m offer
  • Following this most recent purchase, MicroStrategy’s total Bitcoin holdings stand at 226,331 Bitcoins; more than 1% of the maximum 21 million supply (upon completion of mining in the year 2140)
  • The latest buy brought up the company’s average acquisition price per Bitcoin—to $36,798, meaning (unrealised) profit remains healthy

What happened: German government reportedly sells off seized Bitcoin

How is this significant?

  • Reporting emerged this week that Germany’s government is currently selling off Bitcoin; according to data from blockchain analytics firm Arkham Intelligence
  • Earlier this year, Arkham identified wallet addresses it linked to the German federal government, related to the seizure of 50,000 Bitcoins from the operators of a film piracy portal active in 2013
  • Considering the fact that the Bitcoin was from 2013, it’s currently at a significant overall profit despite sluggish Q2 performance; total holdings of the main government wallet are currently valued at $3.05bn, following a peak of $3.6bn in March
  • Blockchain data revealed movements of around $450m worth of Bitcoin from the main wallet address this week, including transfers to wallets linked to exchanges, viewed as indicative of intent to sell
  • Bitrue chief strategy officer Robert Quartly-Janeiro told industry publication Decrypt “Having seen a slippage in the price of BTC, the German government is releasing significant tranches of BTC and has taken a view that the price of BTC is to soften for a while to come. It’s worth remembering that the BTC being sold was seized due to illicit activity, so what’s more interesting is what the German government is planning to do with the capital once sold”

What happened: Deutsche Telekom announces plans for Bitcoin mining operations

How is this significant?

  • Global Telecoms giant Deutsche Telekom (owners of T-Mobile) disclosed plans for imminent entry into “digital monetary photosynthesis”—or in layman’s terms, Bitcoin mining
  • Speaking at the BTC Prague conference, the firm’s Web3 head Dirk Röder revealed a substantial shift in the corporation’s position, from a ban on mentioning Bitcoin during his job interview in 2022, to currently running Bitcoin and Lightning Network nodes, to the forthcoming mining activity
  • Responding to industry website Ledger Insight, a spokesperson clarified that the firm’s focus was on infrastructure development; with a particular focus on energy efficiency and power grid stabilisation efforts
  • In other mining news, Bitfarms benefitted from continued takeover efforts by competitors Riot Blockchain, as the latter increased its holding of Bitfarms common shares to 14%
  • This led to a 5% daily jump in share price (up 20% weekly), whilst Bitfarms also “instituted a so-called poison pill defence… that dilutes the equity of any entity that acquires 15% or more of company’s common shares”
  • The recent Bitcoin halving issuance reduction has put pressure on miners, with several either exiting, redeploying resources to AI processing, or seeking mergers to consolidate mining power
  • This pressure has led to high levels of selling by miners, with CryptoQuant data reflecting miner reserves at 2021 levels, and OTC selling at quarterly highs

What happened: SEC crypto unit head departs after nine years

How is this significant?

  • This week, US regulators lost one of their longest-serving personae in the field of digital assets, as SEC enforcement division Crypto Asset and Cyber Unit head David Hirsch left the agency after nine years
  • Hirsch wrote on Linkedin “I had the opportunity to work on more complex, challenging investigations and issues than I ever imagined… I'm particularly proud of the historic work done by the Crypto Assets and Cyber Unit team I had the privilege to lead”
  • His departure follows the recent resignation of leading enforcement attorney Ladan Stewart, who litigated throughout the agency’s most high-profile crypto cases
  • Bloomberg analyst James Seyffart posited that Hirsch may have moved on to save himself frustration, asking “What lawsuit has the enforcement agency won apart from the plain and obvious scams? I think the courts are going to dictate what crypto policy is at this point… anything he does is going to be extremely challenged in courts… they’re losing left and right, the writing is on the wall that what they were doing wasn’t the right way to go about this”
  • In other regulatory news, Fortune reported that the US CFTC is investigating Jump Trading, with a focus on its crypto investment activity
  • Digital asset exchange Gemini agreed a $50m settlement in New York, over its previous Gemini Earn program, which was suspended following the collapse of lending partner Genesis Global
  • Speaking to Bloomberg, Race Capital general partner Edith Yeung lambasted the US over its slow movement on stablecoin regulation, saying “in cross-border payments, if we just let other people [and governments] define what stablecoins are about, it’s really not good for the long-term finance ecosystem. The US, we need to get our act together, to catch up with Europe and MiCA, Hong Kong and Singapore”
  • During a recent Senate Appropriations subcommittee hearing, Illinois senator Dick Durbin asked whether the CFTC were adequately equipped for a potential increase in purview following the FIT21 Act’s House passage (which favours CFTC industry oversight vs the SEC)
  • CFTC chair Rostin Behnam responded “We are adequately equipped to oversee the markets we are mandated to oversee, but if we were to be given authority over crypto markets, I would certainly expect there to be an increase in a budget”

What happened: Digital asset industry grows US election warchest to $160m

How is this significant?

  • With US elections approaching, the crypto industry continues to lobby for more constructive political discourse and representation, with Bloomberg noting that “The staggering [$160m] sum makes the crypto industry one of the most influential players in federal campaign finance”
  • Specific targets include crypto-sceptic senators in Ohio and Montana, “the only two Democratic incumbents running this year in states Donald Trump won in the last election”
  • Alongside efforts by the Fairshake Industry SuperPAC, Coinbase CEO Brian Armstrong independently “met with more than a dozen Dem and GOP Senators in DC to discuss creating clear rules for the crypto industry and consumer protection for crypto users”
  • He added that “There’s strong bi-partisan momentum to get this done in the Senate now that FIT21 has passed in the House
  • Coinbase chief policy officer Faryar Shirzad told Bloomberg “We’ve learned as an industry that you have to show up politically to be heard. We’re very, very committed to see that though. We’re very committed to this cycle and beyond. This is only the beginning of a long road”
  • Late on Thursday, Reuters reported that Gemini exchange co-founders Cameron and Tyler Winklevoss both donated $1m of Bitcoin to the Trump campaign, after he became the first major party candidate to accept digital asset campaign funding
  • Tyler Winklevoss tweeted his dissatisfaction with “the Biden administration’s war on crypto”, citing “weaponisation of the banking system and the SEC” against the industry
  • Industry advocate Michelle Bond launched a new think tank called Digital Future, “to help shape new rules for crypto and artificial intelligence”
  • David McCormick, a Republican candidate and former CEO of Bridgewater (the world’s largest hedge fund) laid out a pro-crypto campaign position, saying “America must lead on crypto… policy makers must do their part, or this opportunity may slip away”
  • He called it both “good economic policy” and “good national security policy”, saying “we are in the next great wave of innovation with crypto and blockchain… we can create great jobs”

What happened: Japanese exchange Bitflyer targets local FTX unit acquisition

How is this significant?

  • Japanese public broadcaster NHK reported this week that local exchange Bitflyer is expected to acquire the Japanese unit of fallen exchange FTX
  • NHK claims this would be executed through a complete share purchase worth several billion Yen
  • According to reports, Bitflyer doesn’t wish to acquire FTX Japan as an exchange, but rather to relaunch it as a digital asset management or custody solution, targeted exclusively at institutional investors
  • NHK noted significant growth within the last five years for crypto assets in Japan, with the number of accounts linked to exchanges up 300% since 2019

What happened: Historical raises by digital asset startups exceed $100bn

How is this significant?

  • Despite lulls in funding compared to historic highs in the last bull market, digital asset startups achieved a new milestone recently; since tracking began in 2014, the industry has eclipsed $100bn of fundraising
  • Venture capital firm Paradigm helped tip the balance over this landmark figure with its new $850m fundannounced last week, and Q1 saw a return to growth for VC figures
  • Coinbase leads the way for industry investments through its Coinbase Ventures arm, which has sealed 443 deals since 2017, worth approximately 4% of all investment in that timeframe
  • There has also been a recent growth in “secondaries”, as funds and investors have bought up private shares of firms speculated or expected to go public in future, including stablecoin issuers Circle, analytics firm Chainalysis, and digital asset exchange Kraken
  • Andrew Saeta, of secondary market platform Forge Global, told Bloomberg “There’s pretty strong individual investor demand. On the institutional side, we’ve definitely seen an increase. I would say the market is the most robust that we’ve seen in a while”
News Roundups