🤝 Security Token Prime Insights: 7/8/2024

Exclusive Intelligence for Security Token Prime Members

July 08, 2024

Summary and Key Takeaways

1. A $3 Trillion Market Cap Company Gets Tokenized

NVIDIA has exploded in value, quickly becoming one of the hottest investments of all time. Just last week Backed, the token issuance platform focused on non-US investors, has now blown past $50M USD in total issuances across fixed-income and equities products (Coinbase stock and an S&P ETF were previously also tokenized by Backed). The company also employs third-parties for extreme transparency including Chainlink to show proof-of-reserves to investors and recently a third-party rating from Particula. Another first, the company is also tapping INX to use their marketplace for the bNVDA token. It’s clear the team at Backed has a strong foundation on how this technology will shape future markets and therefore will be a best-in-class issuer compared to traditional alternatives for the same assets.

2. Chainlink Delivers on Adding NAVs On Chain

Sygnum and Fidelity International both announced last week their partnership with Chainlink to bring NAV data for their tokenized funds to the blockchain. On top of that, the DTCC announced SmartNAV designed for mutual funds to use. Bringing the Net Asset Value data on chain is critical not just for transparency - I mean how many people are really going to look that up via a blockexplorer? My guess is not that many. Instead, it's the fact that the data lives on chain to be used in applications, reporting, and even trades. Funds typically don’t trade the underlying Limited Partner interests all that often and typically report the NAV annually or quarterly, monthly if it's bigger (and you’re lucky!). The future will enable issuers to do daily NAV reporting beyond an email or PDF and that’s going to radically improve the investability of certain funds while improving the reporting and admin for all funds to be able to use.

3. Nearly $1 Billion in New Tokenized Real Estate Deals

The real estate asset class will be one of the first to jump full speed into tokenization due to the lack of liquidity options and archaic backbone of its industry. We’ve seen all types of exposure too whether via SPVs, funds, titles (which are essentially almost impossible in the US), the mezzanine debt, construction bonds, UPREITS, and even more unique structures tapping into the true capabilities of tokenization. That’s why it’s no longer a shock to see huge numbers in announcements like $500 Million of $5 Billion in Real Estate to be tokenized by MAG on MANTRA and the $235M luxury real estate portfolio in Albania and the Balkans being tokenized by T-Blocks both in the SAME week. That doesn’t include the usual suspects like RealT’s weekly offerings. After all, there is over $300 Trillion in Real Estate globally and the race to tokenize it all is slowly becoming more and more apparent to the incumbents and to owners.

TokenizeThis Workshop Tour Around the US Launches September

Get your tickets today for a full day masterclass around tokenization from A to Z. There continues to be a massive education gap in the industry and off the success of the original workshop in Miami last May, we’ve decided to go nationwide. We’ll be visiting NYC, Houston, Boston, LA, SF, Atlanta, and Chicago, check out workshop.stm.co for more information. Use code PRIME for 15% off.

Notable Market Headlines

Institutional Activity

STM Data

This week the Security Token Market Data Team would like to share a preview of the RWA Securities Market Update - June 2024 report releasing on Wednesday, July 10th.

CoinDesk 20 Index Benchmark

Taking a look at a hypothetical security token bundle of all STM-tracked RWAs, it outperformed the CoinDesk 20 Index, closing out June 2024 at 13.73% versus the index’s -11.74%. The drop in the crypto market could be attributed to macroeconomics as there are expectations of fewer rate cuts. This paired with spot bitcoin ETF net outflows creates negative sentiment in the crypto space, impacting bitcoin’s price and therefore other cryptocurrencies’ which the CD20 is composed of. With that in mind, the STM Team will also compare performance throughout June 2024 by asset class. 

Pooled Investment Fund Interests

  • Market Cap: $1,051,820,147 (8.34% MoM)

  • Volume: $38,963 (73.64% MoM)

CoinDesk 20 Index Benchmark: Tokenized funds grew similarly to the ABS products, closing out the month up 8.34%. The CD20 suffered from crypto’s volatility whereas many of the tokenized funds invest into treasuries, holding their NAV’s a bit more stable while other funds grew, limiting the downside potential. 

Insights: Tokenized funds grew in market cap due multiple factors including net inflows and a new onboard. Starting with the money market fund spotlights, BlackRock’s BUIDL saw a 5.93% increase in net inflows closing out the month at $483,311,326.32. Meanwhile, Franklin Templeton’s BENJI token crossed the $400M AUM mark with a final figure of $401,969,710.57 (15.39% MoM). 

While the two mentioned funds are growing quickly, STM onboarded one of, if not the first, 40 Act funds investing in treasuries: the Arca U.S. Treasury Fund Token ($RCOIN) available on Securitize. With a modest market cap of $409,072 this fund signaled one of the first trades back on Securitize Markets which experienced months unavailable for secondary trading.

Shifting our attention to market movements, although the RealUnit Schweiz AG ($REALU) token on Aktionariat decreased a bit in market cap, it did grow its volume significantly, 114%, from May adding $38,923.90 worth of trades and driving this month’s overall volume increase. The WisdomTree 40 Act funds, however, didn’t didn’t see much movement in AUM aside from one fund growing 15.81%, the WisdomTree Siegel Moderate Digital Fund ($MODRX) which is designed to follow the traditional 60/40 allocation (i.e., 60% equities/40% fixed income). The Fund leverages insights from Professor Jeremy J. Siegel, Senior Economist to WisdomTree and Emeritus Professor of Finance at The Wharton School of the University of Pennsylvania.

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  • Powers Hour: New SEC “Dealer” Rule Expansion and DeFi Impacts (Recording Link)

Hello members,

People often talk about the dream of being able to manage a portfolio of completely tokenized assets. Crowdfunding platforms talk about how they are creating digital access to investments with lower investment minimums otherwise known as fractionalization. Then you’ve got automatic and efficient rebalancing, which JPM’s Onyx highlighted can save thousands of steps performed by humans. The problem is to most people this still sounds like pie in the sky, something that is years away. 

Except it's already possible now. Arguably, international investors have it even better now than their US counterparts. Whether it's access to the largest companies globally like Nvidia or accessing real estate deals around the world or buying precious metals like gold, investors today can build their ideal portfolio on chain because now we are starting to see a critical mass of available products. Week-after-week we continue to see new offerings with an obvious increase in the quality of the asset and issuers, with ratings starting to become more prevalent too. Time to stop dreaming about it and show this in action. Does anyone have a portfolio of RWAs they want to share with the class?

Happy tokenizing,
Herwig
CEO, Security Token Group 
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