The Next Big Wave is Security Tokens or Tokenized Securities to Provide Liquidity
Why do Tokenized Securities Provide Liquidity
During 2017, several virtual currency investors have seen exponential returns on their investments. Some of them even reached 1,000%. But there are some figures in the space that believe that it would not be possible to see another bull run as the one experienced the last year.
However, according to Benjamin Pirus, the market may still have a chance to enjoy a positive exponential trend with tokenized securities leading the way. In order for the total cryptocurrency market capitalization to keep growing, it will need more clarity from regulators around the world. And tokenized securities could be a good way for investors to enter the market. With them, they will feel that their investments are safe.
Most of the virtual currencies are not backed by anything, says Mr. Pirus. The market fluctuates almost entirely based on speculation. And investors in ICOs are waiting the company to succeed in order to have some profits on their investments.
For example, Ripple and XRP have a strong relation. But XRP does not depend on the success of Ripple as a company. Most of the current altcoins in the market are utility tokens that have various roles in the projects that they are linked to. The price of these assets should be based on the demand for the tokens to be used for their purpose in the system rather than speculative.
This is one of the main reasons why there are such a strong hype periods in some projects. Some virtual currencies increase in value but then, they lose most of their gains. In the end, the market has several virtual currencies that were not able to succeed not even after a long period of price increase.
Tokenized securities could be an effective solution to the problems that the market has. Securities are very important because they are regulatory compliant and have value from an underlying asset or company.
If investors own stock in a specific company, essentially, they own part of that company. If the company behaves positively, then, the investors see their profits increase.
Tokenizing these assets is positive for the market because it provides liquidity. More investors would have access to several new assets that they can afford to invest.
Moreover, with tokenization it is possible to enable person-to-person transactions, according to Pirus. Anthony Pompliano, founder and partner at Morgan Creek Digital said that the security market will be worth trillions of dollars in three years.
At the moment, the tokenized securities space is just growing. In the future, new companies could help the market increase its potential. Just to mention an example, Desico is building a platform for issuance and trading of tokenized securities. Additionally, the company is working with the European Union and its regulators to be fully compliant.
Moreover, Desico allows retail investors to gain involvement in the tokenized security space. Desico co-founder, Audrius Griskevicius explained on the matter:
“Currently when a promising company raises capital it sells its equity to institutional investors like VC, while retail investors have access to invest in to it when it goes IPO. DESICO will open up an opportunity for retail as well as institutional investors to invest in to promising companies at an early stage.”
Finally, it is not possible to say when the tokenization of the space will take place. However, the future remains bright for the industry and the space wants to move faster into this direction.