The fast increase in global cryptocurrency adoption, which has surged by 34% in the number of holders since 2023, is driving demand for stable and low-risk digital assets.
One such asset, tokenized US Treasurys, is becoming increasingly popular, and this trend suggests that tokenized US Treasuries might reach a market cap of $3 billion by the close of 2024.
Tokenized Treasuries as a stable investment?
Decentralized autonomous organizations, aka DAOs have shown high interest in investing in tokenized US Treasuries, which could lead to a big influx of capital into these products.
For example, two well-known DAOs, Arbitrum and MakerDAO, both unveiled plans to invest in tokenized US Treasuries.
Arbitrum is looking to allocate about $25 million, roughly 1% of its treasury, while MakerDAO intends to commit $1 billion, representing around 19% of its treasury.
It’s not a simple trade
Despite most DAOs lacking stablecoin reserves that can be easily converted into yield-bearing bonds, some are beginning to consolidate their treasuries with real-world assets like tokenized US Treasuries.
Traditionally, DAO treasuries are largely composed of their own tokens, and it’s not entirely clear how these organizations might convert their treasury tokens into tokenized bonds.
Rather than flooding the open market with their illiquid tokens, DAOs might seek partnerships with bond issuers or gradually acquire tokenized bonds, to minimizing market volatility and avoiding the adverse effects of large-scale token sales.
Open the floodgates?
If more DAOs decide to allocate portions of their treasuries to tokenized US Treasuries, this could result in big capital inflows.
As of July 30, the total value of DAO treasuries is at $24.3 billion. If DAOs were to allocate 1% (in a bearish scenario), 5% (base case), or 10% (bullish scenario) of their treasuries to tokenized US Treasuries, this could generate additional inflows of $243 million, $1.22 billion, and $2.43 billion, respectively.
Such allocations could increase the tokenized US Treasuries market cap by 13% to 31%, up from its current value of $1.85 billion.
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