The most direct way to invest in the rise of tokenization is to buy leading public chains and infrastructure projects: Ethereum, Solana, XRP, Chainlink, etc.
Written by: Matt Hougan, Ryan Rasmussen, Bitwise
Translated by: AididiaoJP, Foresight News
The crypto industry is undergoing some changes.
Tokenization is here, but when will the market reprice?
Tokenization, which moves stocks, bonds, and other real-world assets to the blockchain rather than traditional networks, is now reaching a critical moment.
Just in the past month, the following events have occurred:
Robinhood and Kraken have launched tokenized stock trading. Robinhood chose to build on the Ethereum Layer 2 network, Arbitrum, while Kraken's xStocks system is based on Solana. Although these systems are currently limited to non-U.S. investors, Coinbase has filed documents with the SEC to initiate tokenized stock trading in the U.S., calling it an important strategy.
Financial institutions have invested $135 million in the 'Canton Network', a new Layer 1 blockchain for stock and bond trading. This funding round was led by market-making giant DRW Capital and bond trading platform Tradeweb Markets, with participation from companies like Citadel, DTCC, and Goldman Sachs.
SEC Chairman Paul Atkins called tokenization an important 'innovation' and added that the SEC 'should focus on how to advance tokenization in the market', stating that the days of regulation through enforcement 'are over'.
This is not all.
One of the largest cryptocurrency exchanges in Latin America announced plans to tokenize $200 million of real-world assets on the XRP Ledger; Galaxy Digital stated that tokenized stocks could threaten the NYSE's revenue; the total amount of real-world assets tokenized on-chain has reached a record high.
Clearly, some changes are happening here. But when will it affect the prices of Ethereum, Solana, XRP, Chainlink, and related assets?
The prospects of tokenization
I have held two views on tokenization.
On one hand, it seems inevitable. It's unreasonable for stocks to only trade from 9:30 to 16:00 on weekdays. Imagine if your email shut down every Friday at 16:00 and didn't reopen until the following Monday at 9:30.
Not to mention how slow settlement speeds are. Remember the headlines when stock settlement changed from T+2 to T+1 last year?
In what other industry do we celebrate the operational speed of 1934?
Even though it feels inevitable, I often think we can't rush it. Market structure changes slowly; just ask those who witnessed the shift from floor trading to electronic trading how long it took.
But with a recent series of developments, I am starting to think that the narrative of tokenized stocks may influence the prices of relevant assets sooner than expected.
Why it may start to affect prices now
The tokenized stock market is very large.
Larry Fink, CEO of BlackRock (arguably the most important figure in asset management), wrote in this year's letter to shareholders: 'Every stock, every bond, every fund, and even every asset can be tokenized.'
Let's analyze it.
The stock market is valued at $117 trillion. The bond market is valued at $140 trillion. This means that the battle for tokenization involves a $257 trillion market, not including more niche assets.
Recently, there has been a lot of excitement around the stablecoin market, with many (including U.S. Treasury Secretary Scott Bessent) believing that by 2030, the stablecoin market size will grow from about $250 billion to $2 trillion.
$2 trillion is a lot of money, and the growth of stablecoins indeed presents a real opportunity. But compared to tokenization, $2 trillion is just a drop in the bucket, less than 1% of Larry Fink's dream tokenization market.
I still believe that it will take more than ten years for most stocks and bonds to trade on-chain. But with major financial companies like Robinhood and Tradeweb starting to lay the groundwork for transformation now, I can't help but ask: can tokenization achieve a penetration rate of 1-5% within a few years? Could a dozen major pilot projects drive us to this level of market penetration? It seems possible, and it would mean tens of trillions of dollars in scale, exceeding any other crypto application or asset, including Bitcoin.
The narrative around tokenization will only accelerate; if Robinhood is launching tokenized trading, you can bet that companies like Charles Schwab are actively researching it. I expect a wave of new announcements this fall.
How to invest in the rise of tokenization
The most direct way to invest in the rise of tokenization is to buy a basket of top Layer 1 blockchains and infrastructure projects: Ethereum, Solana, XRP, Chainlink, etc.
Some might argue for concentrated bets, especially since Ethereum is currently the leader in tokenization and has a good chance of gaining market share, but this seems too limiting to me. Look at the announcements above: many different participants are sharing the pie, and it would be unfortunate to make an early bet on the tokenization trend and choose the wrong target.
You can also complement core blockchain assets with a set of stocks that may benefit from tokenization, including Robinhood, Coinbase, Circle, etc.
If Larry Fink is right, the tokenization market could grow more than 4,000 times in the coming years, a chance not to be missed.
