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Anon: "Crypto isn't dead bro. My coins are pumping"
Me: "Only the boring will survive"
Crypto was fascinating, then depressing. Now it's having a little resurgence because financial conditions are easier again. That doesn't mean the worst is behind us. Nor does it mean crypto goes straight back to up only mode.
Basically, some pockets of crypto will survive. Some won't. Plenty are already extinct, and many more will follow. Darwin always wins in the end.
However, one thing that's picking up steam is the boring art of tokenisation. We discussed this almost a year ago here, but the basic premise is that EVERYTHING in financial markets (and a bit more) has the potential to be tokenised 👇
We can debate whether this will be a good or bad thing separately (I say 'we', really I mean 'you and literally anyone else' because OMG how boring).
The point is, it's going to happen. The Gods of Progress decree that it shall be so, and there are plenty of areas of financial infrastructure that can benefit massively.
In the article above, we covered the ancient oddity of share ownership and how when you buy shares with your broker, you don't necessarily own those shares.
You own a claim on those shares, with the broker, who may or may not have fractionalised them (and the person who really 'owns' them according to the house of records is the broker, not you). It doesn't really matter as long as the broker stays solvent.
There's a similar dynamic behind the myth that BlackRock 'owns' controlling shares of the biggest companies in the world. Stuff like this crops up more often than it should 👇
Simple test if you ever come across these claims or anyone who believes them.
What's the market cap of BlackRock? At the time of writing, it's about $112 billion. Pfizer's market cap is currently $258 billion.
If BlackRock owns a controlling stake in Pfizer, why isn't BlackRock worth more than Pfizer (and all of the others combined)?
Maybe because it's just holding assets for literally all of us that have savings, investments, and pensions. We own those companies more than BlackRock do. They're just our storage company and charge a small fee for management and making that ownership easy. (Yes, maybe they have some agendas like ESG that they use the 'ownership' to push, but that's not a debate for today).
Anyway, BlackRock's especially relevant here because CEO Larry Fink believes that "the next generation for markets, the next generation for securities, will be tokenization of securities."
He's all about removing the middlemen and bringing down fees "even more dramatically" 👇
Boston Consulting Group see this as a $16 trillion opportunity by 2030... 👇
Not entirely sure where the opportunity is, but it's an interesting perspective nonetheless. Especially as this is all happening outside of the existing crypto ecosystem...
In fact, there's a bit of innovation going on in the US bond market...
Here's the key info 👇
While we intend to offer a broad range of securities and other credit products for investors, we are starting off with short-term US treasuries and bonds through large, highly liquid ETFs managed by institutions like Blackrock and PIMCO. There are three separate share classes available at launch:
- US Government Bond Fund (OUSG): OUSG will invest exclusively in short term US treasuries, initially via the Blackrock US Treasuries ETF (SHV)
- Short-Term Investment Grade Bond Fund (OSTB): OSTB will invest in short-term investment grade, corporate bonds, initially via the PIMCO Enhanced Short Maturity Active ETF (MINT)
- High Yield Corporate Bond Fund (OHYG): OHYG will invest in high yield, corporate bonds, initially via the Blackrock iBoxx $ High Yield Corporate Bond ETF (HYG)
Ondo Capital Management will be the investment adviser facilitating the purchase and sale of these ETFs. Ondo Finance Inc. will charge a 0.15% per annum management fee.
OK, maybe not quite so innovative. You can essentially own some existing ETF's with easy stablecoin conversion, and Ondo charge a small extra fee for the luxury.
It isn't exactly innovation. But it's where innovation starts. I haven't seen anyone else tokenising US bonds (yet).
Goldman also launched their digital asset platform this month. GS DAP is live 👇
“Goldman Sachs has taken the right approach to tokenization and the underlying blockchain technologies necessary to support this new market. As an early adopter of the technology, Goldman Sachs is paving the way for the future of financial services. We are excited this platform has reached the market and look forward to its continued evolution.”
We're already used to near-instant transfers. This tech could pave the way for near-instant settlement across markets. They've already been involved in the launch of a two year, 100 million Euro digital bond 👇
“We are pleased to bring this Daml-based solution to market and continue to find efficiencies that will improve the velocity of transactions. For example, by reducing the typical bond issuance settlement time for the European Investment Bank from T+5 to T+0 at a speed of sub-60 seconds with cross-chain atomic Delivery versus Payment (DvP) settlement in this inaugural issuance, we show how transformative this technology can be to the financial markets.”
There'll be plenty of bumps in the road, but the blockchain/tokenisation movement is well underway (and here to stay).