In this issue
- Bitcoin surges to new all-time high after MassMutual and other big investors buy in
- Sweden ponders move to digital currency
- DBS bank, Singapore’s largest, backs crypto exchange
- Art world gets boost from non-fungible tokens
- Hong Kong in talks with China to pilot test DCEP digital currency
From the Editor’s Desk
Dear Reader,
A new high.
It’s a timely breakthrough for Bitcoin, breaching US$20,000 for the first time. More than a decade after its birth in 2008 on the heels of the global financial crisis, and now as we enter a world ravaged by Covid-19 –– where it’s headed is anyone’s guess. For us at Forkast.News, it’s timely as we launch our latest Forkast.Insights research report: “The Unstoppable Rise of Digital Assets.” In this report, we explore how new exchanges, new custodians, new regulations, and new assets are levelling the investment playing field. You can download the report here.
Timely too, for newcomers. We now have more Current Forkast subscribers joining us here on Forkast.News than ever before, post-Paris Blockchain Week Summit (#PBWS2020). I’d like to say bonjour and warmly welcome all the new readers with us for the first time.
Asia is increasingly more central to a lot of innovation we’re seeing in blockchain, crypto and DLT… and in my keynote presentation at Paris Blockchain Week, I hope we opened up a lot of eyes to the critical role that Asia is playing: what’s happening here that’s driving initiatives elsewhere. I shared some key blockchain trends in Asia, including the rise of DeFi, next-generation investors, and CBDCs — central bank-backed digital currencies. As we round up the year, these three trends from an Asia perspective are what will remain in the spotlight for 2021.
When more and more corporate treasurers look to crypto to manage a firm’s liquidity risks, these small 1 to 2% diversification bets all add up. Just like the move that Square did earlier this year with a US$50 million push into bitcoin, which represented 1% of its total assets, we’re finding more and more institutional money in this space. This week, it’s MassMutual, the insurance giant founded in 1851 and planting its feet quite firmly in this century by investing both in bitcoin and the industry that serves it. DBS joins in as the first traditional big bank in the world to back a digital currency exchange. These are the headlines that made it into our Current Forkast newsletter this week, and we predict these moves by traditional pillars of finance into crypto will continue to grow bigger in the new year.
‘Tis the season!
As you get ready for the holiday season, please share us with others in your network who might also benefit from The Current Forkast — which offers not only the week’s top blockchain news curated by our editorial team but also our signature insights and analyses. Sign them up for Forkast.News and subscribe. It’s a gift that will keep giving.
Until the next time,
Angie Lau
Founder and Editor-in-Chief
1. MassMutual helps push bitcoin to new highs
By the numbers: MassMutual — over 5,000% increase in Google search volume.
Bitcoin prices hit another record high this week, surging past US$21,000 after a growing list of institutional investors — including Massachusetts Mutual Life Insurance Co. (MassMutual) — added the cryptocurrency to their portfolios. MassMutual, a life insurance giant founded in 1851, has invested $100 million in bitcoin and acquired a $5 million minority equity stake in NYDIG.
- NYDIG is a subsidiary of the investment management firm Stone Ridge Asset Management, and will be providing bitcoin custody services for MassMutual’s investment.
- NYDIG is also the custodian for Stone Ridge’s 10,000 bitcoin, which is worth more than US$213.5 million, at the time of publication.
Forkast.Insights | What does it mean?
In the world of institutional investing, MassMutual is not only blue blood but also close to the top in reputation. As an insurance company, it’s been around since before the American Civil War. As an investor, it has a mission to be a HODLer of assets to ensure it has the means so pay out insurance claims — especially in the event of costly disasters.
MassMutal says its purchase of bitcoin was based on its need to maintain a diverse and resilient portfolio. The bitcoin purchase represented 0.04% of its US$235 billion general investment account. As an asset, BTC has performed remarkably well since March, up over 200% since Jan. 1 to US$21,353 at publication time. Granted, the broader equity market has also been performing well, but this is where diversification comes into play.
Insurance companies in the U.S. hold just under $10 trillion in assets. Even if, collectively, they allocated 0.5% of their holdings to bitcoin, that US$50 billion would be a substantial amount of the overall market cap of BTC — which is around US$355 billion. Hence the need for investing in custodian companies like NYDIG. Investment in these companies is not investing in bitcoin per se, but is still getting exposure — via the company that provides custody — that would allow one to capitalize on demand for it while not eating up the supply on the market (don’t forget about family offices which also have large checkbooks and demand for this alternative asset).
On another note, a report from OKEx notes that the biggest winners of the institutional push for bitcoin have been whales. Whales, a colloquialism for big investors with so much power or assets that their actions can move prices and markets, are selling off the coins they bought low when bitcoin had its “black swan” event in March. Institutions were less concerned about the actual price they bought in at, as they are more interested in just being able to buy in at the first place. And the losers, according to the OKEx analysis? Retail investors. Lacking the speed and order depth of whales and institutional investors, they are this cycle’s bag holders — a number of them sold low when big investors were buying, and bought high when big investors were selling.
2. Sweden ponders switch to CBDC
By the numbers: CBDC — 600% increase in Google search volume.
Congresswoman Rashida Tlaib and two other Democrat lawmakers have introduced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act. The proposed legislation wSweden, the world’s most cashless nation, is considering becoming a cashless society. According to Bloomberg, the nation has launched a feasibility review, to be completed by November 2022, on the country’s move to a digital currency.
- Sweden’s central bank Riksbank governor Stefan Ingves has previously stated that a decision regarding the issuance of a e-krona has to be made at a political level.
- Riksbank is already working on an e-krona CBDC test project with Accenture.
Forkast.Insights | What does it mean?
When talking about central bank digital currencies (CBDCs) it’s important to remember that they are not necessarily a way to accelerate the decline of a cashless society — where mobile payments or payments by card are the norm. As Sweden Central Bank governor Stefan Ingves points out in a recent policy paper, cash is inefficient, but cash is necessary. Cash is a way to redeem deposits from a central bank; use of cash is an expression in the confidence that the central bank is sufficiently capitalized. Commercial bank money, issued by mobile payment providers, or used when a credit/debit card facilitates a transaction, has been on the rise over the last decade and competes with central bank money. Thus for central bankers, the impact of monetary policy is lessened because of this bulge of commercial bank money.
This is key to understanding why the People’s Bank of China (PBOC) is pushing ahead with its CBDC, the DCEP digital yuan. Cash isn’t king in China; mobile payments are. As the largest denominated bill in China is only 100 RMB, it’s quite inconvenient to pay for any big ticket item with cash. But use of cash is an expression of confidence in the PBOC, and with a bulging money supply of M2 — commercial bank loans — it is a way for the central authorities to wrestle back control.
3. Singapore’s DBS Bank backing crypto exchange
By the numbers: DBS digital exchange — 1,100% increase in Google search volume.
Singaporean multinational bank DBS bank is expected to launch a digital currency exchange this week, delivering a world-first crypto exchange backed by a traditional bank, according to the bank’s chief Piyush Gupta. The exchange will feature pairing of BTC, ETH, XRP and BCH with the JPY, USD and HKD. As previously reported in the Current Forkast, DBS — the largest Southeast Asian bank headquartered in Singapore — was rumored to be launching a digital currency exchange, after the plan was revealed by a now-deleted web page.
- In recent weeks, S&P Dow Jones has also announced that it would be launching a cryptocurrency indexing service in 2021.
- The crypto industry has broken through other traditional barriers this year, such as when Diginex became the first company with a cryptocurrency exchange to get listed on the Nasdaq.
Forkast.Insights | What does it mean?
The foray by DBS into the digital asset industry will likely further legitimize the space. The problem as it stands now is the digital asset exchange space is mostly clustered around offshore jurisdictions like Malta and Seychelles, or, in the case of Binance, location unknown. While many of the players in the industry are good corporate citizens and the offshore domiciliation doesn’t necessarily imply nefarious conduct, it isn’t something that’s going to attract big-name institutional money. Good luck convincing a fund manager to put his clients’ hundreds of millions into a crypto exchange that has a corporate registration scheme set up like a Russian nesting doll.
DBS doesn’t have this problem. It’s one of Asia’s biggest banks. Institutional clients across Asia trust DBS with their money. If cryptocurrency is going to become an institutional-grade asset in Asia, which has been the theme of 2020, it’s going to be via a bank like DBS.
4. Non-fungible tokens elevate fine art
By the numbers: Beeple — 850% increase in Google search volume.
Non-fungible tokens (NFT) are making a comeback into headlines as the artist Beeple’s new NFT creations sell off for almost US$600,000 in just five minutes. Beeple is a visual artist who has been selling blockchain collectibles on digital marketplace Nifty Gateway, which is owned by the Winklevoss twins’ Gemini.
- Artist Trevor Jones’s Picasso’s Bull NFT was also sold for US$19,000 on Nifty Gateway earlier this week. It was sold by former pro-baseball player Micah Johnson who bought the work for US$750 in July, while 17-year-old Nevadan artist Fewocious sold her NFT-artwork “NYC Skyline” for over US$21,350.
- Also, an NFT of Paris Saint-Germain forward Kylian Mbappé trading card has been sold for US$65,000 in Sorare, a blockchain-powered fantasy football game. During the previous NFT-craze, which was headlined by CryptoKitties, a lavender digital cat named Dragon sold for 600 ETH in 2018, or about US$170,000 at the time.
Forkast.Insights | What does it mean?
How do you confirm authenticity of something on the blockchain? Use a non-fungible token. The tokens are unique because of the cryptographic codes behind them, meaning they can’t be reproduced or copied. So, if there’s only one in existence, it’s one way to express authenticity and uniqueness. Art is an obvious use case for this. As Forkast.News has reported before, forgery is rampant in the art industry and there’s always a hunt for ways to verify authenticity.
While there are a half-dozen startups that allow artists or trusted art dealers to register their art and issue a token to authenticate the work, there’s not yet a widespread uptake from the industry. But that can change. Christie’s auction house recently auctioned off bitcoin-themed “Portraits of the Mind” — complete with an accompanying NFT. Beeple’s auction, with volume in the mid-six figures, is another proving ground for this technology.
For an artist, there’s nothing more soul-crushing than seeing replicas of your work online only weeks after it’s unveiled for auction elsewhere. Paintings and sculptures are meant to be exhaustible commodities, unlike a movie or a song, and their monetary value is expressed by no one else having the original. NFTs are how this exclusivity is expressed through technology. Non-financial use cases for blockchain is going to be a trend to watch in 2021, and here’s something that could be a driver of it.
5. In China: Hong Kong in talks to pilot test China’s DCEP digital yuan
The Hong Kong Monetary Authority is now in talks with China’s central bank to pilot test the DCEP digital yuan in the territory.
- No timetable for the e-RMB’s official launch has been revealed, but an HKMA spokesperson told 21Caijing, a financial publication in China, that the technical testing of DCEP would be conducted at Bank of China in Hong Kong with 200 bank staff and that selected stores would also participate.
- Once the digital yuan is put into use in Hong Kong, It could be the first time that the new DCEP digital yuan — which is currently being widely tested on the mainland — is used outside of mainland China.
Forkast.Insights | What does it mean?
The Hong Kong dollar is effectively an on-ramp for the RMB, and DCEP’s entry into Hong Kong will be an interesting experiment as to how the mainland currency creates liquidity. What will the DCEP-HKD currency pair look like? Hong Kong is home to the largest offshore pools of RMB, which in turn drives demand for the HKD within mainland China. Will a similar relationship exist with the DCEP e-RMB?
Using the DCEP digital yuan internally for domestic payments is one thing, but cross-border payments (arguably where DCEP can be even more useful) across one of the most important currency pairs in the world is another.
It’s also important to note that DCEP has some similarities with the Hong Kong dollar as far as issuance goes, which makes it somewhat dissimilar to other CBDCs in the making. As Xiaochuan Zhou, the president of China Society for Finance and Banking, points out in a recent journal article, the issuance arrangement is similar to how select Hong Kong banks issue HKD banknotes; all four of China’s major banks would issue DCEP with the promise of sufficient reserves to redeem it for an equal value in fiat RMB when requested. The similarity of arrangements may make Hong Kong an ideal proving ground for the DCEP.
