Token Commodities Are the Safety Net Crypto Investors Always Need

By Alexander Tkachenko, Founder and CEO of VNX

Russia’s invasion of Ukraine and President Biden’s crypto regulatory-focused executive order sent digital asset and stock prices plummeting. In the traditional market, the turmoil caused a massive outflow of capital into various safe-haven assets, such as gold and bonds.

Crypto holders, on the other hand, have less protection against global market shock waves. They also have the added weight of bearing the long-standing and notorious volatility of the cryptosphere. Typically, crypto enthusiasts thrive on volatility, preferring the potential for incredibly high returns over the safety of gradual, modest gains. Nonetheless, desperate times prove that such a safety net might be needed, and frankly an infrastructure for one already exists. Those looking to protect their digital assets from the current turmoil can leverage traditional tokenized assets to finally find the stability and certainty otherwise lacking in the DeFi world.

The Changing Tides of Crypto

Until recently, investors viewed crypto as an asset class that fluctuated independently of the stock market. That changed last year, when Bitcoin’s moves started echoing those of the Nasdaq, which could signal a changing tide in crypto lands given that altcoins generally follow their leader.

The volatility of digital assets as they rose and fell independently of traditional stocks may have seemed problematic to traditional market analysts accustomed to traditional safety nets at the time. But crypto’s growing correlation with the stock market could potentially lead to greater exposure to larger macroeconomic shocks compiled on the digital market’s own volatility.

As these market shifts occur, experts suggest sticking to long-term investment strategies and avoiding knee-jerk reactions, like panic selling when the market crashes. These recommendations only further underscore the fact that crypto investors have little to rely on to protect against such upheavals. Instead, they are advised to just stay calm and hope their 50% loss recovers over the next few months or years – or, in the case of some riskier cryptocurrencies, never.

In terms of crypto, the larger “legacy” cryptocurrencies, such as bitcoin and ether, can seem stable compared to most altcoins. However, it’s important to zoom out and remember that even bitcoin is extremely volatile, which means that some altcoins, when compared to more traditional assets, take volatility to an entirely new level, really comparable to gambling. To lock in their gains, investors today rely on stablecoins rather than bitcoins, providing some level of stability regardless of market changes. But while assets like gold tend to do well in turbulent times, resulting in gains for their holders, the “stable” of “stablecoin” means its price won’t rise either. No gains there, unless the investor wants to dive into staking or use them to buy the line down.

An essential safety net

The tokenization of assets and commodities gives crypto holders the opportunity to diversify their portfolios with a more predictable variety of assets, like a traditional investor would, and gain more confidence in their holdings. Something like tokenized silver, for example, might be good to have in your wallet if Bitcoin continues to reflect stocks, as silver is widely seen as a hedge against market crashes.

It also expands the possibilities for traditionally illiquid or non-fractionable assets, such as real estate, which were previously reserved for institutional investors. Splitting ownership of an asset into multiple digital tokens removes the costly barrier to entry. Someone who has dreamed of owning real estate in Manhattan may not be able to afford it when they arrive in the city. But with the ability to purchase a token representing partial ownership, their dreams can actually come true, with no barriers to entry. It’s a way for crypto investors to diversify their portfolio with more stable assets, while doing it on the blockchain.

Tokenization options don’t stop at physical assets which are generally thought of as inflation hedges. Santander recently announced tokenized soybean and corn-backed loans, with each token corresponding to a ton of grain that has been grown and verified by Proof of Grain Reserve (PoGR). This indicates that there is still a vast array of unexplored possibilities for tokenized assets, both in the worlds of decentralized and traditional finance.

Tokenized shielded assets can also be used for yield farming, allowing holders to earn a return on the tokens themselves, beyond profiting from simply holding the asset itself. Tokenized assets are also a more reliable collateral for lending and minting stablecoins, with the potential to attract more conservative, long-term traditional investors to DeFi. These practical uses of tokenized assets greatly enrich DeFi and open up scenarios for those who might otherwise be put off by industry volatility.

As global markets evolve and crypto coincides with stocks, there has never been a better time for holders of digital assets to explore the best way to protect their gains. The tokenization of real-world assets means investments are backed by something tangible, providing much-needed stability for investors who might tire of the volatility of crypto.

About the Author

Alexander Tkachenko is the CEO and founder of VNX. In addition to his work at VNX, Alexander was the founder of the Luxembourg venture capital fund Co-president of the VC club of the Luxembourg PE/VC association and member of the executive board of the Digital Banking and Fintech cluster of the Luxembourg Banking Association. Tkachenko is a serial entrepreneur and angel investor with academic credentials including an MBA from London Business School and Columbia University.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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