The Signal: A Nickel for Your Thoughts

The Market Signal

Did inflation already send the value of a penny up 5x? Not really. But if the price of nickel continues to soar (now up over 100% in a week), with energy prices marching higher, we may get there. 

War is unpredictable. This week Starbucks, Pepsi and McDonald's all announced they are pulling out of Russia. And then there’s the commodities story. Prices are soaring as export sanctions, shortages and fear drive up prices. We’ve obviously discussed oil and gas prices (and just Tuesday the U.S. and U.K. agreed to impose restrictions on Russian energy), but Russia is also responsible for 7% of the world’s nickel. 

Vale, one of the world’s largest miners, in February (pre-war) forecasted nickel prices to double in the coming decade, partially due to the growing demand for electric vehicles. With war, the forecast came true in less than a month. As an investor, you should weigh the business dynamics. Vale estimated its cost to extract a ton of nickel at $7,500 last quarter. Prices now sit above $100,000/ton (vs $25,000 last month), you can do the math. The market is pricing in some of this behavior, with shares up 20% and ETFs tied to Vale also higher, like SLX, HAP and GNR.

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Will this hurt electric vehicles?

The Teslas, Lucid Groups and Blink Chargings of the world are actually beneficiaries, if you listen to the market as shares have continued to soar. Morgan Stanley estimates that the recent nickel price action should add $1,000 in cost per vehicle. But with energy prices making gas-powered vehicles more uneconomical by the day, the added cost may pale in comparison to increased adoption. 

The Data Signal

What about bitcoin mining?

A recent report from The Block puts the average all-in cost to mine a bitcoin at $4,200-$14,200. How does that compare to nickel and gold? 

The average cost to mine an ounce of gold reached $1,123 in Q3 of 2021, according to the Gold Miner’s Council, while gold’s current price sits at $2,040. But would you invest in the metal, like many who proclaim the yellow metal as a safe haven, or the miners?   

The gold miner ETF GDX is up 23% vs gold’s 11% rise in the past month. Meanwhile, in bitcoin mining, prominent miners like Marathon Digital, Hut 8 Mining and Hive Blockchain have underperformed Bitcoin. Cleanspark is the only exception, outperforming the underlying currency and the miners over the past month. 

Read about the basics of cryptocurrency What about other crypto action?

Cryptocurrencies broadly stabilized Tuesday after Monday’s struggles for all risk assets, which included the worst day for the S&P 500 and Nasdaq in 2022. Decentralized finance (DeFi) tokens were particularly exposed. 

Was there a signal?

A key measure from Domain Money’s Signal* follows developer activity, and we saw the importance this weekend. 

A key figurehead, Andre Cronje, stepped down from involvement in Fantom and Yearn Finance, sending the values of those tokens reeling (30% and 10% over the past week respectively).  This wasn’t the first time Cronje had done something like this, only to return to crypto at a later date, Domain Money’s head of investment management Andrew Pesco said, highlighting DM Advisors* was carefully watching the situation. 

After Fantom CEO’s quick assurances and full throated defense, prices are less volatile. YFI is among the top 20 currencies in performance of the past 24 hours, while FTM is also positive.  Check out their social sentiment ratings** in the app as they may surprise you.

Explore Managed Strategies You can view key indicators in the app in the asset detail screen by selecting an asset from the home feed. 


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* Domain Money Advisors, LLC, an investment advisor registered with the U.S. Securities and Exchange Commission and an affiliate of Domain Money, is currently recommending the following assets contained in this edition of Domain Money’s The Signal as part of Managed Strategies: FTM, YFI, BTC

** These measurements were generated by Domain Money Social Sentiment Signal on 3/8/2022 and they fluctuate continuously in response to the various contributing data points and trends. Domain Money Signals are tools that aggregate information related to market sentiment and should not be relied on for investment decisions.  More detailed information about Domain Money Signal is available at https://help.domainmoney.com/en/?q=signal