Nickel News Roundup - May 26, 2022

Nickel News Roundup

26th May, 2022

Market Overview:

Digital assets traded in narrow ranges at relatively low volumes this week, as the market continues to recover from the Terra blockchain crash.

• Bitcoin traded predominantly between $29,200 and $29,600, with a weekly low of $28,700, and a high of $30,640
• Bitcoin broke above the $30,000 mark on several occasions this week, but was unable to sustain a 24 hour run at those levels
• Bitcoin’s current price of $29,610 represents a 1.2% increase from last week
• Ether performed similarly, breaking above the $2,000 level on several occasions, but unable to establish a continuous run above those prices
• Ether mainly traded in the $1,960 to $2,005 range, with a low of $1,907 on Thursday, and a high of $2,080 on Monday
• Ether’s current price of $1,920 represents a 2% decrease from a week ago
• Regulatory voices on both sides of the fence commented on crypto assets this week, in the wake of the Terra blockchain’s collapse; Christine Lagarde urged stricter regulation as she spoke against the asset class, but IMF managing director Kristalina Georgieva told the World Economic Forum at Davos that although regulation is necessary, not all digital assets should be disregarded based on an algorithmic stablecoin’s crash; “I would beg you not to pull out of the importance of this world… It offers us all faster service, much lower costs, and more inclusion”
• Overall market capitalisation grew slightly to $1.25tn
• Total value locked in DeFi remained steady at $54.9bn according to industry monitor DeFi Pulse

Digital assets exhibited steady performance this week, recovering from recent volatility. Despite concerns over bear market conditions, outside of the markets, news about adoption and investment continues to pour in; featuring the entry of Japanese and Swiss banks, Bitcoin integration by leading payment processors, new VC deals (and a record new VC fund), as well as recognition in the Fortune 500 and from JP Morgan analysts. 

News:

What happened: Andreessen Horowitz (a16z) breaks record for largest crypto VC fund

How is this significant?

• Venture capital firm a16z completed the raise for a new digital asset fund this week, worth a record $4.5bn
• The $4.5bn raise was completed since the turn of the year, with plans first publicised in January
• This smashes the previous record for crypto VC funds, the $2.5bn Paradigm One fund launched by Paradigm during much more buoyant market conditions in November 2021
• The $4.5bn is divided up into two separate allocations; $3bn for venture investments, and the remaining $1.5bn for seed investments
• This new fund brings a16z’s total digital-asset-specific fund allocations to over $7.6bn

What happened: Sumitomo Mitsui moves into digital asset custody

How is this significant?

• One week after Nomura declared plans to set up a digital asset subsidiary, fellow Japanese financial powerhouse Sumitomo Mitsui followed suit, setting up a trust company for digital asset custody
• This company was formed via memorandum of understanding with existing digital asset exchange Bitbank inc., allowing Sumitomo to leverage their existing custody infrastructure for a variety of crypto assets
• Japanese news outlet Nikkei Asia reported that the company will be named the Japan Digital Asset Trust, and operate with a focus on institutional investors
• Bitbank’s CEO hailed the cooperation of “a major trust bank” as a possible watershed moment in Japan regarding public trust towards the asset class
• Nomura also revealed more information about their approach to the asset class, via an interview with their crypto arm’s new CEO, Jez Mohideen
• He told industry publication Coindesk that DeFi efforts won’t feature in the company’s early stages; “To start with, I would say the top 10 cryptocurrencies by market capitalization we will be looking at opportunistically for market-making and client services… Then basically, we’ll go down further the market cap chain to see the opportunity based on institutional demand”

What happened: Julius Baer launches crypto asset services

How is this significant?

• Swiss wealth managers Julius Baer revealed plans to offer digital asset services this week, outlined in a website update
• Their new strategy for 2023-2025 included the news that they “will explore the emerging, albeit volatile, class of digital assets… Integrating digital assets into its holistic wealth management proposition will position Julius Baer firmly at the interface of digital assets and the fiat world”
• The private bank has already launched pilot programs for high net worth clients, “with an eye to offering advice, trading and investing in cryptocurrencies”
• In a presentation on Thursday, CEO Phillip Rickenbacher made it clear that Baer doesn’t fear a potential crypto bear market; “It could well be that at this very instant we are witnessing a bubble-burst moment of the crypto industry, and we all know what happened after the dot-com bubble burst 30 years ago… It paved the way for the emergence of a new sector that indeed transformed our lives; I believe digital assets and decentralised finance hold that same potential”
• Baer previously invested in SEBA, a Swiss bank with a keen focus on digital assets, leading them to identify crypto as a “legitimate sustainable asset class of an investor’s portfolio”

What happened: Payment processor Stripe integrates Bitcoin

How is this significant?

• Four years after suspending Bitcoin support during the previous crypto winter, payment processor Stripe re-integrated the leading digital asset, allowing customers to accept payment in Bitcoin
• Stripe customers and app users will also be able to convert incoming payments and existing balances into Bitcoin, through a partnership with Web3 company OpenNode
• OpenNode builds on the Bitcoin Lightning Network, a Layer-2 solution that allows parties to send Bitcoin transactions at greater speed with lower cost—key limiting factors that led to its previous removal from the Stripe app and network
• The move comes following increased digital asset integration from a variety of Stripe’s competitors in the payments space, including PayPal, Block (formerly Square), and checkout.com

What happened: Ethereum scaling solution StarkWare valued at $8bn

How is this significant?

• StarkWare, an Ethereum Layer-2 scaling solution, demonstrated continued VC appetite for the industry (despite the current market downturn) by quadrupling their valuation to $8bn this week, following a successful $100m Series D funding round
• The Series D round follows six months after a $50m Series C round that valued the company at $2bn
• StarkWare president Eli Ben-Sasson told TechCrunch that the raise happened “literally after LUNA crashed… To a large extent, this valuation is a vote of confidence of this larger [digital asset] ecosystem”
• Contributors to the new round included Tiger Global, Coatue, and Greenoaks Capital, alongside undisclosed existing investors
• StarkWare CEO Uri Kolodny said “From day one, we have consistently engaged investors who have shared our vision of the future… We are building for the long haul”

What happened: Hedge fund billionaire Alan Howard outlines his crypto investment approach

How is this significant?

• In an exclusive interview with industry publication TheBlock this week, hedge fund billionaire (and Brevan Howard co-founder) Alan Howard shed some more light on his involvement in the digital asset space, as well as his general investment thesis
• He presented a positive appraisal of the industry’s potential, telling TheBlock “You have to be in, and have exposure to, the crypto world to understand what is going on there… In short, this is an important macro trend and a new asset class that can, and likely will, impact the evolution of technology and the economy at large for many years to come”
• Howard also advocated for casting a wide net, arguing that the asset class remains young enough to avoid any clear entrenched winners; “As I balance my broad thesis with the reality that digital assets are a nascent asset class, I argue that it’s most prudent to invest across the entire crypto ecosystem in a highly diversified manner”
• Founded earlier this year, his BH Digital firm already manages over $1bn worth of crypto assets, employs more than 60 people, and includes “investors such as sovereign wealth funds, pension funds, foundations and endowments”
• BH Digital reflects his strategy of breadth over depth; “BH Digital reflects my belief in the importance of investing across the entire ecosystem, regardless of instrument (i.e. token, equity, NFT etc.) in a diversified and well risk-managed way… This ensures that your return stream is never dependent on just one strategy, one theme or one risk-taker”
• Howard also revealed plans for BH Digital to roll out more market-making and liquidity services for teams launching new tokens; “In the crypto markets, in contrast to trad-fi, I think venture investing and liquid trading should be treated as part of one universe and not two separate arenas, particularly because token projects ‘go public’ much earlier in their lifecycle”
• Additionally, he spoke about other digital asset interests, including “a research-based incubator named WebN Group”, institutional access and trading platform Elwood Technology, service provider Coremont Digital and even a personal collection of generative art NFTs 

What happened: Coinbase becomes first digital asset company to enter Fortune 500

How is this significant?

• Coinbase Global—the first digital asset exchange to list on the US stock market—became the first crypto company to enter the annual Fortune 500 list this week, ranking in at 437 globally
• As Coinbase listed last year, this was the company’s first opportunity to enter the coveted rankings of business titans
• The move cements them amongst the key business in America; the Fortune 500 represents approximately two-thirds of United States GDP, with cumulative revenues in the collective of over $16tn
• Editor-in-chief Alyson Shontell highlighted Coinbase as one of “several pandemic winners" that "thrived under the freakish circumstances of COVID”

What happened: JP Morgan dub digital assets their “preferred alternative asset class”

How is this significant?

• In a new investor note to clients this week, JP Morgan analysts backed digital assets to bounce back, as well as praising their potential as an asset class
• Strategists including Nikolaos Panigirtzoglou contributed to the note, which deemed Bitcoin’s fair price more than 25% above current levels, forecasting “significant upside from here”
• Their current “fair price” valuation puts Bitcoin at around $38,000; they argue that the industry was hit disproportionally hard by the combination of macroeconomic factors that led investors to greater risk-off behaviour 
• JP Morgan strategists wrote that “The past month's crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally”
• The perceived greater upside also led them to upgrade the position of digital assets in their investment thesis, writing “We thus replace real estate with digital assets as our preferred alternative asset class”

What happened: BNP Paribas builds fixed-income trading solutions on blockchain

How is this significant?

• French banking giant BNP Paribas became the latest financial institution to acknowledge the benefits of blockchain this week, joining JP Morgan’s Onyx Digital Assets Network for fixed income market trading
• Onyx Digital Assets network uses digital tokens to represent assets for short-term trading in fixed income markets
• According to SeekingAlpha reports, the Onyx network has “has raked in over $300B in intraday repurchase (repo) deals since its rollout in December 2020”, and “allows banks to lend out U.S. government bonds—without those bonds leaving their balance sheets—for a few hours as collateral”
• Joe Bonnaud, BNP Paribas’ global markets COO told the Financial Times that blockchain adoption will continue to grow in financial circles; “This is not just proof of concept work, we see this as part of our efforts to utilise the technology for the whole trading and operations lifecycle as the market evolves”