Nickel Research Centre

Nickel News Roundup - Week 19

12th May, 2022 

Market Overview:

Digital assets suffered large losses this week, following declines across many major global markets.

Digital assets suffered major losses this week, triggered by movement in other global markets, before being exacerbated by new inflation figures and a crash in a major stablecoin protocol. News of the UST stablecoin depegging dominated reporting this week, but there were still several positive news stories beyond this violent market-moving event; several of America’s largest banks invested in the same digital asset company, Gucci announced acceptance of digital assets as payment, a digital asset exchange achieved a $10bn valuation, and VC deals and funds continued to roll in.


What happened: BNY, Citi, Wells Fargo back institutional digital asset technology company

How is this significant?
  • Talos, a company developing institutional-level digital asset trading technology, completed a Series B round worth $105m, for a current valuation of $1.25bn
  • The list of investors in the round featured many major names from the field of venture capital and finance; including BNY Mellon, Citigroup, Wells Fargo, PayPal Ventures, Fidelity Investments, Andreessen Horowitz, and General Atlantic
  • Talos provides institutions with access to digital asset trading, including liquidity access, direct market access, price discovery, automated execution, clearing and settlement
  • This $105m round follows a $40m Series A round last year
  • A Talos representative told industry publication TheBlock that they plan to use funding to double their headcount, and expand the company’s geographic reach further into Europe and Asia-Pacific
  • The company claimed 20-fold growth in trading volumes within the past year, with an end-user base of around 20 million, and currently have plans to launch support for DeFi platforms alongside existing integration with centralised exchanges
  • CEO Anton Katz said that despite competitors recently having been acquired by Coinbase and Gemini, Talos has no plans for acquisition; “We enjoy being independent and the ability to work with the wide-range of different service providers and entities across the entire digital asset ecosystem”

What happened: Dapper Labs debuts $725m ecosystem fund to catalyse NFT adoption

How is this significant?
  • Andreessen Horowitz (a16z), the Digital Currency Group, Union Square Ventures, and Coatue were this week among the participants in Dapper Labs’ newly-announced ecosystem fund for their NFT-centric Flow blockchain 
  • The $725m ecosystem fund aims to entice more developers away from Ethereum, offering them incentives in the form of “investments, token grants, and development support”
  • Dapper CEO Roham Gharegozlou claims that 7,500 people are currently building on Flow, but the blockchain has a long way to go in order to catch up with the popularity of the world’s leading smart contract (and NFT) platform
  • Thus far Flow’s success has primarily been limited to their officially-licensed NBA Topshot collection with the National Basketball Association; the company prioritises ease-of-use for non-crypto natives, rather than tapping into the existing and established audiences for NFTs within the broader digital asset sphere

What happened: TerraUSD stablecoin depegs, leading to wider crash in value 

How is this significant?
  • TerraUSD (better known as UST), the stablecoin of the Terra blockchain, suffered a major loss in value this week that created a cascading effect crashing the chain’s native LUNA token—and likely affecting the further digital asset market as the Terra company sold off their Bitcoin reserves in an attempt to restore the peg on UST
  • The issues arose because UST is an algorithmic stablecoin, (theoretically) maintaining a valuation around $1 through a codified relationship with the chain’s LUNA token, based on a combination of trading activity and mathematical equations; users should always be able to exchange 1 UST with $1 worth of LUNA, burning the UST and minting the LUNA
  • However, with a massive sell-off of UST on two DeFi platforms, UST lost its peg, creating a spiral as more UST was sold off due to lost confidence—which in turn drove down the value of LUNA as people redeemed dollar values based on sub-dollar UST, and led to large-scale sell-offs (or as the Luna Foundation identified it, a loan) of their Bitcoin reserves in order to drive capital back towards restoring the peg
  • At its lowest point this week, one UST was valued at $0.29 on Wednesday, before recovering somewhat towards the end of the day
  • The team behind Terra has put together a plan to recover value within their ecosystem, involving a combination of outside investment, and changes to the UST:LUNA token dynamics
  • At the start of the week, UST was the third-most valuable stablecoin by market capitalisation, before briefly dropping to fifth place; at the time of writing it has recovered to fourth place, behind the reserve-backed Tether, Circle, and Binance stablecoins
  • Janet Yellen cited the de-peg of UST as a risk of the nascent stablecoin market, urging legislation and regulation for the category by the end of the year

What happened: Singaporean crypto startup Amber aims to triple valuation in new raise

How is this significant?
  • Less than three months after a previous funding round (including investment from Singapore sovereign wealth fund Temasek), digital asset trading platform Amber is reportedly speaking to prospective investors about a new investment round
  • According to Bloomberg sources, Amber are proposing investment at an overall company valuation of $10bn, more than tripling their previous raise
  • The company had stated in February that they would likely pursue another funding round in 2022, with plans to go public next year
  • Given that the funding proposals would have been made before this week’s major market downturn, it will be interesting to see investor appetite at such multiples of previous—and recent—funding levels

What happened: Gucci enables in-store crypto payments

How is this significant?
  • Gucci became one of the first luxury brands to directly accept digital assets as payment, approving them for use in several of their US stores
  • New York, Los Angeles, Miami, Atlanta, and Las Vegas Gucci stores will accept a variety of digital assets from the end of May onwards, according to a statement from Gucci
  • Francois-Henri Pinault, CEO of Gucci’s parent company KeringSA, had noted in February that fashion houses like Gucci and Balenciega were keenly investigating Web3 and metaverse opportunities, with full teams dedicated to the space
  • Customers will be able to pay with 10 different digital assets, including Bitcoin, Ether, and Bitcoin Cash

What happened: Kucoin digital asset exchange achieves $10bn valuation

How is this significant?
  • Kucoin—one of the leading retail-centric digital asset exchanges—concluded a $150m funding round this week, taking their valuation to $10bn
  • The funding round was led by Jump Crypto, the new digital assets arm of financial giant Jump Trading
  • Other investors in the Series B round included Circle Ventures, IDG Capital, and Matrix Partners
  • According to industry data trackers, Kucoin currently processes around $4.7bn in trading volume per day; roughly two-thirds as much as Coinbase Global, and CEO Justin Chou states that they operate with a net margin above 60%

What happened: Venture capital roundup—$600m in new digital asset VC funds announced

How is this significant?
  • There were several other developments from the world of venture capital this week, including two significant new funds
  • SPiCE VC announced the launch of the new $250m SPiCE II fund for blockchain investment, with a particular focus on institutional investors and the Dubai region as rising areas of interest in the digital asset space
  • This fund is five times larger than their previous fund dedicated to the asset class
  • Tal Elyashiv, co-founder of SPiCE VC, said their new fund will reflect the evolution of the asset class since the previous fund launched in 2017; “We invest in companies that are building significant pieces of the blockchain ecosystem, and companies that are building infrastructure… to significantly change industries...the breadth is much bigger. So we expect more diversity in SPiCE II versus SPiCE I”
  • On Wednesday, UK-based asset manager Fasanara kicked off fundraising for a new $350m VC fund dedicated to fintech and crypto asset companies—which unlike previous venture funds will be open to outside investors
  • With a background as a hedge fund, Fasanara CEO Francesco Filia told Bloomberg that they are particularly “keen on investing in crypto companies that intersect with trading”
  • Katie Haun’s new Haun Ventures VC led their first funding round this week, on a $50m raise for NFT platform Zora, on a valuation of $600m
  • Development tools creation company Moralis raised $40m in Series A funding from a variety of backers, including Coinbase Global, Fabric Ventures, and Dispersion Capital
  • This puts the Stockholm-based company’s valuation at $215m since launching last June
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