Digital asset management firm 21.co recently postulated in a report that, under optimistic conditions, the market value of tokenized real-world assets (RWAs) could skyrocket to an impressive $10 trillion by the decade’s close.
However, even under a less favorable forecast, tokenized RWAs are still anticipated to amass a market capitalization of approximately $3.5 trillion by 2030, as per 21.co’s estimates.
The recent market cap for tokenized RWAs stood near $116 billion, with the majority, about 97%, being dominated by USD-tethered stablecoins.
Furthermore, the Ethereum blockchain serves as the foundation for roughly 60% of all currently available tokenized RWAs. Ethereum continues to uphold its reputation as the dominant layer-1 protocol, extensively leveraged in the Decentralized Finance (DeFi), Non-Fungible Token (NFT), and web3 spheres.
21.co refers to these digitalized dollars as the “inaugural triumph of tokenization.”
USD-anchored stablecoins, such as Tether’s USDT and Circle’s USDC, empower cryptocurrency enthusiasts to seamlessly transfer a digital representation that closely mirrors the intrinsic value of the US dollar. This occurs in an environment that’s unrestricted, resistant to censorship, devoid of borders, and is almost instantaneous.
Both of these cryptocurrencies maintain a 1:1 backing with genuine US dollars or liquid equivalents, with the funds securely held in bank accounts overseen by Tether and Circle.
Moreover, 21.co shed light on the exponential growth experienced in other asset tokenization facets. For instance, there’s been a noteworthy 450% growth spurt in the tokenized US government bond domain. This surge has been catalyzed, in part, due to the US bond yields soaring to peaks not seen in several decades this year.
RWAs – The Convergence of TradFi and Crypto
21.co emphasized in their report that there’s a remarkable growth in the intersection of cryptocurrency with conventional asset categories, such as fiat currencies, equities, government bonds, and real estate.
With the evolution of the cryptocurrency realm, the expectation is that an increasing number of traditional establishments will construct their offerings atop blockchain infrastructures, the report’s analysts contend.
The report further elaborates, “In this metamorphosis, cryptocurrency will progressively fuse with extant financial software, facilitating the inclusion of RWAs on-chain through the medium of tokenization.”
However, regulatory hurdles combined with a possible absence of uniform procedures are among the challenges 21.co identifies as potential brakes on the momentum and acceptance of tokenized RWAs.
Tokenized RWAs to Power Ether (ETH) to Multi-Trillion Dollar Market Cap?
If blockchains, particularly Ethereum, retain their premier status as platforms for issuing tokenized RWAs, it could notably amplify the demand for Ether (ETH) in the coming years.
Ether (ETH) isn’t just any token; it’s the heart of the Ethereum blockchain, utilized to cover the gas expenses that facilitate transactions and activities on the blockchain.
The latest valuation of Ether placed it at a market cap of approximately $188 billion. This is a figure triple the worth of the $60 billion in assets that are directly tokenized on its system.
Given this trajectory, if by 2030 Ethereum accommodates 60% of an assumed $10 trillion in tokenized RWAs, it’s plausible to predict Ether’s valuation ballooning to several trillions. Such a scenario could even see Ether challenging gold’s market prominence, with the precious metal’s cap recently being estimated at about $12.8 trillion.
Ether has been witnessing a slump lately, declining by over 6% in the past month and plummeting over 25% from its peak earlier this year.
A couple of factors have been pinpointed as culprits for its subpar performance. One is the lukewarm reception to the newly launched Ether futures ETFs in the US. Additionally, the flagging on-chain activity which has made the Ether supply revert to an inflationary trend is also a contributor.
Another challenging aspect is the diminishing yields on staked ETH, currently hovering around 3.5% APY. This comes at a juncture when US bond yields are on an upward trajectory, with the 10-year benchmark now exceeding 4.8%. This yield differential can divert potential investment away from ETH.
Furthermore, persistent challenges such as comparatively high transaction fees and not-so-swift transaction durations persistently deter broader adoption.
The current trading range for Ether hovers around $1,570. Market pessimists are closely observing the potential for a breach below a pivotal long-standing support level, situated in the low $1,500s. Should this level give way, Ether could be exposed to a deeper descent, possibly revisiting the sub-$1,400 lows witnessed in March.