Dispatch #76: When Price Doesn’t Matter

In this patch of your weekly Dispatch:

• Russia invades Ukraine
• An NFT hiccup
• Nexo listings and investments

The Big Idea

Global Conflict

This is one of those weeks where, frankly, it feels weird to be talking about crypto like there wasn’t a major geopolitical crisis going on.

A few weeks ago, the only context for us to discuss Russia was the battle between the country’s central bank – which has long sought a full ban on crypto – and its legislative bodies, which have been recently working towards legalization and regulation. This week, of course, we feel the urge to discuss it in the context of its escalating conflict with Ukraine, and by extension, Europe and the United States.

This week began with President Putin recognizing two break away regions in Ukraine, which brought condemnation and sanctions from governments around the world. By Thursday morning, Russia had invaded eastern Ukraine, with explosions also reported in its capital, Kyiv, and in other major Ukrainian cities. In a pre-recorded address, Putin warned that anyone trying to interfere with the Russian military will lead to “consequences they have never seen.”

Amid the international community’s condemnation of the invasion, what happens next is anyone’s guess. What’s clear is that it will almost assuredly have dramatic consequences for global energy, supply chains, and more. And that’s to say nothing of all the people directly affected.

The Nexo team expresses our solidarity to anyone and everyone affected by these circumstances. Let’s hope for better news by the next Dispatch issue…

The Latest In…

Crypto in the Crisis

There are many economic questions swirling around the Russia-Ukraine crisis. Specifically, there is a looming question of whether the US and Europe will decide to shut Russia out of the SWIFT system. To many, this is where crypto comes into the story. One of the risks the US faces in weaponizing SWIFT in this way would be to threaten the dollar's global reserve status. Would being cut off from SWIFT push Russia into alternative settlements like its native system or China's SWIFT alternative? Or might it push them to use a non-sovereign settlement system like Bitcoin? With Russia's recent moves to push to legalize and regulate crypto, these questions are less far fetched than they sound. We're witnessing history, of that there is no doubt.

The Latest In…

NFTs

This week was supposed to have another seminal NFT moment. A lot of 104 CryptoPunks from consignor 0x650d was up for auction at Sotheby’s, who had branded the auction “Punk It!” and put together an evening of events around it. Then, suddenly, 23 minutes after the auction was set to begin, it was abruptly canceled, with the official word being that the consignor had chosen to pull the lot. 0x650d tweeted “nvm, decided to hodl” but the real reason for the pull seemed more obvious and ominous – Blockworks reported that there were simply not enough bidders.

The Latest In…

Nexo’s Strategic Investments

• Nexo invested in Blockfills, a digital asset trading and financial technology provider. The deal is part of BlockFills’ $37M Series A and will lead to the development of a syndicated loan solution for the crypto mining industry, where BlockFills has significant exposure. ​​In return, BlockFills gets access to Nexo Prime, our premium brokerage solution designed specifically for institutional investors.
• We also backed Bware Labs as part of a round that values the decentralized infrastructure provider at $50M. Nexo is excited to support the company’s objective of providing high-quality, high-performance DeFi crypto payments infrastructure across blockchains.

The Week’s Most Interesting Data Story

And Now for the Bad News

Given the macro and geopolitical climate, it might be reasonable to suspect that crypto markets – like all markets – could be headed for some volatility. If that’s the case, Bitcoin could face meaningful headwinds from short-term holders. Currently, they hold 54.5% of all Bitcoin with an unrealized loss (around 2.56M BTC), in other words, Bitcoin bought for more than the current market price. This cohort is the most likely to stress-sell in times of high volatility. Does this mean that we could be headed for a shakeout of those short-termers? Possibly, although as Lawrence of Arabia says “nothing is written.”

Hot Topics

What the Community Is Discussing

A primer on the SWIFT system.

(Un)popular opinion?

A discussion on why Bitcoin went down initially and how different types of traders impact markets.

What to Watch for Next Week:

• Are NFTs cooling off?
• Will Bitcoin move closer to its ‘digital gold’ function?
• Where is Nexo investing next?