Nickel Research Centre

Nickel News Roundup - Week 34

25th August, 2022

Market Overview:

Digital assets retracted some recent gains, as most markets moved into risk-off mode ahead of the Federal Reserve’s annual meeting.

  • Bitcoin dropped off sharply over the weekend, in anticipation of continued hawkish tightening policies from Jerome Powell and the Federal Reserve
  • After a weekly high of $23,550 on Thursday, the global move towards risk-off investment dropped Bitcoin below $21,000 on Saturday, with a weekly low around $20,870
  • Bitcoin’s spent the majority of the week thereafter trading in a tight range between $21,000 and $21,600
  • Bitcoin’s current price of $21,730 reflects a 7.2% weekly decline, taking prices back to July 27th levels
  • Ether performed similarly, dropping from a weekly high of $1,876 on Thursday evening, to a low of $1,538 on Monday
  • Current prices of $1,703 equate to a 7.7% weekly decline—but price levels have only been set back two weeks, as opposed to Bitcoin’s one month reversal
  • Overall market capitalisation declined to $1.04tn
  • Total value locked in DeFi decreased sharply to $38.8bn, according to industry monitor DeFi Pulse

Digital assets retraced significantly this week as global investment approaches turned cautious ahead of the Federal Reserve’s annual meeting, setting price levels back a few weeks. However, adoption continues to roll on, with major names around the world like Invesco, Mastercard, DBS, MercadoLibre, and Alibaba affiliate Ant Group all featuring prominently, alongside steady VC activity.

What happened: UK moves towards CBDC trials and legal framework for digital assets

How is this significant?
  • The United Kingdom continues moving towards its own legal framework for digital assets, since Brexit excludes them from the European Union’s recently-proposed MiCA (Markets in Crypto Assets) agreement
  • As part of this, the Law Commission—an independent regulatory body advising the UK government on legal reform—have moved to provide a statutory basis for the treatment of digital assets
  • In an interview with Bloomberg, representatives from the Commission said that their main aim is proposing certainty, particularly that crypto assets can be objects of property rights, with supporting reasoning and principles
  • Additionally, a consortium of private companies known as Digital Financial Market Infrastructure (DFMI) announced a privately-led Digital Sterling pilot program, set to run for at least one year from this autumn
  • After 12 to 24 months of testing, DFMI will provide recommendations and a white paper to the Bank of England
  • BCG serves as one of DFMI’s consulting partners, with MD and partner Kunal Jhanji saying “With the advent of blockchain technology, digital assets are ushering in a new era for money, with potentially transformative benefits for consumers, businesses, financial institutions and states”

What happened: DBS says digital asset trading surged in Singapore despite sell-off

How is this significant?
  • Singapore’s largest bank, DBS, disclosed this week that despite a depressed market in 2022, trading activity on their proprietary crypto asset exchange has grown significantly
  • In particular, the bank said that trading more than doubled in June compared with April—and that buys accounted for 90% of the trading activity
  • The amount of Bitcoin purchased on the exchange quadrupled in the same timeframe, with DBD Digital Exchange CEO Lionel Lim saying “Investors today are instead seeking out safe harbours to trade and store their digital assets amid the ongoing market volatility”
  • One of the key attributes of DBS’ exchange is that it only serves private clients like institutional investors and family offices, meaning that interest amongst these groups appears to have grown despite adverse market conditions—plans to expand trading to retail investors were paused earlier this year, as the bank awaits regulatory clarity

What happened: Contagion latest—Temperatures run high at Celsius

How is this significant?
  • Beleaguered lender Celsius hit several headlines this week as a result of their ongoing bankruptcy proceedings, and failed hedge fund 3 Arrows Capital (3AC) also saw further developments in their ongoing liquidation saga
  • Celsius faced accusations over a lack of transparency from trustees overseeing their current bankruptcy court case, leading to requests for an examiner to be appointed to allay “confusion and anxiety” over the company’s actual financial state
  • The lender also countersued a former money manager (who has accused them of fraud), alleging that the firm KeyFi and its founder Jason Stone were “incompetent” and had misled them over their investing expertise and lost Celsius assets through purported “extraordinarily inept” decisions leading to “staggering” liability to Celsius
  • Additionally, Celsius found the time to sue crypto custodian Prime Trust, claiming that the company was still holding Celsius-owned digital assets worth a cumulative $17m, and had “refused to fulfil its obligations to transfer” them back since Celsius initiated bankruptcy proceedings
  • Meanwhile, 3AC’s liquidators achieved a victory in Singapore’s high court, allowing them to probe the firm’s local records
  • This decision gives Teneo (the firm appointed when liquidation proceedings began in the British Virgin Islands) “access to any financial records the fund kept locally”
  • Fellow Singapore-based firm Hodlnaut provided an update on their current legal processes and financial status after previously filing for creditor protection
  • The company stated they are “working hard on the recovery plan”, but also confirmed “pending proceedings” with the Singapore police force, and have reduced headcount by 80% to cut costs

What happened: Mastercard partners with Binance to broaden crypto payments

How is this significant?
  • Mastercard—the second-largest global payments processor—partnered with Binance, the world’s largest digital asset exchange, this week
  • The partnership will allow Binance customers to use their digital holdings for payment in over 90 million stores worldwide within Mastercard’s merchant network
  • The program will begin in Argentina, before rolling out globally later on if all goes well
  • As a nation with over 70% annual inflation, Argentina could prove a key testing ground for digital assets as a general payment mechanism; over the last four years, Bitcoin has grown by over 1,350% against the Argentine Peso
  • Mastercard CEO Michael Miebach said on Linkedin “We can unlock the full potential of blockchain technology when we make it easier to access + easier to use. One way we do that is by bringing crypto to everyday purchases”

What happened:Invesco launches actively-managed Metaverse equity fund

How is this significant?
  • Financial firm Invesco became the latest institutional presence to pronounce an interest in the burgeoning blockchain-driven Metaverse space this week, launching a new actively-managed equity fund concentrating on companies with metaverse exposure
  • The new fund will be managed from within Invesco’s Asia & Emerging Markets equities team, co-led by Tony Roberts and James McDermottroe
  • Roberts was keen to stress the potential scale of the nascent Metaverse opportunity, saying “It has been estimated that, by 2030, virtual and augmented reality could deliver a £1.4trn boost to the global economy. The interconnectivity that it enables will likely have a transformative impact across industries as diverse as healthcare, logistics, education and sport”
  • Invesco has identified seven key areas of investment for the fund, including blockchain, hardware, and interoperability tools
  • In particular, Invesco believes “those involved in developing the infrastructure that is required to be in place for the metaverse to reach its true potential” stand to gain the most from a forecast surge in adoption for shared digital worlds and assets
  • An Invesco spokesperson told industry publication Decrypt that the fund is registered in Luxembourg, and will carry an initial valuation of $30m

What happened: Alibaba affiliate Ant Group to launch crypto “SuperApp”

How is this significant?
  • Reports in the Malaysian press this week revealed that the country’s largest independent investment bank, Kenanga Bank Bhd, has signed a memorandum of understanding with Chinese financial firm Ant Group to develop a new “wealth-centric SuperApp”
  • Ant Group is an affiliate company of China’s financial powerhouse Alibaba, making this partnership one of the company’s most overt entries into the digital asset field to date
  • According to a press release, digital assets will be a key area of focus for this app targeting the “mass affluent” of Malaysia, alongside more traditional trading opportunities like forex and stocks
  • Kenanga Managing Director Datuk Chay Wai Leong praised Ant Group’s digital technology and blockchain expertise, saying the new platform could “make wealth creation more accessible by democratising financial services for the millions of Malaysians around the country who want better, swifter and cheaper access to financial products and solutions”

What happened: LatAm e-commerce giant launches proprietary digital asset

How is this significant?
  • MercadoLibre—Latin America’s largest online marketplace—created its own digital asset this week, serving as part of a new loyalty program for customers
  • The new “Mercado Coin” was launched on the Ethereum blockchain as an ERC-20 token, with an initial valuation of $0.10 each
  • This price can fluctuate according to market forces, as opposed to traditional loyalty programs or rewards, where the issuing company has sole authority over the value they pass on to customers
  • The amount of Mercado Coin earned will correlate with the value of transactions, acting like a cashback reward
  • Mercado Libre CEO and founder Marcos Galperin identified the development as a “step towards democratising financial inclusion in Latin America”
  • This latest move is just the latest evolution in the company’s approach to digital assets; it holds millions of dollars worth of Bitcoin on its balance sheet, launched digital asset trading capabilities, and partnered with Mastercard to increase safety of customers’ crypto assets

What happened: South Korean brokerages move to set up digital asset operations

How is this significant?
  • South Korean newspaper NewsPim this week reported that seven major local brokerages are in the process of setting up digital asset exchanges to launch early next year
  • This includes Samsung Securities, a subsidiary of electronics giant Samsung, as well as Mirae Asset Securities—the remaining five major firms were not named in the report
  • NewsPim reported that this entry from large traditional investment businesses aligns with a more crypto-friendly environment pledged by new Korean president Yoon Suk-Yeol—although the recent collapse of the Korean-based Terra Luna blockchain has raised regulatory scrutiny in the country
  • The report stated that streamlined regulations are on their way, with a Digital Asset Framework Act creating a clear division between security-type tokens and non-security-type tokens

What happened: VC news

How is this significant?
  • Decentralised Autonomous Organisations, better known as DAOs, are an increasingly popular organisational structure in the digital asset field, enabling democratised decision-making on development priorities—but thus far they haven’t achieved much notable presence in the VC field
  • This week, however, Orange DAO raised $80m for democratised Web3 funding efforts, with over 1,000 members and links to the renowned Y-Combinator business accelerator
  • Nischal Shetty, a co-founder of leading Indian digital asset exchange WazirX, is seeking $20m to $30m of seed funding on a $200m valuation for a new Ethereum-compatible blockchain called Shardeum, according to sources speaking to TechCrunch
  • Shardeum seeks to solve the blockchain trilemma—a widely-held consensus that any blockchain will have to sacrifice one of scalability, speed, and decentralisation to achieve high metrics in the other two—by partitioning the blockchain into several smaller parallel networks, known as “shards”
  • Shetty confirmed to TechCrunch that he is “currently working with top VCs in an ongoing funding round”
  • Metaverse-gaming-centric startup Ready Player Me raised $56m for the development of cross-game digital assets, in a Series B round led by Andreessen Horowitz (a16z)
  • The Estonian startup allows users to create avatars compatible across multiple different games, driving towards the Metaverse mission of unified digital identities
  • Ready Player Me previously raised $13m in a January Series A round, since then it has more than tripled the number of announced partners for its creation platform, working with companies like Huawei, Tencent, Verizon, and HTC
  • Galaxy Digital Holdings confirmed that their new Galaxy Liquid Alpha Fund is on track to reach $100m in AUM, up from current levels approaching $50m AUM after launching in this year’s bear market
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