Written by: Nancy, PANews
"It is time to move beyond the stage of Bitcoin and MEME coins; the market is shifting towards 7×24 hour on-chain trading and truly useful real assets." This statement from Robinhood CEO Vlad Tenev after the official announcement of tokenized stock trading depicts the current craze for tokenized stocks and reveals that the crypto market is undergoing profound changes.
With platforms like Robinhood, Kraken, and Coinbase sequentially laying out tokenized stocks, the crypto world is welcoming a restructuring of market structure and fund flows. Some voices believe that tokenized stocks, as a significant innovation in the crypto field, are expected to expand the overall market fund scale and help the crypto ecosystem transition from the fringe to the mainstream. There are also views that the introduction of quality assets may pose a severe impact on altcoins that rely on narrative-driven dynamics. However, at present, tokenized stocks are still in the early stages, facing various challenges such as insufficient liquidity and regulatory hurdles.
Are altcoins heading towards marginalization?
As traditional quality assets like US stocks are gradually being 'on-chained,' the flow of funds in the crypto market is quietly changing.
Some market opinions believe that tokenized traditional quality assets, with clear business models, legal and compliant regulatory frameworks, and stable actual returns, are becoming the new favorite for on-chain funds and creating a siphoning effect on the altcoin market. Especially for those tokens lacking actual revenue models, with immature products, and relying solely on narratives to support market value, they are facing liquidity exhaustion and survival pressure.
For example, crypto KOL BITWU.ETH raised a sharp question: "When traditional quality assets are all tokenized and can be traded on-chain, do native crypto assets still have value? Investors can directly buy highly liquid, stable, and clearly valued targets like Apple and Tesla on-chain; why gamble on an altcoin that 'may build a product'? He believes that the structural differentiation of altcoins has officially begun, with more and more high-quality real assets on-chain, and narrative-based altcoins may be directly marginalized and then lead to extinction.
Of course, this trend also signifies that the crypto market may bid farewell to the era driven solely by narratives, moving towards a more rational and value-driven development path. Crypto analyst Crypto_Painter pointed out that altcoins will not necessarily disappear; they will simply find it increasingly difficult to survive. In the crypto market, every new quality asset added is a blow to those assets whose prices are maintained by consensus. The only way out for altcoins in the future is to create actual application value, and it must be value that can generate real income. All tokens that cannot land and rely solely on narratives for survival will gradually enter a death spiral. There may still be altcoin seasons, but the era of universal price increases for thousands of tokens will no longer occur; simple models should have become a thing of the past.
However, Qiao Wang from Alliance Dao believes that tokenized stocks will not kill altcoins, but perpetual contracts for stocks will. Because they possess a continuous new narrative + high volatility adjusted for leverage.
Colin Wu, editor-in-chief of Wu Says Blockchain, also expressed a similar view. He pointed out that if it's just about buying spot, it seems meaningless. The perpetual contracts for stock tokens may be the real trump card. Traditional centralized exchanges (CEX) may find it somewhat difficult, while decentralized platforms like Hypeliquid could provide stock perpetual contracts, which would likely have good results. The difficulty, besides regulation, is that people trading cryptocurrencies and stocks will have a relatively long education process to adapt to this hybrid species.
Cross-border invasion of traditional finance.
Regarding the popular trend of tokenized stocks, several crypto practitioners and KOLs have expressed optimistic views, believing that stock on-chain is not just an innovation in trading tools but may fundamentally change the ecology and landscape of securities trading, and promote the scale and depth of the crypto market.
The market environment, user profile, and infrastructure of the synthetic asset protocol Mirror Protocol (using stablecoins to synthesize stock-like assets) are not on the same level compared to today. Crypto KOL Chen Mo (CM) pointed out that earlier, some questioned whether Hyperliquid was the next dYdX, and now it is said that stock on-chain is the next Mirror and FTX. In fact, the right thing may not succeed the first time, but success is a matter of time. The key lies in the degree of integration of stocks on-chain as on-chain assets and ecosystems. Simply buying and selling is just the tip of the iceberg. The biggest change compared to before is the shift in regulatory attitude. The US stock tokens of Mirror were once not allowed to appear on the trading frontend of Uniswap, let alone the integration of multi-chain and multi-ecosystems, which cannot be compared.
Crypto KOL Blue Fox added that one of the significant features of crypto technology is lowering transaction barriers, in other words, it can promote trading freedom. For instance, users in some regions who previously couldn't purchase securities now have the opportunity to do so. Even shares of popular companies not publicly traded can circulate through tokenization. Although these have not yet materialized, they are beginning to germinate. At the same time, there will be a cruel reality: behind free trading, a concentration effect will emerge, where some leading assets and currencies will gain increasingly larger opportunities. Conversely, weaker currencies or assets will gradually become marginalized due to losing protective barriers. Of course, new assets with narrative capabilities will also have more opportunities. The true impact of crypto technology has only just begun. From an investment perspective, new opportunities and new traps will continuously emerge.
Crypto KOL @Cody_DeFi emphasizes that directly purchasing US stocks in DeFi protocols is a significant leap for stock on-chain, meaning stocks can also be priced using AMM, and financial derivatives like Loop and Yield Swap can be utilized. Doing this within traditional finance would be extremely complex and lengthy due to the need for cumbersome middle and back offices to support it. When stock assets can flow on-chain as smoothly as tokens, the simplicity and elegance of DeFi will be more intuitively demonstrated. In simple terms, the core function of blockchain in finance is 'payment and settlement,' something that cannot be achieved in any large-scale financial network in traditional finance. Once 'payment and settlement' is realized, even if US stocks cannot be traded 24/7, tokenized US stocks can, and the core of trading does not lie in infrastructure but in liquidity matching. Under the conditions of payment and settlement, OTC can also possess capabilities comparable to exchange counters.
From a more macro perspective, BroLeon from the Australian Big Lion pointed out that the issuance of stock tokens has indicated a cross-border invasion from traditional financial platforms to blockchain infrastructure, marking a shift where, with the process of regulatory compliance for crypto assets, traditional finance and crypto assets are no longer two clearly defined camps but are beginning to integrate. Traditional CEXs should feel the arrival of strategic competition from another dimension and are likely to start retaliating quickly. Stock tokens should also soon become popular across major CEXs. The tokenization of private equity like OpenAI and SpaceX being sold to retail investors is a global first and resembles the previous IEO model. This opens up a normative example for the tokenization of assets in unlisted companies, and once the ice breaks, it may stimulate a large number of similar innovations (like new potential companies, real estate, or even tokenization of artwork).
In the future, there will be many innovations regarding equity tokenization, such as the exploration of perpetual contracts for equity. These innovations could change the industry landscape. Currently, the US SEC is also encouraging experimentation with new things, which makes companies bolder and no longer afraid of legal risks or regulatory suppression. Galaxy Digital founder Mike Novogratz stated in a recent interview that Galaxy is currently collaborating with the SEC and may soon start tokenizing its stocks as a first step.
Aptos Foundation ecosystem head ash bluntly stated that tokenized stocks are an arbitrage opportunity for emerging market users and also serve as an entry point to attract a larger scale of retail users to engage with cryptocurrencies. If this behavioral trend truly emerges in the next 2-3 years, it will be a significant boon.
Still facing multiple challenges such as lack of liquidity and compliance.
Although the concept of tokenized stocks is gaining popularity, it is still in the early stages and has not yet formed sufficient market depth. Taking xStocks data as an example, Dune data shows that its total trading volume is only about 8.05 million USD, with fewer than 8,000 users. Only three stock tokens (SPYx, TSLAx, CRCLx) reached a trading volume of one million USD within 24 hours. It is evident that the actual liquidity on-chain is still quite limited.
Velocity Capital investor DeFi Cheetah also referenced early attempts like Mirror Protocol and Synthetix, pointing out that their failures were primarily due to a lack of sufficiently meaningful liquidity. Simply tokenizing stocks is not difficult; what is truly challenging is having enough liquidity to support global-scale trading, but at the current stage, it is still difficult to match traditional markets.
Dragonfly partner Rob Hadick also highlighted the structural flaws in the current tokenized stock products, pointing out that the market currently has excessively high expectations for tokenized stocks but lacks details. He believes that most platforms at this stage rely on SPVs (special purpose vehicles) to purchase equivalent real stocks as collateral, but most of them can only buy during US stock market hours. This means that all after-hours/weekend trades need to be borne by market makers who take on price risks. However, these price fluctuations are difficult or nearly impossible to hedge in traditional finance. Moreover, even for redemptions, market makers must bear fees as high as 25 basis points (bps), which is a significant cost for them. Additionally, any DeFi protocol or market maker that unwittingly provides this token trading service to US users will face compliance risks far exceeding those of other crypto assets. This means that weekend & after-hours trading is generally unsuitable for professional traders, price fluctuations are highly coupled with the official opening prices, and these products are not user-friendly for most users.
Despite facing various challenges, Rob still sees long-term potential in tokenized stocks. In the long run, when the primary market is truly on-chain, collateral shifts to tokenized stocks, and traditional institutions upgrade their outdated technological frameworks, we will ultimately see: stocks truly appearing on-chain in large-scale liquidity form; smooth on-chain trading, accurate pricing, and active institutional participation; and the integration of infrastructure between crypto and traditional finance will accelerate. Only then will it be the turning point for the explosion of tokenized stocks. The current products are merely a minor disappointing transitional product on the road to the future, which may bring some topics and experimental value but will not be the endgame.
