The Breakdown - Real World Asset Tokenization Shows Positive Early Indicators

Episode Date: March 26, 2025

On this grab bag episode, NLW covers a range of topics, including what was once the odds-on favorite to be this cycle's big narrative driver: real world asset tokenization. Sponsored by: Crypto Tax Calculator Accurate Crypto Taxes. No Guesswork. Say goodbye to tax season headaches with Crypto Tax Calculator: Generate accurate, CPA-endorsed tax reports fully compliant with IRS rules. Seamlessly integrate with 3000+ wallets, exchanges, and on-chain platforms. Import reports directly into TurboTax or H&R Block, or securely share them with your accountant. Exclusive Offer: Use the code BW2025 to enjoy 30% off all paid plans. Don’t miss out - offer expires 15 April 2025! Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today. Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Tuesday, March 25th, and today we are talking real world assets and much, much more. Before we get into that, however, if you were enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, while we have a bit of a grab bag today, lots and lots of stories to catch up on across multiple dimensions, and the first is that the tokenized asset revolution has begun and early pilots are showing good results.

One of the things that was really interesting to me when BlackRock started to get in the crypto game is that Larry Fink was very avowedly interested in both tokenization, as well as Bitcoin itself as a specific asset. After BlackRock announced that they would be pursuing the Bitcoin spot ETF, media hosts kept trying to pin him down to blockchain, not Bitcoin, or one or the other, and he basically just said over and over again, both, please. Now, over the past year, the tokenized asset story on Wall Street has largely been about putting U.S. Treasuries on chain. BlackRock and Fidelity have seen strong demand for their tokenized money market funds given the limitations.

Both products are fully registered in the U.S. and only available to accredited investors, so most of the demand has come from crypto-native funds that want a safe treasury asset to store spare on-chain cash. Out in the gray area of offshore products, crypto-native companies are starting to experiment with tokenized stocks. The focus for the moment is on high-volume growth stocks like Nvidia, Tesla, and Apple, as well as CryptoLink companies like strategy, formerly micro-strategy, Coinbase, and Marathon. The value proposition, at least for the moment, is that Crypto whales can trade equities without needing to take their funds off exchange and get them into a traditional brokerage. Bloom Network CEO Chris Yin said, it's sort of foreshadowing what's to come,

which is where the line between crypto and the real world begins to blend together. Right now, it's the access thing. Both sides are getting a taste of something they couldn't do before. Bridging funds across to a brokerage can still take several days. And it only takes one institution to question source of funds or KYC information to leave your funds trapped in limbo for weeks or months. Yin added, there's a feel for folks on chain who just don't want to come off. That's the initial audience. The appeal of round-the-clock trading is also obvious, especially for Asia-based whales who don't want to live on New York time. RippleX SVP Marcus Invenger commented, Unlike traditional equity markets, which often rely on fragmented infrastructure and delayed settlement,

tokenized equities offer a faster, more accessible, and more programmable alternative. Honestly, I think that the shift to tokenize stocks is basically inevitable to everyone on Wall Street, despite the slow progress of regulations. Robin Hood's CEO Vlad Tenev has gone all in on the concept, pivoting the company towards tokenization and discussing the topic at every opportunity. BlackRock CEO, Larry Fink, also continues to be vocal about the need to tokenized markets, pushing the SEC to stand up regulations as fast as possible. Speaking at Davos in January, he said,

that will simplify things, make things easier. BlackRock would never have to vote on a proxy vote anymore, because every owner of record would be notified through a tokenization of equities. Those are the type of financial reforms we need. Kevin Rush, founder of tokenization startup RAAAC, commented that financial institutions are moving as quickly as possible, adding, the benefits of tokenization are finally escaping nobody, least of all, BlackRock. Now, the growth of tokenized stocks is relatively modest, but we're still in the early innings.

Overall, on-chain real-world assets crossed $10 billion for the first time this month, but the vast majority is in a handful of tokenized money market funds. According to RWA.xyZ, the entire tokenized stock market has just $15 million in total value, but that number has tripled so far this year. David Henderson, the head of marketing at BACT, said, most of the growth in the RWA space is big institutions, and a huge amount of it is double-counting. chasing TVL growth only goes so far. We expect Defi-enabled tokenized stocks to reach between $1 billion and $2 billion by the end of the year.

The other angle is that there's a race to launch products and established market share before U.S. regulations are settled, and the Robin Hoods and Black Rocks of the world can sink their teeth in. Injective CEO Eric Chen is focusing on investors outside of the U.S. and especially in poorly served regions. He said, anywhere that Robin Hood does not service, there's always an edge for products offered by us. Chen claimed that his data is showing globalized demand. with a spokesperson clarifying that the bulk of trading volume is coming out of Singapore, Vietnam, and Thailand. Which is not to say that these companies are thriving due to a lack of regulation.

Chen is actually worried about a surge of dodgy operators undermining the credibility of the sector, commenting, we're going to see a lot of potentially opportunistic people. Keep trying to launch random stuff to take advantage of the opportunity. And I think those people will definitely get penalized in the space long term. Plum Network's yen thinks that the transition to tokenized stocks will take a lot of time, probably more than we anticipate. He commented, stable coins were the first sort of RWA. It's taken 10 years plus for people to get comfortable with stable coins.

The line between these two things will continue to blur. At some point, it will be indistinguishable. At that point, crypto and tokens are just like anything else to everybody. And that, to me, is where it starts to get really interesting. So, interesting to see the RWA narrative start to pop back up. It was for a time a leading contender on what the big theme of this cycle would be. Now, obviously, it got sort of bumped out of the way by the Bitcoin's body TFs and then memecoin MemeCoynia, but honestly, after memecoin mania, I wouldn't be surprised if a lot of people

actually thought that maybe real-world asset tokenization seems like a better thing to hang our hat on for this cycle than whatever the hell's going on on Pumpsout Fun. Moving on to our next topic, the Trump Media Group has signed a non-binding agreement with crypto.com. The truth social parent company will partner to offer a series of ETFs in the U.S. According to a press release, the funds will focus on a Made in America theme and are expected to hold digital assets as well as securities. crypto.com will provide back-end technology and custody for the digital assets.

In discussing the deal, Trump Media Group chairman Devin Nunes was focused on culture war issues. He said the funds would offer exposure to companies that concentrate on rapid growth and strengthening the U.S. economy while being, quote, unencumbered by woke nonsense and political posturing. Crypto.com's CEO Chris Mazalik said the funds would include a first-of-its-kind basket of tokens including CRO. He also flagged that the funds would be available worldwide through the crypto.com app. Aside from the political undertones, or overtones, I guess, in this case, the announcement reinforces that there is a race to test new crypto ETFs in the market. The Bitcoin ETFs were a wild success. Demand, on the other hand, for the Ethereum

ETFs has been a little tepid. Many firms are rushing to launch various altcoin and meme coin ETFs where the demand is even more dubious. There is a growing bet that the average investor doesn't want to sift through all coin charts, but instead just wants broad exposure through a crypto index fund. Combination Bitcoin and Ethereum ETFs offered by hashtags and Franklin weren't well received. But in the private markets, Bitwise's top 10 crypto fund is one of their most popular products. So it makes sense overall for crypto.com to be positioning in this space. Today's episode is brought to you by Crypto Tax Calculator. If you're looking for accurate crypto taxes with no guesswork, check out Crypto Tax Calculator. Get accurate CPA-endorsed

tax reports with full support for IRS rules. For those who have fallen down the on-chain rabbit hole, CTC has you covered with more than 3,000 integrations. They have full support for defy staking in NFTs. Import directly to TurboTax or H&R block or share securely with your accountant. Create an account, import your sources, and review. It's that easy. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with the breakdown. Many of you know, but for those of you who don't, Ledger is the most secure hardware wallet for your crypto and logins. It's trusted by 7 million users and secures 20% of the world's digital assets. What's more, ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem

of products and services, all of which are designed to make digital ownership more secure and accessible. You can buy your Bitcoin with Ledger and Ledger Live and so much more. Basically, not only did they want to keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks and Ledger Flex introduced the world's first secure touchscreens, making it easier and safer to manage your transactions and assets. alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app, offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their

ecosystem what they have available to you. So thanks, once again, to Ledger for sponsoring the show. Next up, making the case for Bitcoin investment, standard chartered, have analyzed how adding the token to leading U.S. stocks would change their return profile. The investment bank created a hypothetical Mag 7B index, taking the magnificent 7 tech stocks and replacing Tesla with Bitcoin. Analysts Jeff Kendrick wrote, We find that Mag 7B has both higher returns and lower volatility than Mag 7. This suggests that investors can view Bitcoin as both a hedge against TradFi and as part of their tech allocation. Indeed, as Bitcoin's role in global investor portfolios becomes established,

we think that having more than one use will bring fresh capital inflows to the asset. This is particularly true as Bitcoin investment becomes more institutionalized. The analysis also found that Bitcoin was almost always more correlated to the NASDAQ index than gold over the short term. This could mean it makes more sense to lump Bitcoin in with an allocation to tech stocks rather than as a hedge asset. Kendrick's analysts used the starting date of December 2017, which was the absolute top of that Bitcoin cycle when the asset was trading at $20,000. Looking forward, the Mag 7B index has outperformed the Mag 7 by 5% since then. The Mag 7B outperformed in five of the past seven years, with the two failures coming in 2018 and 2020. Essentially, the analysis shows that Bitcoin has been a safer bet than Tesla over that period,

only lagging during uniquely bad years for Bitcoin or uniquely good years for Tesla. Kendrick wrote, This suggests to us that Mag 7 portfolios would have benefited from including Bitcoin and removing Tesla over the past seven years. Pointing to Tesla's lacked luster performance so far this year, Kendrick suggested that it's a relatively easy swap to make with the wide availability of Bitcoin ETFs. He also noted a shift in Bitcoin's volatility profile since Trump's inauguration.

Bitcoin volatility adjusted behavior is very very very much. similar to Nvidia, while Kendrick claimed Tesla is a little more like Ethereum. Hold aside the details because you could be forgiven for thinking that this is just an argument for Bitcoin over Tesla, which is kind of less interesting as an argument overall. But I think that the point that he and Standard Chartered are trying to make was summed up in the line, we think that Bitcoin should be seen as serving multiple purposes in investor portfolios. That ultimately is the key argument here. This is just the particular example they choose to show it.

And of course, we can't get out of a standard chartered segment without updating Kendrick's price target. The analyst is still bullish, pointing out that the NASDAQ is about to close its worst quarter quarter-quartered since mid-2020, and that portfolio rebalancing could put a floor under the index. He wrote, higher NASDAQ will equal higher Bitcoin, $90,000 in focus now. Getting back to our theme of tokenization, but maybe moving to a new domain, the Abu Dhabi global market has signed a memorandum of understanding with ChainLink for asset tokenization. The agreement will allow ADGM to use ChainLink suite of tools, including data feeds and interoperability protocols to power their financial infrastructure. The ADGM is a financial free zone with

its own set of laws and regulations, similar to the City of London. As of 2024, it hosts around 134 asset and fund managers and 275 financial institutions. BlackRock, PGM, and Morgan Stanley have all recently opened subsidiaries in the ADGM. One of the really interesting things about the emerging Middle Eastern financial hubs is that they have an opportunity to start from scratch with regulators fit for the 21st century. The ADGM was only established in 2015, and most of the most of the emerging. its growth has happened in the last few years. Crypto is obviously a key priority, with the ADGM officially recognizing Tether in December, and state-owned investment firm MGX recently becoming a minority stakeholder in Binance. The enthusiasm for crypto is echoed in the investor base, with crypto

app downloads in the UAE growing 41% last year. The ADGM could be quick off the mark with tokenized assets because of a lack of established markets. The Abu Dhabi Securities Exchange only does around 500 million of daily volume, a tiny portion of the trillions that flow through the major exchanges in New York. But does that create an opportunity for the Middle Eastern financial hub to become the home of global tokenized stocks? Seems like an interesting bet for them, if nothing else. A couple more quick ones before we get out of here. Cracken is reportedly exploring a billion-dollar debt raise ahead of a potential IPO. Bloomberg reports the exchange is working with Goldman Sachs and J.P. Morgan to put together a debt round, which is still in the early stages. Sources say the debt

would be put towards growth initiatives and isn't required to fund day-to-day operations. They added that as little as $200 million could be raised once the deal is struck, and an equity raises also on the table. Crackett has been making lots of interesting moves as they prepare to become the second publicly listed crypto exchange. Last week, they announced the acquisition of derivatives platform Ninja Trading for $1.5 billion. That platform acquisition comes with CTFC licensing, positioning Cracken to legally offer crypto derivatives in the U.S. The latest reports suggest that Cracken's IPO is likely to happen in the first quarter of next year, with the company being very active in their preparations. Lastly, today, an unfun one, but still maybe one that closes the story

out, Bitcoin is on track to close its worst first quarter since 2020. Even with the Trump bump in January, Bitcoin is down over 7% from where it opened the year. The first quarter of 2020 was almost an 11% drop, but obviously there were some pretty major global impacts in March of that year. Many analysts believe the worst could be over, largely because uncertainty around government policy is subsiding. CNAG of 21st Century Capital wrote, within a quarter or less, uncertainty around tariffs and government spending cuts will likely be resolved. Focus will then shift to tax cuts, deregulation, and rate cuts. Reciprocal U.S. tariffs go into force next Wednesday, which is expected to cause a market shock. One Nansen analyst said, there's a decent probability that we've passed peak

tariff uncertainty, notably because the administration, especially Treasury Secretary Bessent, is striking a more pragmatic tone around tariffs, i.e. in negotiation for collective tariff barrier decrease. Some are even starting to suggest the market bottom could be in. In his Sunday report, Mark Castilian of 10x research wrote, Bitcoin is attempting to form a bottom, supported by Trump's recent shift towards flexibility on the upcoming April 2nd reciprocal tariffs, softening his earlier rhetoric. Drawing in on other recent macro events, he added that the Fed signaled that they would, quote, look past short-term inflationary pressures, laying the groundwork for potential future easing. Powell's mildly doveish tone suggests that the Fed's put remains intact, providing further support

for a recovery and stock prices. In short, the technical backdrop has now reset to a point where a renewed up trend could plausibly unfold. The signs of recovery are starting to show up in the market. Last week was Bitcoin's strongest performance since January. and so far this week, the $86,000 price level is holding steady. We also saw a return of enthusiasm to the ETFs, breaking a streak of five weeks of outflows. Almost 750 million worth of inflows were recorded for the week, not particularly strong, but a great deal better than the billions in weekly outflows from the prior month. Look, I think a lot of markets are just waiting to see what happens on April 2nd when it comes

to these tariffs, but they're maybe feeling a little bit more optimistic than they were over the past couple of weeks. We'll see if that's the case. We'll see if there's any justification for that. I don't think it's good to count any chickens before they've hatched in this particular administration. But I agree that there is reason to be optimistic heading into Q2 of 2025. For now, though, that's going to do it for today's breakdown. Appreciate you guys listening, as always. And until next time, be safe and take care of each other. Peace.