The subsequent leg of the crypto bull market won’t be triggered by the bitcoin halving or approval of an Ethereum ETF; it’s going to be led by real-world assets.

The underlying thesis for real-world assets (RWA) is that any asset could be tokenized and traded on a blockchain. This includes each relatively straightforward things like stocks, commodities, and national currencies and more complex instruments like real-estate derivatives, government treasuries, and company bonds.

Boston Consulting Group estimates that asset tokenization could reach $16 trillion by 2030, brought on by roughly $20 billion value of annual savings because of the efficiencies provided by blockchains. Several firms have already tokenized the U.S. dollar, with brokerage firm Bernstein projecting that the U.S. stablecoin market will reach $3 trillion by 2028.

The explanations for mass tokenization are clear. Blockchains provide a highly transparent and secure technique to trade assets 24/7, greatly reducing counterparty risk while improving capital efficiency. This implies a drastic reduction in administrative and security costs, all of the while improving the productivity of assets. As such, it’s the natural evolution for financial markets as they migrate into the digital-native era.

Smart contracts also introduce the notion of “smart money,” whereby assets could be programmed to do things the identical way a pc application can. For example, enabling the cross-collateralization of multiple debt positions and automatic deleveraging of at-risk positions will help improve capital efficiency and reduce risk.

Central banks worldwide are pursuing research on central bank digital currencies, with claims that every one G20 members except Argentina are within the advanced stages of research. Accordingly, firms like BlackRock wish to get ahead of the market and position themselves because the leaders of this next generation of finance.

BlackRock and RWAs

BlackRock plunged headfirst into the RWA narrative this 12 months with the launch of BUIDL, the BlackRock USD Institutional Digital Liquidity Fund. BUIDL is an ERC20 token hosted on Ethereum that exposes investors to U.S.-dollar yield generated by short-dated U.S. treasuries.

As a tokenized fund, buyers simply purchase the BUIDL token. Dividends are then distributed to holders as additional tokens every month, and investors enjoy round the clock settlement and access to liquidity.

There are also plans to let users enter and exit the pool using USDC, the world’s second-largest retail stablecoin. This may effectively allow investors to leap from the walled garden of BUIDL — which is tightly restricted to approved investors and follows SEC rules — into the “Wild West” of decentralized finance (DeFi) tokens and apps.

Ondo Finance ($ONDO) is a DeFi platform with strong ties to Wall Street that’s trying to leverage the partnership between BlackRock and Circle (the issuer of USDC). In actual fact, Ondo was the primary to check the brand new BUIDL-USDC bridge, which it hopes to connect with its suite of on-chain products like OUSG (a fund much like BUIDL).

In accordance with Ondo CEO Nathan Allman, “We’re using it to power fast 24/7/365 redemptions of OUSG into USDC.”

Three Tokens For Investors Bullish on RWAs

Ondo Finance ($ONDO)

In March, Ondo Finance (ONDO) made waves when it deposited $95 million into BlackRock’s BUIDL fund. The investment was made using a part of Ondo’s flagship Short-Term U.S. Government Treasuries fund (OUSG). OUSG is a tokenized fund that gives liquid exposure to short-term U.S. Treasuries.

Just like BUIDL, investors can enjoy the advantage of low-risk yield from U.S. Treasuries but with the convenience of entering and exiting their positions through the OUSG token. Incorporating BUIDL into the fund is a clever move by Ondo, effectively allowing the firm to leverage BlackRock’s extensive institutional infrastructure, security, market reach, and, perhaps above all, its fame.

Since integrating with BUIDL, Ondo’s token $ONDO has increased from 20 cents on January 21 to 80 cents today. This growth has been aided by the launch of USDY, which is Ondo’s stablecoin for the retail market.

Just like OUSG, it’s a stablecoin with built-in yield generated by short-term U.S. Treasuries. Nonetheless, unlike OUSG, which is just available to accredited investors, USDY is accessible to anyone within the Ethereum, Solana and Cosmos ecosystems.

At 5.2%, it offers a rather higher yield than OUSG and has twice the entire value locked, with $208 million invested as of April 22, 2024.

Provided that Ondo’s products closely resemble BlackRock’s own RWA strategies, investors looking to speculate within the RWA narrative will probably want to look further on the $ONDO token as a proxy investment — or just benefit from the Treasury bill-based yield offered by USDY.

Oracles – Chainlink ($LINK) and Pyth Network ($PYTH)

Real-world assets hosted on a blockchain need a reliable data feed from “the actual world.” This includes things like real-time price feeds from stock exchanges, exchange rates of national currencies, commodity prices, etc. That is where oracles are available.

Oracles are essentially data feeds that channel data from external data sources into blockchain apps reliably and securely. This permits DeFi applications like decentralized exchanges, money markets and lending platforms to reliably integrate real-world assets like stablecoins or stock prices into their products.

Reliability is essential here. If a price oracle diverges, it could cause chaos for the markets and end in extensive losses. In accordance with Chainalysis, DeFi protocols lost $403 million in 2022 resulting from oracle attacks.

To assist ensure reliability, oracles use incentivized token models which require users to stake (collateralize) assets in return for the power to offer an information feed. In return, they’re rewarded with newly minted tokens. Nonetheless if their data is unreliable, then they stand to lose a portion of their staked assets.

Chainlink ($LINK) has cemented itself because the industry’s most reliable oracle, securing around $22 billion value of assets as of April 23, in accordance with data from DeFiLlama.

Chainlink can be trying to expand its product suite by adding cross-chain messaging infrastructure called CCIP, which allows for the improved transfer of assets across different blockchains and ecosystems.

A partnership with Australia’s ANZ bank explored how CCIP could transfer real-world assets between private and public networks. This demonstrates how Chainlink uses CCIP to construct underlying infrastructure for real-world-asset tokenization and adoption by major financial institutions.

Chainlink’s native LINK token has been thought to be considered one of the cryptocurrencies with essentially the most potential for several years now, given the best way it’s cemented throughout the DeFi ecosystem. The market cap of Chainlink now hovers a little bit over $9 billion, making it considered one of the highest 20 cryptocurrencies by market cap, although perhaps a little bit pricey for investors on the lookout for greater growth opportunities.

Recently, Pyth Network has emerged as a reliable alternative to Chainlink. Pyth first gained popularity on Solana but has since emerged on other networks like Ethereum and Cosmos.

The Pyth Network currently sits at a market cap of around $1 billion. This makes $PYTH a gorgeous option for anyone who’s trying to get increased exposure to oracles and RWAs but is postpone by the high valuation of $LINK.