Tokenization of stocks triggers a new wave in the crypto market, altcoins face challenges

Recently, the wave of tokenized stock trading has swept through the crypto market, with several well-known trading platforms announcing the launch of related services. This trend not only signifies that the crypto world is undergoing profound changes, but also raises concerns in the market about the future development of alts.

The Survival Crisis of Alts

As traditional high-quality assets gradually achieve "on-chain" status, the flow of funds in the crypto market is quietly changing. Some viewpoints suggest that tokenized traditional high-quality assets, with clear business models, compliant regulatory frameworks, and stable actual returns, are becoming new favorites for on-chain funds and creating a siphoning effect on the altcoin market. Especially those tokens that lack actual revenue models, have immature products, and rely solely on narratives to support their market value are facing liquidity exhaustion and survival pressure.

A sharp question has been raised by some crypto practitioners: When traditional high-quality assets are tokenized and can be traded on-chain, do native crypto assets still hold value? Investors can directly purchase stocks of well-known companies that have strong liquidity, stable volatility, and clear valuation logic on-chain, so why should they bet on an altcoin that "may build products"?

However, not everyone holds a pessimistic view. Some analysts point out that alts will not necessarily disappear; rather, their survival environment will become more severe. The only way forward for alts in the future is to create actual application value, especially value that can generate real income. All tokens that cannot be implemented and survive solely on narratives will gradually enter a death spiral.

The Integration of Traditional Finance and the Crypto World

Many industry insiders hold an optimistic view on the development prospects of tokenized stocks. They believe that this is not only an innovation in trading tools but may also fundamentally change the ecology and landscape of securities trading, and promote the scale and depth of the crypto market.

Some viewpoints point out that a major feature of encryption technology is the reduction of transaction barriers, promoting transaction freedom. For example, users in regions that previously could not purchase securities now have new opportunities. Even some popular company shares that are not circulated in the public market may be able to circulate through tokenization.

From a technical perspective, the core function of blockchain in the financial realm is "payment as settlement." This feature is difficult to achieve in traditional financial systems, but it can be fully realized in tokenized stock trading. This means that, although US stocks cannot be traded around the clock, tokenized US stocks can be traded 24/7.

From a broader perspective, the tokenization of stocks indicates the cross-border integration of traditional financial platforms into blockchain infrastructure. This marks the beginning of a fusion between traditional finance and crypto assets, as the compliance process for crypto assets progresses, no longer remaining two distinct camps. In the future, this may stimulate more innovations, such as the tokenization of emerging companies, real estate, and even artworks.

Still facing multiple challenges

Despite the popularity of the tokenization of stocks concept, it is still in the early stages overall, and there is not yet sufficient market depth. Currently, the on-chain actual liquidity is still quite limited, with most tokenized stocks having low trading volumes and user numbers.

Industry experts point out that the main challenges facing tokenized stocks include insufficient liquidity, flaws in product structure, and compliance risks. For example, most platforms currently rely on special purpose vehicles to purchase equivalent real stocks in the market as collateral, but this model faces price risks and liquidity issues during non-U.S. stock trading hours.

In addition, any decentralized finance protocol or market maker that inadvertently provides this token trading service to US users may face higher compliance risks. This means that the current tokenization stock products may not be ideal for most users.

Despite facing numerous challenges, tokenized stocks are still considered to have immense potential in the long term. As the primary market truly goes on-chain, collateral shifts towards tokenized stocks, and traditional institutions upgrade their technological architecture, we can expect to see stocks appear on-chain in a form of large-scale liquidity, achieving smooth on-chain trading, accurate pricing, and active institutional participation. When the infrastructure between encryption and traditional finance accelerates its integration, tokenized stocks may usher in a true explosion point.