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February 16, 2024

Tokenized RWAs in a crypto bull run; Binance delists Monero; Bitcoin ETF

Welcome to Swarm Markets’ media memo. This weekly update provides comments from Swarm Markets’ co-founders, Philipp Pieper and Timo Lehes, and Chief BD Officer, Katie Evans, on key industry news that has caught our eye, plus our own developments.

Comments available on the following news items:

  • RWA are still the future of finance, despite recent market slowdown
  • The downsides of crypto regulation
  • Bitcoin ETFs could calm price volatility


Tokenization is still the future of finance, despite slump

It’s been a challenging few months for the real-world asset sector (RWA), which shrunk in size by almost 37% since its peak in October, according to DL News .

The reason given for the slump is that investors are pivoting towards higher-yielding – and riskier – areas of the market such as DeFi lending and liquid restaking. Some have also suggested that the RWA sector won’t take off again until the next bear market.

There is some merit in that argument. When markets are riding high, investors tend to seek out riskier assets to maximize their gains. Conversely, they seek out safe havens when markets take a turn for the worse.

But new economics are needed on chain as the market matures. Investors will need more stable and uncorrelated collateral on chain during a bull run so they can escape volatility when needed.

We also believe RWAs can be leveraged ahead of the next bull run taking off, allowing investors to borrow against their tokenized stocks to ape more into crypto. We expect the stablecoin market to increase during the next bull run as these assets are the oxygen that fuels more investors to move on chain.

As a pioneer in RWA, the recent downturn has done nothing to shake our conviction in the concept of tokenization. We believe that it is the future of finance and that widespread adoption is a matter of when, not if.


Binance’s decision to delist monero does not mean the end of privacy solutions 

Binance’s decision to delist monero sparked controversy across the industry.

Exchanges delist tokens all the time, but this one took on much more significance than usual. That’s because monero is a so-called ‘privacy coin’, which to supporters is regarded as the nearest thing to physical money in terms of the privacy benefits it brings.

Binance is still licking its wounds from the $4.5bn fine it had to pay last year to US authorities due to its failure to clamp down on money laundering. Understandably then, it is erring on the side of caution when it comes to anything that may make it foul of those rules again.

But to advocates of privacy, this was another case of regulation producing suboptimal results, although I doubt the regulators themselves see it that way. Let’s not forget also that while monero had a cult following, it was a tiny token in the grand scheme of things.

Monero was a great first solution to privacy but we are seeing developments in the tech that are providing alternatives that go more nicely with regulation – for example, zero knowledge proof. This to us is a symptom of the industry maturing.


Bitcoin ETF inflows could smooth out extreme price volatility 

For an asset that’s just 15 years old, Bitcoin has certainly had a colorful history. We’ve seen no fewer than five major price rallies (and subsequent crashes) in that time, as the cryptocurrency forced its way into the mainstream.

Some have argued that widespread adoption, especially by institutional investors, may make the asset less volatile but the reality is that has not happened yet. However, the introduction of spot Bitcoin ETF may well be a step in that direction.

We’ve witnessed enormous inflows into these funds since they were first approved by the Securities and Exchange Commission in January last year. Several media outlets are reporting that inflows are now topping more than $1.5bn a day  and that Bitcoin ETFs now own more of the cryptocurrency than MicroStrategy, which holds more than 190,000 coins.

Some observers say this may be a risk to market stability, where a sell-off could lead to another price crash. But, while it’s dangerous to generalize, ETF holders are typically more likely to ‘buy and hold’ than those who view cryptocurrencies merely as a short-term speculative punt. Therefore, as more investors pump money into these ETFs, one would expect that volatility to smooth out in the long-term.

On current trends, we would also expect Bitcoin’s price to continue its recent movement. With the next halving coming around the corner, we may even see Bitcoin’s price reach a new record high in the not-to-distant future.