Nickel Research Centre

Nickel News Roundup - Week 5

5th February, 2021

Market Overview:

The digital assets market continued the positive momentum that began towards the end of last week, with strong growth from Bitcoin, new all-time highs from Ethereum, and positive performance from altcoins all helping to push the total market cap to new record levels.

  • Bitcoin grew steadily this week, from around $32,000, to a current value of $37,500
  • Ethereum had another record-setting week, breaking the previous records by a more significant margin than in the previous two all-time-high run-ups. Ether experienced over 20% growth, to reach a new record level of $1,680, and is currently trading at $1,649, partly driven by an inflow of institutional investment
  • Bullish momentum was sustained across the entire market, with 19 of Coinmarketcap’s top 20 assets (excluding stablecoins) growing in value over the course of the week. At the time of writing, only 7 coins in the top 100 performed negatively over the last 7 days
  • As well as Ethereum, there were new all-time-highs for a wide range of altcoins. Notably, several exchange tokens offering benefits for users on exchanges such as Binance, FTX, and Uniswap broke records, buoyed by record trading volume
  • The overall crypto asset market cap reached new all-time highs, breaching the trillion dollar mark again for a total value of $1.18tn
  • The DeFi sector grew to a new record of Total Value Locked this week. The overall value in DeFi increased from $29.7bn to $39.7bn

Digital assets carried on where they left off last week, maintaining the momentum of Friday’s surge. This week, big names declared their support for digital assets, big corporations outlined their plans, established financial institutions confirmed more adoption, and influential nations rubber-stamped more regulatory approval.

What happened: Visa CEO reveals plans on cryptocurrencies across their payment network

How is this significant?

  • Visa is the world’s largest payments processor, giving them the ability to greatly increase the accessibility and utility of crypto assets
  • In Visa’s Q1 Earnings call, CEO Al Kelly spoke about their plans regarding the integration of digital assets, saying he wished to make them both easier to purchase, and integrate them as a means of transaction across their payment network—albeit with the latter role seemingly reserved for stablecoins
  • Kelly told investors “we believe that we are uniquely positioned to help make cryptocurrencies more safe, useful and applicable for payments through our global presence, our partnership approach and our trusted brand”
  • He differentiated between regular cryptocurrencies, and fiat-pegged stablecoins, declaring that cryptocurrencies such as Bitcoin and Ethereum are “digital gold… predominantly held as assets” 
  • Visa’s broad crypto strategy centres around working “with wallets and exchanges to enable users to purchase these currencies using their Visa credentials or to cash out onto our Visa credential to make a fiat purchase at any of the 70 million merchants where Visa is accepted globally
  • For stablecoins, direct use as payment is an option, with Kelly declaring that “stable coins and central bank digital currencies… could have the potential to be used for global commerce, much like any other fiat currency... we see them as part of our network of networks strategy”
  • Visa also sent out a press release on Wednesday, announcing a digital asset pilot program with neobank First Boulevard, trialling Visa’s crypto APIs, and exploring how “financial institutions lacking their own digital currency infrastructure can harness Visa’s platform for tapping into the growing world of crypto assets and blockchain networks”
  • Infrastructure for Bitcoin trading is provided by digital asset bank Anchorage, who said “Visa’s crypto APIs pilot program is a significant step forward both for the proliferation of crypto as an asset class, and for accessibility and inclusion in payments and financial services”

What happened: Thousands of firms register for corporate “Bitcoin-buying Bootcamp” 

How is this significant?

  • Numerous major digital asset companies, including Binance, Gemini, Coinbase, Microstrategy, Fidelity, Stone Ridge Asset Management and Galaxy Digital combined forces this week for a two-day virtual summit aimed at demystifying and catalysing institutional investment into cryptocurrencies
  • Dubbed “Bitcoin for Corporations”, the event was aimed at helping institutions “to figure out how to plug Bitcoin into their balance sheet or their PNL’’
  • Microstrategy CEO Michael Saylor, a leading institutional advocate of crypto assets, was keen to share the knowledge they’ve accrued as an early mover; “We’re going to publish our playbook, all of our accounting guidance, our legal guidance, all the work we did over the course of months to get ready to do this as a publicly traded company’
  • According to a tweet by Saylor on Tuesday, over 1,400 firms registered to follow the livestreamed conference, representing significant potential for future investment 
  • The participants in the conference can all point to success from digital assets; since Citigroup downgraded Microstrategy’s stock to “sell” on December 8th due to a perceived overreliance on Bitcoin, MSTR shares have increased from $289 to $747

What happened: Coinbase to launch direct listing on NASDAQ

How is this significant?

  • Coinbase is the largest American-based crypto asset exchange, and going public on the tech-heavy NASDAQ provides a better chance of direct exposures to investors familiar with their fundamentals
  • Although the timeline hasn’t been confirmed yet, it was reported this week that Coinbase would list on the NASDAQ, following news last week that they plan to go public by direct listing
  • wrote that “Existing Coinbase investors have already been trading shares through Nasdaq’s Private Market platform, where the company has notched an implied valuation of $50 billion”

What happened: Elon Musk publicly endorses Bitcoin

How is this significant?

  • Elon Musk, CEO of Tesla (and currently the world’s richest person) is one of the most influential billionaires on the planet, thanks to his public profile and history of innovation
  • After sporadic previous statements indicating curiosity and interest in cryptocurrencies, Musk made a definitive declaration of support for crypto assets on Monday, via the audio-based social media platform Clubhouse
  • Musk declared that "I do at this point think Bitcoin is a good thing. I'm late to the party, but I am a supporter of Bitcoin”, saying he should have bought in 8 years ago
  • He added his belief that institutional adoption is set to accelerate, stating that  “I think [Bitcoin] is on the verge of getting broad acceptance by conventional finance people”
  • This followed on from his decision on Friday to change his Twitter biography to one word; “#bitcoin”, which was credited by some for a sudden surge in Bitcoin’s value

What happened: Mark Cuban praises cryptocurrencies and “the Store of Value generation”

How is this significant?

  • Billionaire tech entrepreneur and investor Mark Cuban is one of the most high-profile billionaires in the world, thanks to appearances across a wide range of media platforms
  • Cuban published a blog this week praising the potential of crypto assets in creating digital stores of value
  • He outlined the potential benefit of smart contracts, such as automation of bureaucratic processes, guaranteed levels of issuance or scarcity, and “my favorite and what I think is possibly the ultimate game changer; whether or not future sales pay a percentage of every sale to the person/company who originally minted the digital good”
  • Noting their purpose beyond currencies, he proposes calling cryptocurrencies “CryptoAssets” instead, noting that “CryptoAssets... like Bitcoin , Ethereum and so many others, along with the tokens being created to support De-Fi and other value creating derivatives of CryptoAssets... all are Stores of Value with market cap leader Bitcoin having a decade plus long history of transactions and wealth generation”
  • Taking inspiration from the recent social-media-driven rally for GameStop, he says “the bottom line is that there are a growing number of investors and traders who think that the digital goods and CryptoAsset marketplaces are better than old school physical markets and the stock market, and most of them are young. They love the fact that NO ONE has power over them. That there is no central authority and they get the results of their own efforts”

What happened: Swiss blockchain regulation comes into effect

How is this significant?

  • With its background as an international banking hub, Switzerland has also been at the forefront of digital asset development, most notably in the “Crypto Valley” of Zug, near Zurich
  • The first phase of Switzerland’s so-called “blockchain law” came into effect on Monday, marking the first step of a move towards a fully regulated Swiss digital securities industry
  • Rather than aimed at restrictions, these regulations aim to bring new benefits into the market, such as “faster trading, reduced costs and a wider range of products available to a greater number of participants”
  • This makes Switzerland one of the first countries in Europe to comprehensively and unambiguously codify blockchain into national law
  • Hans Kuhn of the Swiss digital asset-focused bank SEBA noted that “With the DLT law coming into force, Switzerland reaffirms itself as one of the most progressive and innovative legal and regulatory jurisdictions around the world that now fully supports the issuance of digital securities on a native blockchain basis”

What happened: US Federal Reserve recruiting “digital innovations” specialist

How is this significant?

  • The United States is one of the most influential economies in the world; so US movement on blockchain can have wide-reaching effects
  • In an event hosted by Princeton University recently, Jerome Powell confirmed that The Fed is investing heavily in understanding the [CBDC] technology and analyzing the policy questions”
  • Less than a month after the OCC ruled that stablecoins could be used for transactions by American banks, the Federal Reserve posted a job listing for a Digital Innovations Policy Program manager
  • According to the job description, the manager will be in charge of assessing the impact of digital innovations (including cryptocurrencies) on the “operation and oversight of financial services, and the supervisory and regulatory framework of emerging payments platforms, activities and institutions”

What happened: SDAX receives Singaporean regulatory approval to launch tokenised asset exchange

How is this significant?

  • Singapore is one of the most advanced economies in Asia, and one of the main hubs for blockchain development globally
  • SDAX (Singapore DigiAssets Exchange) has been granted Approval-in-Principal from the Monetary Authority of Singapore to operate an institutional grade, blockchain-based digital asset trading platform
  • Rather than trading digital assets in the form of crypto assets, this platform aims to use blockchain technology to trade digitised versions of traditional financial assets, such as “digitised debt, equity, and hybrid instruments with high-quality real estate as the underlying asset class”
  • Unlike most exchanges dealing with blockchain, SDAX will keep 16 hour trading days, and be targeted at institutions
  • Former Singapore government minister of National Development, Mah Bow Tan, sits on the advisory panel of SDAX, and was quoted as saying “Singapore is a globally trusted financial hub with strong government support for fintech and blockchain technology... These factors will give the global market significant confidence in home-grown digital asset exchanges like SDAX”

What happened: Rabobank completes first real-time blockchain-based commercial paper transaction

How is this significant?

  • For the first time ever, commercial paper transactions were executed via blockchain technology, leveraging increased efficiencies
  • The transactions represent the culmination of a successful two year pilot program, alongside Commerzbank and Euroclear
  • The transactions involved the settlement of multiple €1m one week maturity Euro commercial papers, sent from Rabobank to Dutch asset managers, NN Investment Partners and PGGM, settled instantly rather than the standard two business days
  • Rabobank Markets head of innovation, Jacek Wieclawski, praised the potential of the technology: "By leveraging the mix of both blockchain and existing technologies, we managed to create a new market for our clients where public debt securities can be traded and settled instantly while keeping fund managers focused on managing investors’ money in real-time”

What happened: USA’s largest Pension Fund invests in crypto mining

How is this significant?

  • The California Public Employees' Retirement System (CalPERS) is the largest pension fund in the USA, worth almost $442bn
  • According to filings with the SEC on Tuesday, CalPERS holds 113,034 shares in crypto mining company RIOT blockchain inc.; representing a significant increase from 16,907 RIOT shares held according to their Q3 2020 filings.
  • Surging interest in cryptocurrencies has benefitted crypto miners, and made them a more attractive investment opportunity; RIOT’s share value increased 541% during Q4 2020
  • The total value of CalPERS holdings in RIOT increased from $49,000 at the end of Q3, to approximately $1.9 million at the end of 2020

What happened: Crypto miners experience record revenues in January

How is this significant?

  • The levels of demand for crypto assets made January a record-breaking month for miners, as well as traders
  • Miners of the two largest cryptocurrencies, Bitcoin and Ethereum, both recorded revenues at their highest levels since January 2018
  • Bitcoin miners earned $1.09bn in revenue, with over $977m coming from block subsidies, as the value of Bitcoin rose from $30,000 to a high of $42,000 over the course of the month—contributing to a 62% increase in monthly miner revenues
  • Ethereum Miners earned an all-time high of $800m in revenues, with the demand of the DeFi sector meaning that transaction fees accounted for over $300m of that value

What happened: January spot trading volume reaches exceeds $900m

How is this significant?

  • According to data from crypto-research company The Block, digital asset spot trading in January reached new highs, eclipsing the previous record set in December by 140%
  • Overall, across 20 exchanges featured in the data, spot trade volumes in January amounted to approximately $906m; about 90% of the market cap of all crypto assets
  • Binance, Coinbase, and institutional spot exchange LMAX represented the three largest volume exchanges, indicating strong demand across both the institutional and retail investor tranches
  • This trade volume was backed up by broader indicators of interest, such as Coinbase ranking within the top 400 website in the USA and experiencing over 1.3m app downloads in January. At the time of writing, Coinbase was the 3rd most popular finance app in the Apple App Store, and the 6th most popular overall

What happened: 2021 sees record network activity for Bitcoin 

How is this significant?

  • 22.3m Bitcoin addresses were active in January, reflecting a new record, according to crypto analytics company Glassnode
  • This aligns with increased interest in Bitcoin on both an institutional and retail level
  • The number of active addresses has exceeded the previous record of 21.6m set during Bitcoin’s previous record run in December 2017
  • More active addresses means more trading interest, and a wider base of interest which strengthens Bitcoin’s proposition as a store of value

What happened: Guggenheim CIO revises Bitcoin projections in light of increased institutional investment

How is this significant?

  • In an interview with CNN, Scott Minerd, Chief Investment Officer of multi-billion dollar investment firm Guggenheim Partners, spoke about Bitcoin becoming increasingly compelling to institutional investors as the market cap of crypto assets grows
  • Previously, they believed that the digital asset market “just wasn’t big enough to justify institutional money”, but that once Bitcoin crossed $10,000, it started to look “very interesting”
  • He sounded a bullish perspective on the long-term future prospects of Bitcoin, saying “We did a lot of fundamental research… If you consider the supply of bitcoin relative … to the supply of gold in the world, and what the total value of gold is, if Bitcoin were to go to those kinds of numbers, you’d be talking about $400,000 to $600,000 per Bitcoin”
  • Whilst stressing that there was no definite guarantee of Bitcoin reaching such a price, he believes the upside potential is positive, as “that’s an indication of what might be a measure of fair value… That gives you a lot of room to run”
  • In a December interview with Bloomberg, Minerd had claimed their fundamental research forecast a long-term maximum value of $400,000 per Bitcoin based on the same rationale of measuring against gold valuation, noting that “Bitcoin has a lot of the attributes of gold and at the same time has an unusual value in terms of transactions”

What happened: CME Chief Economist calls Bitcoin “an emerging competitor to gold”

How is this significant?

  • In a video for Bloomberg, Bluford Putnam, Managing Director and Chief Economist of the CME Group, outlined the value proposition of Bitcoin compared to gold, and noted how Bitcoin was becoming a more significant competitor to the precious metal
  • Whilst acknowledging the volatility of Bitcoin can be exacerbated by sudden supply-demand imbalances, Putnam pointed out that gold’s production is able (and expected) to increase this year, whilst Bitcoin’s issuance is reliably finite
  • The CME has “also noticed that gold may be losing its appeal as a hedge against global political risks”, with gold movements most closely correlated with policy shifts from the Federal Reserve, the same driving force behind movements in the equity market
  • As “the gold-equity relationship tended to become more closely associated”, gold’s “safe haven appeal” has weakened, whereas Bitcoin’s record performances have been set against a backdrop of global political and economic uncertainty
News Roundups