The most direct way to invest in the rise of tokenization is to buy leading public chains and infrastructure projects.
Written by: Matt Hougan, Ryan Rasmussen, Bitwise
Translated by: AididiaoJP, Foresight News
The cryptocurrency industry is undergoing some changes.
Tokenization has arrived; when will the market reprice?
Tokenization, the technology that transfers stocks, bonds, and other real-world assets to the blockchain instead of traditional networks, is now at a critical moment.
In just the past month, the following events have occurred:
Robinhood and Kraken 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 two systems are currently limited to non-U.S. investors, Coinbase has submitted documents to the SEC to apply for tokenized stock trading in the U.S., calling it an important strategy.
Financial institutions invested $135 million in the "Canton Network," a new Layer 1 blockchain for trading stocks and bonds. This round of financing was led by market-making giant DRW Capital and bond trading center 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 regulating through enforcement "are over."
And that's 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 on-chain tokenized real-world assets reached a historic high.
Clearly, some changes are happening here. But when will it affect the prices of Ethereum, Solana, XRP, Chainlink, and related assets?
The Outlook for Tokenization
I have always held two views on tokenization.
On one hand, it seems inevitable. It is unreasonable for stocks to trade only from 9:30 AM to 4:00 PM on weekdays. Imagine if your email shut down every Friday at 4:00 PM and didn’t reopen until the following Monday at 9:30 AM.
Not to mention how slow the settlement speed is. Remember the headlines when stock settlement changed from T+2 to T+1 last year?
In which other industry would we celebrate an operational speed from 1934?
Despite feeling inevitable, I often think we cannot rush it. Market structure changes slowly; just ask those who witnessed the transition from floor trading to electronic trading how long it took.
But with a recent series of developments, I am starting to believe that the narrative of tokenized stocks may impact the prices of related assets sooner than expected.
Why It May Start Affecting Prices Now
The market for tokenized stocks is enormous.
Larry Fink, CEO of BlackRock (arguably the most important figure in asset management), wrote in his letter to shareholders this year: "Every stock, every bond, every fund, and even every asset can be tokenized."
Let’s analyze this.
The stock market is valued at $117 trillion. The bond market is valued at $140 trillion. This means the tokenization race involves a market of $257 trillion, not including more niche assets.
Recently, there has been excitement about 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 significant amount of money, and the growth of investment in stablecoins does indeed present 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 most stock and bond trading on-chain will take over ten more years. But with major financial companies like Robinhood and Tradeweb now starting to lay the groundwork for transformation, I can’t help but ask: Can tokenization achieve a 1-5% penetration rate in a few years? Can a dozen significant pilot projects drive us to this level of market penetration? It seems possible, and it would mean trillions of dollars in scale, surpassing 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.
One might argue for a concentrated bet, especially since Ethereum is currently the leader in tokenization and is likely to gain market share, but that seems too narrow to me. Look at the announcements above: many different participants are sharing the pie, and it would be unfortunate to bet too early on the tokenization trend and choose the wrong assets.
You can also supplement 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, and the opportunity is ripe.
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