Market Overview:
The digital assets market saw unprecedented growth this week, with new records set across a variety of crypto assets, including market leaders Bitcoin and Ethereum.
- Bitcoin hit a new all-time-high, accelerating past the previous record of $42,000 to reach a record value of $48,003. At the time of writing, it’s retraced slightly to $45,000—a weekly increase of 21%
- Ethereum followed Bitcoin’s lead, surpassing its previous record of $1,680 en route to a new all-time-high of $1,816, a move which took its total market cap above $200bn for the first time. Ether subsequently retraced in line with Bitcoin’s movements, for a current value of $1,740
- Bullish momentum continued across the entire market, with only one of Coinmarketcap’s top 40 assets (excluding stablecoins) declining in value over the last week. At the time of writing, only 5 coins or tokens in the top 100 performed negatively over the last 7 days
- The overall crypto asset market cap again climbed to new all-time highs, reaching a top value of $1.42tn; more than Google’s $1.4tn share value. At the time of writing, total market cap is $1.36tn
- The DeFi sector experienced increased growth thanks to the appreciation in Ether and Bitcoin value, with a Total Value Locked of $45.4bn for both assets—a weekly increase of more than $5bn
Digital assets gathered even more bullish momentum this week, driven by Tesla. After Elon Musk declared his support for Bitcoin last week, the world’s most valuable car maker officially adopted, on multiple fronts. Meanwhile, China accelerated CBDC trials for Lunar New Year, Ethereum futures launched, banks bought stakes in digital asset exchanges and set up Venture funds for blockchain, and the mayor of a major American city announced plans to formalise digital assets within their financial infrastructure.
What happened: Tesla announces $1.5b investment in Bitcoin and plans for payment support
How is this significant?
- Tesla is the most valuable automobile manufacturer in the world, and Elon Musk one of the most high-profile and influential CEOs (as well as the world’s richest man)
- In an SEC filing, Tesla disclosed that they had purchased $1.5bn worth of Bitcoin for about 11% of their cash reserves, in order to “diversify and maximise” their returns on cash
- Alongside adopting Bitcoin from a store-of-value investment standpoint, Tesla plans to make use of its medium-of-exchange properties as well, accepting Bitcoin as a means of payment “subject to applicable laws and initially on a limited basis”
- Whilst the last 6 months have seen a wave of institutional investors moving into digital assets and adding crypto to their portfolios, Tesla represents the first major consumer-facing corporation from outside the financial services industry to officially endorse crypto assets
- The Financial Times noted that this is likely the “most significant corporate endorsement yet” for Bitcoin, and called it a “game-changing move for the use of Bitcoin from a transactional perspective”
- Since the news catalysed an upward price movement for Bitcoin, it has actually overtaken Tesla by market cap; at the time of writing, Bitcoin’s market cap is $831.6bn, compared to Tesla’s $780.4bn
- Former acting Comptroller of US Currency, Brian Brooks, in response to the news, noted that it made sense for corporations to diversify into digital assets as a hedge against inflation in times of economic stimulus programs worldwide; “That would explain why a lot of institutions want to have Bitcoin sitting in their treasury because it’s a lot more stable source of value over the long haul, potentially.’
What happened: Ethereum CME Futures launch with over $30m in volume
How is this significant?
- CME Ether futures began trading on Monday, providing a new means of digital asset exposure to institutional investors
- At the end of the first day of Ether futures, there was $33.6m in volume, with 388 contracts traded
- Speaking about the launch, Stefan Coolican, chief financial officer of Ether Capital, said “This is a big milestone for Ethereum and Ether from several different angles…First, it provides clarity on Ether as a commodity like Bitcoin; second, it gives institutions a well-known and accessible way to access ether exposure; third, it provides another tool for price discovery that helps investors and regulators better assess market dynamics”
- A particular advantage in Ethereum’s value proposition is its smart contract capabilities, allowing other crypto asset businesses to build on top of Ethereum’s infrastructure. According to Lior Messika, founder and managing partner at EU venture fund Eden Block; “With the Ethereum network enabling tens of new ‘crypto unicorns’ in the last year, ETH is poised to become a clear focal point for investors seeking exposure to the broader innovation enabled by crypto, and its now numerous use cases”
What happened: Siam Commercial Bank launches $50m VC fund aimed at crypto assets
How is this significant?
- Via its venture arm SCB 10X, Siam Commercial Bank announced that they’ve established a $50m fund aimed at investing in companies within the blockchain and decentralised finance (DeFi) space
- Although many financial institutions have been investing in established cryptocurrencies, this is one of the first instances of an established bank creating a VC fund dedicated specifically to companies in the digital asset space
- Mukaya Phanich, the Chief Investment Officer of SCB 10X, said that this move was done in anticipation of blockchain technology impacting multiple industries in the future, noting “With our new $50m VC fund, we will invest across the capital stack in innovative and promising startups in blockchain infrastructure, blockchain innovative applications, and decentralized finance globally, to better prepare the bank for future disruption”.
What happened: Ethereum accounts for 80% of weekly institutional inflows
How is this significant?
- Ethereum is the second-largest crypto asset in the world, and over the course of the last few months has been outpacing market leader Bitcoin in terms of growth
- According to data analysis by crypto asset manager Coinshares, we are now seeing significant diversification within the institutional space, citing nearly $200m of inflow into Ether products last week, ahead of the CME Ether futures launch this week
- This accounted for 80% of weekly inflows into crypto asset investment products, and in the 6 weeks of 2021, the crypto investment product market has already reached 39% of the total institutional capital invested into crypto funds in 2020
- According to the Coinshares report, as investors grow more comfortable with crypto assets through Bitcoin, the appeal of other established crypto assets grows too; “We believe investors are looking to diversify and are growing increasingly comfortable with Ethereum fundamentals”.
What happened: Bitcoin Twitter volume reaches all-time-highs
How is this significant?
- According to data from social sentiment analysis firm TheTie, Bitcoin saw the most discussion ever on social media, following Tesla’s disclosure of investment
- Social media activity and sentiment is useful in particular for gauging levels of awareness and interest amongst retail investors
- In 24 hours after Tesla’s announcement, there were 143,000 tweets about Bitcoin from unique accounts, with TheTie CEO Joshua Frank noting that “I think that it’s definitely clear that retail is here. We are seeing absolutely massive surges across the board in twitter activity, trading activity, and price movement for altcoins which institutions are not touching”
- Although the amount of activity was catalysed by Tesla’s announcement, it was just enhancing an existing trend, as Frank said “Today’s movement can absolutely be attributed to Elon Musk, but BTC social activity has been on a tear all year”
What happened: Bill Miller files with SEC for $400m Bitcoin investment
How is this significant?
- Noted value investor Bill Miller submitted an SEC filing for his flagship fund, Miller Opportunity Trust, to gain up to 15% exposure to Bitcoin, equating to a $400m investment
- Miller has been proven correct in past predictions regarding digital assets, personally holding Bitcoin since 2014, and noting in November last year that “ the current relative trickle into Bitcoin” would “become a torrent”
- The current 5 year returns of Miller Opportunity Trust place it within the top 2% of all funds, according to Bloomberg data
- Previously, Miller and his son Bill Miller IV had brought Bitcoin into their Income Strategy Fund, explaining in a letter to investors that “Not owning any bitcoin has been a massive mistake, and we expect that will continue to be true”
What happened: Major Malaysian investment bank purchases stake in digital asset exchange
How is this significant?
- Kenanga Investment Bank Berhad, a major Malaysian investment bank, acquired a 1/5ths stake in a Malaysia-based licensed digital assets exchange called Tokenize
- Group Managing Director Datuk Chay Wai Leong said “We have been building a digital ecosystem to offer our customers a wide spectrum of financial products and services, including digital assets. The emergence of digital assets including cryptocurrencies have been gaining acceptance globally in the last few years”
- Leong sees tokenisation of assets as a catalyst for digital asset opportunities far beyond cryptocurrencies; “Our interest in digital assets goes beyond Bitcoin and other commonly traded cryptocurrencies. We believe that the technology behind digital assets is very powerful and the emergence of digital assets in the future is inevitable. We are hopeful that fund raising through the tokenisation of businesses and assets will be a significant part of the capital markets in the future for Malaysia”
How is this significant?
- Francis Suarez, mayor of Miami since 2017, is perhaps one of the most powerful regional crypto advocates in the United States
- Speaking to Forbes, he said “We’re working on making sure that our incentives are in place and that our legislation promotes crypto and blockchain and is forward-thinking”, citing the sparsely-populate US state of Wyoming as “smart” for being an early adopter of digital asset-friendly legislation
- Suarez has wide-ranging plans on integration of crypto assets into the financial infrastructure of Miami, stating “There are three things that I want to do with Bitcoin and crypto generally. One is I want to be able to give my employees the ability to take a percentage of their salary in Bitcoin and crypto. Two, I want our residents to have the ability to make payments of taxes and fees in crypto. And the third thing is including Bitcoin as a part of the city’s investment portfolio”
- A few weeks ago, Suarez made Miami the first major American city to hire a Chief Technology Officer, in a bid to increase its fintech and digital asset capabilities
What happened: China extends CBDC trial for Lunar New Year
How is this significant?
- As one of the world’s economic powerhouses, China’s plans to roll out a national digital currency could influence other countries to follow suit
- With the Lunar New Year Festival—the most significant public holiday in the Chinese calendar—the People’s Bank of China has an ideal opportunity to test CBDC usage and infrastructure
- Lunar New Year will mark the first opportunity for Beijing to trial the digital yuan, with 50,000 residents selected via a lottery system to be awarded a total of $1.5m in digital currency
- Recipients will be able to spend their CBDC at a variety of offline locations, alongside major online retailer JD.com over the course of the holiday as China’s digital yuan trials accelerate ahead of an anticipated launch this year
What happened: Grayscale CEO believes Tesla is at the vanguard of corporate digital asset investment
How is this significant?
- Speaking on CNBC, Grayscale CEO Michael Sonnenschein says that crypto assets will become an increasingly attractive part of institutional investment portfolios
- Citing the examples of high-profile business leaders like Elon Musk and Jack Dorsey becoming public advocates of Bitcoin, he believes that Bitcoin has been further legitimised; “You’re going to see a lot of other visionary leaders and disruptive companies actually realizing it has really moved from why to why not”
- “If flows are any indication of investor interest, on the heels of a record-breaking 2020, I’m pleased to say and encouraged that that momentum is not only continuing this year, but actually accelerating… there’s very very sustained and growing demand from a lot of institutional players at the moment”
What happened: Russia imports largest-ever batch of crypto-miners, whilst Bitcoin miners hold private share sale to institutional investors
How is this significant?
- As the value of crypto assets continues to grow globally, more companies, nations, and entities are investing heavily in crypto mining infrastructure in order to maximise their own production
- According to reports on Russian news site Kommersant, the BitRiver crypto farming business recently took delivery of 20,000 pieces of crypto mining hardware—or 14 truckloads valued at approximately $50m
- Due to the low price and surplus supply of electricity in Russia, the country is currently the third-largest centre of cryptocurrency mining, after China and the USA. This latest order has an energy output equivalent to approximately 3 months of Russian crypto asset mining production
- Meanwhile in Canada, publicly-listed cryptocurrency mining company Bitfarms announced this week that they are selling approximately 40m CAD worth of shares to institutional investors; their third round of financing in a month, after two previous rounds of 20m CAD each.
- These funds are earmarked to help them increase production, with a press release about the share raise stating its purpose is “principally to acquire additional miners, expand infrastructure, and improve its working capital position”
- Bitfarms CEO Emiliano Grodzki also noted an intent to grow the business beyond Canada; “This additional financing will allow us to further grow our miner count and expand infrastructure. We are very pleased to continue to expand our institutional presence in the United States”