Today’s edition is brought to you by Phemex - a top 5 exchange gearing up to kick off its native token launch through a long-awaited airdrop campaign.
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GM. This is Milk Road, your daily crypto cheat sheet - because who actually reads the whole textbook?
Today, we’re gonna talk about what everyone is talking about… RWAs.
No, seriously. It’s everywhere.
*143 unread messages on Discord*... all about RWAs.
*Hops into Uber* ... driver asks me if I’ve heard of RWAs.
I started thinking Dr. Dre and Ice Cube created a new rap group. I was wrong (unfortunately).
Turns out RWAs stands for Real World Assets. And it’s slowly been rising crypto’s FOMO-Meter.
So before it goes any higher, we decided to dig deeper and find out everything we could about Real World Assets.
Here’s what we got for you today:
- Wtf is a tokenized RWA? 👀
- A peek under the hood of one: tokenized treasuries 🧐
- Are tokenized RWAs sh*t or legit? 📊
- BONUS: 4 things you might’ve missed from yesterday 🍪
Prices as of 11:00 AM ET. Click here for our Fear & Greed Index
WTF IS A TOKENIZED RWA? 👀
The concept is pretty straightforward…
You take an asset that exists in the real world, and you tokenize it on the blockchain. And everything is getting put on chain nowadays…
- Masterworks is tokenizing fine art.
- Courtyard is tokenizing Pokemon cards.
- Arcade is tokenizing luxury watches.
- Roofstock onChain is tokenizing real estate.
- PumpYourDump is tokenizing poo–(Just kidding. No one’s done this, yet).
So it’s no wonder it's been getting all the hype.
And while other sections of DeFi have been losing total value locked (TVL), RWAs have consistently grown during the bear market.
In 2023 alone, the TVL of RWA protocols has grown from $750M to ~$5.7B.
Some big institutions are even predicting the tokenized RWA market could grow to a $10T market by 2030.
And there’s one particular RWA that’s been getting a lot of attention: tokenized treasuries.
Let’s take a deeper look.
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And now back to your regularly scheduled programming…
Ok. Back to tokenized treasuries.
Tokenized U.S. treasuries, bonds, and cash equivalents have gone from a$113M → a $750M market in under a year.
- Franklin Templeton tokenized over $300M of its U.S. Government Money Fund.
- Ondo Finance tokenized over $100M of its Short-Term US Government Bond Fund.
- WisdomTree tokenized $10M of its Short-Term Treasury Fund.
In other words, business is boomin’.
So, why are treasuries getting put on chain in the first place? There are a few benefits…
For investors: it offers near-instant settlements, 24/7 trading, and lower costs (i.e. there’s less paperwork, intermediaries, legal fees, etc).
Plus, it makes it easy for investors to gain exposure to U.S. treasuries - like T-bills, bonds, etc.
This is good for investors who either:
a) live outside of the U.S. but still want access to treasuries, or
b) live inside the U.S. but don’t have a brokerage account and have no idea how to get access to treasuries in the first place.
But now for the million-dollar question…
ARE TOKENIZED RWAS SH*T OR LEGIT?📊
Milk Road Take: Legit.
Tokenized RWAs solve a big problem in DeFi… they provide tokens that are backed by realassets that can earn real yield.
To help explain, let me quickly tell you about the history of DeFi.
*enter smooth narrator voice (ideally Obama)*
It was the summer of 2020. DeFi was beginning to gain traction.
The total value locked (TVL) in DeFi protocols jumped from under $1B → $10B in just a few months. This was a phenomenon known as “DeFi Summer”.
Then in 2021, the DeFi market exploded. It jumped from a $17B market cap → a $180B market cap in under a year.
DeFi was on top of the Crypto Mountain.
New DeFi protocols were popping up every day. They’d offer juicy yields (APYs) to incentivize investors to dump their money into their products.
Deposit your money, and get a RandomInternetToken back that would “earn” you some yield. (And many protocols were offering upwards of 20% returns on deposits).
Then new protocols popped up that would let you take your RandomInternetToken and deposit that, to earn even more yield.
Suddenly investors started stacking APY’s the same way I stack my pancakes on Sunday morning - til I can’t anymore.
But there was a big problem: it isn’t sustainable.
You see, most of the projects were offering juicy returns just to attract more investors.
More investors = more deposits. And these new deposits were required to cover the yield returns for older deposits.
(In the real world, some people would call this a Ponzi-like. In crypto, it was called Just Another DeFi Protocol).
Well eventually, the music stopped and there was nowhere to sit. New money stopped flowing in, tokens crashed in price, and the yields being paid in worthless tokens became, well, worthless.
The total value locked in DeFi crashed from $160B in April 2022 → $60B by July 2022.
Turns out DeFi wasn’t sitting on top of Crypto Mountain, it was sitting on a House of Cards.
So what will it take to bring the DeFi industry to new highs? Sustainable yield.
We need real assets on the blockchain generating real yield to drive institutional interest into DeFi. And that’s why we dedicated this whole edition to RWAs.
While tokenized Pokemon cards may not be the future of finance, they are clearing the path for other tokenized assets to land on chain.
Btw, we’re curious…
Are you currently invested in any tokenized RWAs?
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BITE-SIZED COOKIES 🍪
Binance released its latest proof of reserve report. The report shows that the crypto exchange has enough reserves to cover customer balances for all its crypto holdings including BTC, ETH, BNB, and USDT.
HSBC and Metaco are teaming up to launch a new institutional custody platform for tokenized securities. According to HSBC, the move was fueled by the “increasing demand for custody and fund administration of digital assets from asset managers and asset owners.”
Circle is reportedly looking to IPO next year. The stablecoin issuer tried going public via a SPAC back in 2022, but plans fell through. Time for Take 2?
The number of Bitcoin held by long-term holders is at an all-time high. 68% of Bitcoin’s supply hasn’t moved in over one year and 30% hasn’t moved in over 5 years. #DiamondHands
MILKY MEMES 🤣
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ROADER REVIEW OF THE DAY
VITALIK PIC OF THE DAY
GTA 🤝 Vitalik Buterin
— Milk Road Images (@MilkRoadImages)4:23 PM • Nov 8, 2023
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
