Low rates are a major test for the tokenized bond market. Onchain treasuries will double in value in 2024, helped by proponents including BlackRock. Investors now “move further up the risk curve” for increased risk.
Euphoria is in the air. China's stimulus, combined with Federal Reserve interest rates earlier this month, is prompting investors to ditch haven assets and pile into riskier bets.
Rates on US Treasury bonds – the safest bet there – fell. That means issuers of those government bonds on the blockchain are seeing less demand as yields fall from 5%.
“Falling rates change the investment thesis,” said Timo Lehes, co-founder of Swarm, a trading platform that offers tokenized versions of bonds and stocks on the blockchain.
It doesn't matter.
The group and rivals, including Centrifuge and Backed Finance, say this year will be the real test of the market for private loans, bonds, equities and real estate to get on the blockchain. Boston Consulting Group It predicted that possibility It will reach $16 trillion by 2030.
US government bond opportunities alone are huge – the Treasury market is worth $29 trillion.
Cheap transactions
Treasuries moved onchain are worth more than that Doubled Since the start of the year – fueled in part by BlackRock, JP Morgan and Franklin Templeton – more investor offerings have been secured onchain.
Issuers say the promise of cheaper, more transparent and more efficient transactions will keep demand coming.
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“Equities and indices are unexplored on Unchain,” says David Henderson, head of marketing at Backed Finance. News. “Corporate bond ETFs — which we've tokenized — offer a similar risk profile to Treasuries with better yields.”
High-risk products
Pundits argue that blockchains can replace creaky financial rails entangled with intermediaries. Tokenized versions of Google stock, barrels of oil, and real estate can be seamlessly settled at the speed of the Internet.
Blockchain also has a suite of high-risk products for DeFi lovers to pile on.
“We expect that onchain investors, who naturally have a higher risk tolerance, will explore opportunities to further up the risk curve,” said Bhaji Illuminati, CMO of Centrifuge. News.
“This could mean a shift toward other safer assets, such as AAA-rated collateralized debt obligations or a growing appetite for private credit deals.”
Just at $4 billionTokenized treasuries are just a blip $119 trillion bond market.
And with rates falling, some investors will stay away.
Stablecoin lenders on Aave, for example, Earn up to 6%. It was only 2.4% at the beginning of August.
Henderson said if investors gauge their appetite for risk amid another Fed cut in November, they will have a wider range of tokenized assets to choose from.
Liam Kelly is a DeFi Correspondent News. Got a tip? Email him [email protected].
