Nickel News Roundup - Week 15

15th April, 2021

Market Overview:

• Bitcoin achieved a new record value just below $65,000, remaining above $60,000 since Sunday, with a current value of $63,040—a 10% weekly increase
• Bitcoin’s market capitalisation exceeded $1.2tn for the first time on Wednesday as it reached new all-time highs
• Ethereum had another strong week, eclipsing its previous all-time high by more than 10%, rising to a current value of $2,480—representing 22% weekly growth
• The entire market saw strong growth, with 16 of the top 20 coins (excluding stablecoins) seeing at least double-digit percentage growth
• Binance Coin and XRP saw especially significant growth amongst major altcoins; each growing by more than 35% over the course of the week
• The overall market cap of the asset class increased by over 10%, to a new record value of $2.26tn
• Decentralised Finance achieved new record values in line with the rest of the market, thanks to over $71bn in total value locked into DeFi applications

News:

What happened: Coinbase IPOs on NASDAQ and trades at a 30% premium

How is this significant?

• COIN listed on Nasdaq, with day one closing was priced at $328, a gain of over 30% from its $250 reference price. During the session, the stock hit a high of $429, corresponding to valuation of over $100 billion, eclipsing the market capitalisation of NYSE and Nasdaq combined.  
• Several analysts, such as CNBC’s Jim Kramer, see Coinbase’s listing as a watershed moment for digital assets, with a researcher from John St Capital noting that the company’s Q1 results were impressive, and that “The 56 million user number is bigger than CashApp & Venmo and significantly larger than RobinhoodApp & eToro. That's greater than every bank apart of JP Morgan”
• Ahead of the COIN stock’s listing, top digital asset exchanges Binance and FTX both announced that they would offer tokenised COIN stocks on their exchanges, one day after Binance announced it would offer tokenised and fractionalised stock trading, beginning with Tesla

What happened: State Street announces plans for crypto asset trading

How is this significant?

• State Street, the second-oldest bank in the US, is following BNY Mellon (the country’s oldest bank) into the world of digital assets
• With more than $3tn in assets under management, State Street’s move signals an increasing acceptance of digital assets within the frameworks of traditional finance, particularly as they aim to create institutional trading platforms
• State Street’s Currenex technology arm is working alongside London-based Forex technology provider Pure Digital to create “a fully automated, high throughput OTC market for digital assets and cryptocurrencies with physical delivery and bank custody”
• In a press release about the collaboration, David Newn of State Street Global Markets said “Currenex is thrilled to leverage our experience and expertise in the FX and digital asset trading marketplace to provide Pure Digital with robust technology and infrastructure for this exciting digital currency trading initiative”
• State Street and Pure Digital expect to begin trading from “the middle of 2021” onwards

What happened: Ethereum project incubator Consensys raises $65m in funding from major names in traditional finance

How is this significant?

• Consensys, a major developer of technology for the Ethereum ecosystem, this week confirmed a $65m funding round with participation from major financial institutions
• As well blockchain-focused companies like Alameda Research and the Maker Foundation, the funding round included giants from traditional finance, including UBS, Mastercard, and JP Morgan
• Primarily, this is seen as a move by traditional finance companies to gain exposure and access to the rising tide of decentralised finance (DeFi) built on the Ethereum blockchain
• In a statement, Consensys founder (and Ethereum co-founder) Joseph Lubin said “ConsenSys’ software stack represents access to a new automated objective trust foundation enabled by decentralized protocols like Ethereum. We are proud to partner with preeminent financial firms alongside leading crypto companies to further converge the centralized and decentralized financial domains at this particularly exciting time of growth for ConsenSys and the entire industry”
• UBS’ head of group technology Mike Dargan noted “Our investment in ConsenSys adds proven expertise in distributed ledger technology to our UBS Next portfolio”
• Mastercard’s Raj Dhamodharan (executive vice president of digital asset and blockchain products) stated “Enterprise Ethereum is a key infrastructure on which we and our partners are building payment and non-payment applications… Our investment and partnership with ConsenSys helps us bring secure and performant Enterprise Ethereum capabilities to our customers”

What happened: Billionaire Daniel Loeb’s hedge fund revealed to hold crypto assets 

How is this significant?

• After announcing a “deep dive” into digital asset education last month, billionaire Third Point hedge fund manager Daniel Loeb appears to have been convinced of its potential
• Third Point LLC currently hold over $17bn in total assets under management
• Regulatory filings reveal that five of Third Point LLC’s funds hold crypto assets with Coinbase
• However, although exposure has been confirmed, it is not currently clear how much their digital assets are worth, or what form Third Point’s digital asset exposure currently takes, but in another brochure the company has confirmed that they can invest through both direct ownership and derivatives contracts

What happened: ETF developments gather pace

How is this significant?

• On Thursday, BNY Mellon announced that they would be the service provider for the proposed First Trust Skybridge Bitcoin ETF
• BNY Mellon stated that “As the world's largest asset servicer, we take great pride in working with our clients to bring new, innovative products to market... growing interest in digital assets presents a compelling opportunity to allow investors to explore cryptocurrency and we are proud to work with First Trust to bring their new Bitcoin ETF to market
• Galaxy Digital filed for a Bitcoin ETF this week, making them one of nine ETFs to be reviewed by the SEC
• On Friday, the SEC released a statement that they had begun the process of reviewing the Bitcoin ETF filed by WisdomTree last month, following VanEck’s ETF filing into the evaluation process
• In Germany, the ETC group announced that they would list a physically-backed Litecoin ETP on the Deutsche Boerse, following a physical Ethereum ETC which they launched on the exchange in March
• JP Morgan commented on the potential impact of digital asset ETFs in a report this week, noting that “Launching a Bitcoin ETF in the U.S. will be the key to normalizing the pricing of bitcoin futures, in our view”, potentially shrinking the 25% premium present in June contracts recently listed by the CME

What happened: Microstrategy board of directors agree payment in Bitcoin

How is this significant?

• In a regulatory filing this week, digital asset advocate Michael Saylor’s Microstrategy revealed that as part of the company’s “commitment to Bitcoin”, non-employee directors on their board will henceforth receive payment in Bitcoin rather than cash
• Microstrategy are one of the highest profile voices behind institutional investment into digital assets, and this move followed news of another $15m Bitcoin purchase by Microstrategy this week, bringing their total holdings to 91,579 Bitcoins
• The company’s commitment to Bitcoin has led to significant returns; a day after the disclosure about board Bitcoin payments, the company’s share price grew 10%, for a current market capitalisation of around $7.5bn

What happened: Former CIA director publishes paper refuting concerns about Bitcoin

How is this significant?

• One of the longest-running arguments used by opponents of Bitcoin is that it might be used in covert financial dealings
• Former CIA director Michael Morrell published a paper of his research on the subject, finding arguments about Bitcoin’s role in illicit finance untrue
• Morrell noted that he went into his research expecting traditional arguments to be proven correct, but found that these were significantly overstated, and that “the illicit use of cryptocurrencies in general and Bitcoin in particular, as a share of total market activity, is certainly not higher than it is in the traditional banking system and is most likely less”
• In concrete terms, he believes that below 1 per cent. of transactions on blockchain are related to illicit activity, whilst “illicit activity in the economy as a whole, overwhelmingly conducted through traditional financial intermediaries and with traditional fiat currencies, are on the order of 2 to 4 per cent. of global GDP”
• Furthermore, thanks to the open and transparent nature of blockchain, he believes that use of digital assets can actually prove useful in reducing financial crime, noting “[It] is easier for law enforcement to trace illicit activity using Bitcoin than it is to trace cross-border illegal activity using traditional banking transactions, and far easier than cash transactions”
• In an interview with Forbes ahead of the report’s release, Morrel said he sees blockchain and digital assets playing a key role in the future financial infrastructure of the world: “we [the United States] need to make sure that the conventional wisdom that is wrong about the illicit use of Bitcoin doesn't hold us back from pushing forward the technological changes that are going to allow us to keep pace with China”

What happened: Bitcoin adoption grows in Turkey due to economic uncertainty

How is this significant?

• Last month, Turkish president Erdogan dismissed the central bank’s chief, the third time in 2 years the institution has had a change in leadership
• The wider Turkish economy is experiencing inflation of over 16%, and the unemployment rate exceeds 12%
• Although the Guardian notes that president Erdogan has “called for Turks to invest in gold and foreign currencies to shore up up domestic financial markets”, there appears to have been a far greater growth in digital asset trading instead
• Data from Reuters reveals that year-on-year, trading volumes in digitals have increased approximately 23-fold, and Google search results for the asset class are also at all-time highs

What happened: Time Magazine adds Bitcoin to balance sheet

How is this significant?

• Grayscale, one of the largest institutional investors in digital assets, have partnered with Time Magazine to produce a series of educational videos about digital assets for their readership
• Grayscale CEO Michael Sonnenschein noted that as part of this deal, Time have agreed to be their first partners to take payment in Bitcoin, with the intention of holding it on their balance sheet rather than immediately converting to cash
• This marks another major move into digital assets by the 98-year old publication—in March, they created and auctioned special NFT editions of classic magazine covers, as awareness around non-fungible tokens grew
• Their intent to hold Bitcoin on their balance sheet may have been foreshadowed by a job listing posted in March for a new CFO, requiring candidates to demonstrate “Comfort with Bitcoin and cryptocurrencies”

What happened: Chinese technology company Meitu adds to institutional crypto asset investments

How is this significant?

• On Thursday, China and Hong Kong-listed technology company Meitu disclosed another major investment into digital assets, purchasing $10m of Bitcoin at approximately $57,000 per coin
• This brings their total digital asset investments over the last two months to around $100m, split almost evenly between Ether ($50.5m) and Bitcoin ($49.5m)
• Although crypto investment by companies in the global West has become increasingly commonplace over the last year, Meitu is the first significant corporate buyer of digital assets in China
• As part of their latest purchase, the company’s board provided a rationale for their investment, praising Bitcoin’s issuance rate and maximum supply; “these features potentially even render Bitcoin as a superior form to other alternative stores of value such as gold, precious stone and real estate”

What happened: Federal court supports XRP founders in SEC lawsuit

How is this significant?

• Court documents published on Friday revealed that a federal judge in the US has denied the SEC’s request to examine the personal finances of the founders behind the digital asset XRP
• This marks the second legal victory in quick succession for Ripple (the company that created XRP), after the same judge ruled a few days earlier that they would be granted access to the SEC’s internal communications concerning their crypto asset
• Ripple’s XRP has rallied strongly in response to this news, reaching its highest levels since early 2018

What happened: CBDC development continues globally

How is this significant?

• In an announcement on Thursday, the European Central Bank revealed the results of a public consultation concerning the development of a digital Euro
• Over 8,200 responses were received, and the report found that privacy was the most important feature for 43% of respondents, followed by security (18%), and implementation across the Eurozone (11%)
• Although a digital Euro likely remains 3-4 years away, the document should be important in shaping its development, with ECB executive board member Fabio Panetta noting “We will do our best to ensure that a digital Euro meets the expectations of citizens highlighted in the public consultation”
• In Japan, the Bank of Japan announced plans to create a set of common rules for CBDCs within a group of the world’s seven largest central banks
• Meanwhile, Russia’s central bank earmarked this December for the release of its first digital Ruble prototype, to be run on a hybrid system of decentralised ledgers and centrally-administered controls
• The RCB intends to draft regulation about digital Ruble integration in 2022, with plans for smart contract integration to allow for automated financial settlements

What happened: Crypto asset mining experiences high levels of investment and miner confidence

How is this significant?

• US-based Integrated Ventures agreed to a $35m purchase of crypto mining hardware this week, including access to new machines releasing in 2022
• Graphics card producer NVIDIA revealed on Monday that their Q1 financial results are tracking above initial forecasts, with revenue estimates for their industrial crypto mining processors adjusted upwards to $150m—tripling the original $50m forecast
• Russian mining company BitRiver has become the latest miner to create a token offering holders access to their mining infrastructure
• American company Gryphon Digital Mining raised $14m for environmentally-sustainable mining infrastructure
• According to data from crypto analytics firm Glassnode, Bitcoin miners are accumulating coins for the first time since December, with 30-day holdings on miners’ addresses increasing—indicating that miners would rather hold in anticipation of future value increase than immediately cash out for overheads and expenses
• Publicly-listed Canadian mining company Hut8 has released a short-form prospectus ahead of a planned securities offering on the Toronto Stock Exchange worth almost US$400m

What happened: Swiss custody firm introduces DeFi offering to banks

How is this significant?

• METACO, a Swiss digital asset custody firm, announced on Tuesday that they have launched a platform allowing private banks to easily integrate and access DeFi applications
• Their “METACO Harmonize” solution is intended to provide “an end-to-end digital asset orchestration system for institutions”
• According to their CEO Adrien Treccani, “The launch of METACO Harmonize is driven by the exponential growth of the digital asset economy, from an increase in the number and types of assets which are being tokenized, an increase in the number of counterparties trading those assets, and an increase in the relevance of decentralized finance applications… METACO Harmonize was developed together with our customers and provides institutions with a platform which will enable them to scale their digital asset operations with the requisite flexibility”

What happened: Digital finance platforms experience digital asset growth

How is this significant?

• Revolut, a Britain-based digital banking service with 15 million customers worldwide added 11 new digital assets to their platform this week in response to customer demand
• This takes the total number of coins and tokens supported by Revolut (on a custodial basis) to 18
• Several of the tokens added to their platform, such as Uniswap (UNI) and Yearn Finance(YFI), are relatively new entrants to the space, created during the rise of DeFi last year
• As an online-only bank, Revolut was one of the first financial institutions to add custodial support for digital currencies, beginning with Bitcoin, Ether, and Litecoin in 2017
• In a blog post titled “How Crypto Fits Into Robinhood’s Mission”, digital brokerage Robinhood disclosed that they have tripled the size of their crypto asset team due to overwhelming investor appetite for digital assets
• Robinhood currently features custodial trading for 7 different digital assets
• In the first quarter of 2021, Robinhood had 9.5 million customers trading crypto assets through their platform; more than quintupling the number from the last quarter of 2020

What happened: Liberty Mutual participates in insurance-focused $100m raise by NYDIG

How is this significant?

• Digital asset manager New York Digital Investment Group (NYDIG) secured $100m of growth capital from the insurance sector, including Liberty Mutual and Starr Insurance
• According to a report in the Insurance Journal, this is part of a wider move to bring digital assets into the insurance field; “Mike Sapnar, a 30-year insurance industry veteran of insurance and former CEO of TransRe, is joining NYDIG as global head of Insurance Solutions to focus on accelerating bitcoin use in in the global property/casualty industry”
• The report also notes that “According to NYDIG, life, annuity and P/C insurers now own, in aggregate, more than $1 billion of direct and indirect bitcoin exposure facilitated exclusively by NYDIG and held on NYDIG’s platform”

What happened: Bloomberg’s monthly crypto report includes possible $400,000 Bitcoin target

How is this significant?

• On Wednesday, Bloomberg released their monthly digital asset report, with April’s title reading “Rising Bitcoin Adoption Tide”
• As suggested by the title, the report is overwhelmingly positive on the potential of crypto assets, with Bloomberg analysts forecasting a possible price of $400,000 per Bitcoin, based on movements experienced in the 2013 and 2017 bull markets
• Whilst past performance is no guarantee of future results, they noted that “history may rhyme”, citing the reduction in new mining rewards created by last May’s “halving” as a significant factor when it comes to supply vs demand, saying that “The year after a supply cut (halving) is what 2021 has in common with 2017 and 2013, along with subdued volatility”
• Analysts also believed that macroeconomic factors favour Bitcoin ahead of traditional stores of value like gold, writing that “Rising real yields are a headwind for gold prices, but less so for bitcoin, still in its price-discovery stage… Gold is fighting a battle with Bitcoin, which can earn 6%-8% in crypto savings accounts and is well on its way to becoming a global reserve asset in a digital world”