Bittime – So far, many have predicted that crypto price increases will be triggered by the Bitcoin Halving or the approval of an Ethereum ETF. However, the latest predictions state that the main driver of the next increase in crypto prices will come from real-world assets (RWA).
The basic concept of RWA is that any asset can be converted into a digital token and traded on the blockchain.
This includes relatively simple assets, such as stocks, commodities, and national currencies, as well as more complex instruments such as real estate derivatives, government bonds, and corporate bonds.
Digital Assets Around the World
Boston Consulting Group estimates asset tokenization could reach $16 trillion by 2030, driven by annual savings worth around $20 billion thanks to the efficiencies offered by blockchain.
Several companies have tokenized the US dollar, with brokerage firm Bernstein projecting that the US stablecoin market will reach $3 trillion by 2028.
The main reasons for the shift to tokenization are clear. Blockchain provides a highly transparent and secure way to trade assets 24/7, drastically reducing counterparty risk while increasing capital efficiency.
This means significantly reduced administration and security costs while increasing asset productivity. Thus, tokenization is a natural evolution for financial markets migrating to the digital era.
Smart contracts also introduce the concept of “smart money”, where assets can be programmed to do things just like computer applications.
For example, enabling “cross-collateralization” of some debt positions and automatic deleveraging of risky positions will help improve capital efficiency and reduce risk.
Central banks around the world are conducting research into central bank digital currencies, with claims that all G20 members, except Argentina, are in the advanced stages of research.
Therefore, companies like BlackRock want to be at the forefront of the market and position themselves as the next generation of financial leaders.
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BlackRock and RWA
BlackRock dived headlong into the RWA space this year with the launch of BUIDL, the BlackRock USD Institutional Digital Liquidity Fund. BUIDL is an ERC20 token created on Ethereum and offers investors exposure to US dollar yields generated by short-term US treasuries.
As a tokenized fund, buyers simply purchase BUIDL tokens. Dividends are then distributed to holders as additional tokens each month, and investors enjoy around-the-clock settlement and liquidity access.
There are also plans to allow users to enter and exit pools using USDC, the world's second-largest retail stablecoin.
This effectively allows investors to jump from BUIDL, which is strictly restricted to accredited investors and follows SEC rules, into the “Wild West” realm of decentralized finance (DeFi) tokens and applications.
Ondo Finance ($ONDO) is a DeFi platform with strong connections to Wall Street that is looking to capitalize on the partnership between BlackRock and Circle (issuer of USDC).
Ondo is the first to test the new BUIDL-USDC bridge, which is expected to connect to their suite of on-chain products such as OUSG (a fund similar to BUIDL).
According to Ondo CEO Nathan Allman, “We use it to support 24/7/365 instant redemptions from OUSG to USDC.”
Also Read: Ondo Finance Launches Ondo Global Market, Here's the Explanation
Three Tokens for Investors Interested in RWA
1. Ondo Finance ($ONDO)
The company attracted attention in March when it invested $95 million into BlackRock's BUIDL fund. The investment was made using a portion of US Short-Term funds
Ondo's Government Treasuries (OUSG). OUSG is a tokenized fund that offers liquid exposure to short-term US treasuries.
Similar to BUIDL, investors can enjoy the benefits of the low-risk yield of US treasuries but with the ease of entering and exiting their positions via the OUSG token.
Incorporating BUIDL into the fund was a smart move by Ondo, effectively allowing the firm to leverage BlackRock's institutional infrastructure, security, market reach, and perhaps most importantly, its extensive reputation.
Since integrating with BUIDL, the Ondo token $ONDO has risen from 20 cents on January 21 to 80 cents today. This growth was supported by the launch of USDY, which is Ondo's stablecoin for the retail market.
2. Oracle – Chainlink ($LINK)
Oracles are essentially data feeds that deliver data from external data sources to blockchain applications reliably and securely.
This enables DeFi applications such as decentralized exchanges (DEX), money markets, and lending platforms to reliably integrate RWAs such as stablecoins or stock prices into their products.
Reliability is key here. If the price oracle deviates, it can cause chaos in the market and result in huge losses. According to Chainalysis, DeFi protocols lost $403 million in 2022 due to Oracle attacks.
To help ensure accuracy, oracles use an incentive token model that requires users to stake (collateralize) assets in exchange for the ability to provide data feeds.
In return, they are rewarded with newly created tokens. However, if their data is unreliable, then they could lose some of the assets they bet on.
Chainlink ($LINK) has established itself as the most reliable oracle in the industry, securing around $22 billion worth of assets as of April 23, according to data from DeFiLlama.
Chainlink is also looking to expand its product suite by adding a cross-chain messaging infrastructure called CCIP, which enables increased asset transfers across multiple blockchains and ecosystems.
A partnership with Australia's ANZ bank explores how CCIP can transfer RWA between private and public networks. This shows how Chainlink is using CCIP to build the basic infrastructure for RWA tokenization and adoption by large financial institutions.
Chainlink's native LINK token has been considered one of the cryptocurrencies with the greatest potential for several years now, given its strong position in the DeFi ecosystem.
Chainlink's market capitalization now stands at just over $9 billion, making it one of the top 20 cryptocurrencies by market capitalization, although it may be a little pricey for investors looking for greater growth opportunities.
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3. Pyth Network ($PYTH)
Recently, Pyth Network has emerged as a reliable alternative to Chainlink. Pyth first gained popularity on Solana but has since appeared on other networks such as Ethereum and Cosmos.
Pyth Network currently has a market capitalization of around $1 billion. This makes $PYTH an attractive option for anyone who wants to gain greater exposure to oracles and RWA but is hindered by $LINK's high valuation.
Conclusion: Invest in RWA
The world of crypto assets is experiencing a shift. RWA tokenization is expected to be the next major driver of crypto growth and adoption.
Investors interested in RWA have some interesting options to consider, including tokens from companies like Ondo Finance ($ONDO) and leading oracles like Chainlink ($LINK) and Pyth Network ($PYTH).
However, as always, it is important to do your research before making any investment. The crypto market is still volatile and carries high risks. Diversification is key to achieving long-term success in the crypto space.
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Read Also:
What Are Real World Assets (RWA), 5 Crypto Coins & Blockchains That Use the RWA Narrative
Worldcoin Plans to Sell 500,000 to 1.5 Million WLD per Week Over the Next 6 Months
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DISCLAIMER: This article is informational and is not an offer or solicitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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