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Welcome to Crypto Long & Short! This week, Jason Barraza, COO of Security Token Market, says tokenized RWAs help hedge against crypto volatility, add utility and efficiencies, and streamline access to alternatives.
Then, Tom Whitton, CFO of Pier Two, says staking benchmarks help Ethereum operators can identify areas for improvement and optimize their operations, as well as to differentiate their staking products in a competitive market. As always, get the latest crypto news and data from coindeskmarkets.com. – Ben Schiller, head of Consensus Magazine at CoinDesk
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How Tokenized Real World Assets Are Outperforming Crypto |
Real world asset (RWA) tokenization has been growing in popularity among institutions with financial giants such as BlackRock entering the space with their own tokenized assets. Leveraging blockchain technology, this allows traditional assets to be issued, managed, and distributed more efficiently compared to their off-chain counterparts, especially private and alternative assets. Security Token Market has covered this space since 2018 and, from tracking 600-plus tokenized products, here are some themes we’re seeing along with their performance. Looking at the talk of town, the BlackRock USD Institutional Digital Liquidity Fund ($BUIDL) is a prime example of an asset institutions are increasingly deploying into: tokenized money market funds. BUIDL saw a 5.93% increase in net inflows closing out June 2024 at $483,311,326.32 in AUM. |
How is putting a fund like this on-chain worth the effort? One answer is because of the utility that comes with it. Issued on the Ethereum public blockchain via Securitize, this token was recently used as collateral on prime brokerage FalconX to secure loans and collateralize derivatives positions. Meanwhile, in venture capital, Mike Reed from Franklin Templeton shared an anecdote at TokenizeThis 2024 where a venture capitalist mentioned wanting to use their tokenized money market fund ($BENJI), to fund portfolio companies. The idea here is that he can directly send his company a yield-generating asset to hold in their treasury and theoretically see how the money is used thanks to the power of blockchain. Of course there are other examples of cost savings and utility being uncovered through both proofs of concept and in-production use cases. Here are a few: |
| Broadridge reports $1M savings for every 100K repo transactionsThrough a Project Guardian proof of concept, Onyx by JPMorgan reports cutting rebalancing portfolios from 3,000 steps to a few clicks of a button (assuming 100,000 discretionary portfolios)The proof-of-concept above also resulted in eliminating cash drag from discretionary portfolios by around 18% annually through the use of smart contracts. Figure has tokenized $7B+ worth of HELOCs. By issuing, warehousing and securitizing them, they’ve saved 150 bps out of the process. These savings go to the issuer and the end investor.Hashnote’s USYC product is looking to work with Broadridge to access the intraday market (primarily for banks), boost their yield, and then pass on to their customers. |
Keeping these use-cases in mind, what kinds of assets are being tokenized? Security Token Market covers on-chain equity, fund LP units, real estate, debt, and more. |
Taking from STM’s RWA Securities Market Update - June 2024 report, a hypothetical security token bundle of all STM-tracked RWAs 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’ in the CoinDesk 20. With that in mind, the STM Team will also compare performance throughout June 2024 by asset class: see here for our latest research report. |
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How Staking Rate Benchmarks Can Build Digital Assets Markets |
As the staking industry matures, and more node operators enter the market, the need for performance metrics becomes increasingly important for gaining a competitive edge. The Ethereum staking rate is the closest equivalent to the “risk free rate” of digital currencies. Institutional staking service operators, like Pier Two (where I work as CFO) and Figment, are dedicated to providing security and stability to the Ethereum ecosystem while delivering premier staking yields to customers. Understanding CESR One such metric gaining prominence is the CESR (Composite Ether Staking Rate) benchmark, created by CoinDesk Indices and CoinFund. CESR measures the average staking rate across the Ethereum network, providing a reliable standard for operators and stakers to gauge performance. By comparing staking rates to CESR, operators can objectively assess their competitiveness and effectiveness. Why benchmarks are important Benchmarks are important in financial markets to create structure, standardization and comparability for many financial products, including ETFs. CESR is a useful rate for issuers that are looking to offer ETH Staking funds, and for validators that are looking to engage in performance monitoring, or swaps to lock in rates and build more sustainable and less volatile business models. How Operators Can Use the CESR Benchmark |
CESR offers operators a metric to benchmark their validator performance against the broader network. By comparing their returns to a trusted industry benchmark, operators can identify areas for improvement and optimize their operations, as well as to differentiate their staking products in a competitive market. The CESR benchmark fosters healthy competition among operators. Those who outperform are rewarded with increased delegations, while those who don’t are incentivised to enhance their performance to remain competitive. |
| Market Monitoring and Strategic Insights |
CESR enables operators to gain deeper insights into the Ethereum ecosystem. By monitoring trends, operators can make informed strategic decisions and adapt to market conditions and network changes (including recent Shapella and Dencun upgrades). The CESR benchmark demonstrates that well-managed operators can achieve consistent returns despite market and network fluctuations. This underscores the value of robust operational practices and vigilant monitoring. |
| Enhancing Infrastructure Performance with Rated RAVER |
Reliable and performant infrastructure is key to yield success. Operators must leverage high uptime, low latency, and rigorous operational protocols to maximize staking efficiency and rewards. Using Rated’s Validator Effectiveness Rating (RAVER) helps measure these factors, considering uptime, participation in consensus, and overall reliability. By using CESR as the industry signal and Rated's RAVER metrics to measure infrastructure performance, an Institutional staking service operator may optimise to maintain a competitive edge. This comprehensive approach allows operators to fine-tune strategies and operations continuously, to further enhance services. Final thoughts The CESR benchmark offers a tool for operators to measure and enhance their performance within the Ethereum ecosystem. By leveraging CESR alongside operational metrics like Rated RAVER, operators can achieve greater transparency, trust, and efficiency. As the Ethereum network continues to evolve, these benchmarks will play an increasingly vital role in guiding and evaluating validator success. CESR will continue to be used by market participants, validators and financial institutions worldwide when engaging in products that reference Ethereum as the first bedrock financial rate of return for the Internet. |
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Here's some news worth knowing, from CoinDesk deputy editor-in-chief Nick Baker: |
| GERMANY: For a while now, crypto traders have had their eyes on a giant potential source of selling pressure for bitcoin (BTC): the estate of long-defunct exchange Mt. Gox distributing tokens to investors who haven't seen their crypto for a decade. Bitcoin is up, well, a lot since Mt. Gox collapsed in 2014, so presumably many of those investors will want to sell their newfound riches. Money is being distributed now. What was not on many radars, however, was a large pile of nearly 50,000 BTC that German officials confiscated early this year and are now dumping. Bitcoin has fallen into the $50,000s, well down from the $70,000s reached earlier this year. And the carnage has been widespread, with the CoinDesk 20 Index dropping about 18% in the past month. Where do things go from here as Mt. Gox and Germany batter the market? As bitcoin losses accelerated, investors added money to bitcoin ETFs, a sign of optimism that prices will rebound. And my colleague Omkar Godbole argues that bullish catalysts remain in place: "Once supply overhangs from Germany and Mt. Gox creditors run dry, the market could stage an impressive recovery." |
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