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Tokenization in Europe – Current State and Future Outlook

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After the substantial rally of cryptocurrencies, such as Bitcoin, in recent months, it is time to take a detailed look at the current and future market development for tokenized assets. A joint study by Plutoneo and Tangany focuses in particular on Europe and its share of the global market capitalization of tokenized assets.

Comprehensive data for the security token market was collected, depicting the most precise statement for this category in Europe. The trend is clear – the underlying magic of blockchain and distributed ledger technology is advancing more and more. At this moment, the market for tokenized assets consists almost exclusively of cryptocurrencies. However, the future belongs to security tokens. We venture a look at when this will happen.

Key assumptions

For this study, we analyzed the research conducted by third parties and combined it with data from relevant market participants. To calculate the market size for tokenized assets in Europe, the underlying key assumptions are as follows.

  • Market share of cryptocurrencies in Europe
  • Outlook of market size for cryptocurrencies in Europe
  • Market share of security tokens in Europe
  • Outlook of market size for security tokens in Europe

The first two assumptions are used to derive the market size of cryptocurrencies in Europe, while the last two assumptions are used to derive the market size for security tokens in Europe. Combined, we can project the market size for tokenized assets in Europe. In the following, we explain our thought process behind all four assumptions.

For the first time, it was possible to determine the market volume for security tokens without approximations based on the gross domestic product on a global or European level. The mathematical model developed for this study focuses on the key parameters of the financial markets, such as market size for equities and bonds, and extrapolates the degree of tokenization in the coming years.

In this study, we define the term ‘cryptocurrency’ as payment and utility tokens. While cryptocurrencies heavily dominate the market in terms of market capitalization, more and more regulatory progress opens up the space for the tokenization of classical financial instruments. Therefore, this category is referred to in this study as ‘security token.’

Both segments are part of the larger digital assets pool, which also contains fiat-backed tokens and the catching pool for new, yet unclassified tokens. Fiat-backed tokens are classified as security tokens in our study, as they are backed by an asset. Fiat-backed tokens are either issued by a private entity such as Tether (USDT) or Binance USD (BUSD) or by a public institution such as the European Central Bank (ECB), aiming to have a constant exchange rate – usually 1:1 – to a major currency like the US dollar. The pool of others contains appearances like non-fungible token (NFT), mostly used for video games, art and by creatives and designers. NFTs are not part of this case study.

Categories of digital assets covered in this study.

1. Market share of cryptocurrencies in Europe

CoinMarketCap thoroughly tracks the history of the global market size of cryptocurrencies. However, it is not easy to determine how this is distributed among the various continents – in our case, Europe. Based on the extensive studies of Cambridge Center for Alternative Finance, latest statistics and data, we were able to determine that ~55 million Europeans (~7,5% of the European population) hold or use cryptocurrencies. Furthermore, our results show ~40% of global cryptocurrency users come from Europe. As a result, Europe is leading with respect to the number of users worldwide. However, with regard to the global market capitalization in cryptocurrencies, Europeans only cover ~25%.

2. Outlook of market size for cryptocurrencies

The market for cryptocurrencies is experiencing a further bull market in recent months. As a result, the price of the leading cryptocurrencies – Bitcoin and Ethereum – is climbing almost unstoppably from an all-time high to an all-time high. Additionally, there is a steady stream of positive news within the industry providing a significant tailwind to the market. This includes, for example, PayPal’s strong interest in establishing itself in the crypto segment, which can be observed in the acquisition of digital asset security firm Curv.

Moreover, even the giants of the traditional financial world such as Goldman Sachs and JP Morgan can no longer ignore their customers’ demand to access digital assets. Another step that shows how advanced the mainstream adoption of digital assets has come was certainly the IPO of Coinbase, with a market capitalization of over $80 billion.

The growing interest of financial institutions in digital assets now enables institutional investors to access this asset class. For the further development of the market, significant growth is to be expected as institutional investors have not been able to invest in digital assets for regulatory reasons, and in some cases, still are not able to do so. However, a new law in Germany allows precisely that. Here, institutional investment funds (Spezialfonds) can allocate up to 20% in crypto assets in the future. Even if such financial instruments invested only a few percent of their capital in digital assets, the impact on the crypto market would be enormous. This is because these investment vehicles have a market capitalization of approximately 1.2 trillion euro in Germany alone.

Projection digital asset market size Europe from 2018 to 2026 in EUR billions.

3. Market share of security token in Europe

The market for security tokens sparked a few years ago, no earlier than 2017. Since then, the field of security tokens has seen rapid growth. Regulators worldwide adopted the new form of financial instruments into existing regulation. The process started in early 2020 with the financial license introduction for custody of digital assets in Germany and other EU member-states.

Governments see this area as a field where innovation is being created, and the next digital giants are evolving. In this light, countries like Germany are preparing their legislation to allow securities to be represented in the form of tokens. Especially European countries are leading this movement, while the US is still looking for their way to go. Asian jurisdictions have chosen quite different ways of approaching this topic while closely monitoring the developments in Europe.

The global market volume of security tokens – which includes all kinds of tokens that are asset-backed or represent a kind of value – was ~2.7 billion euro in 2019. In contrast, about 0.7 billion euro were issued in Europe (~25%). That includes the European Union and all other European countries.

The market volume in Europe will be around 918 billion euro in 2026, covering all kinds of security tokens. For the first time, security tokens are expected to surpass cryptocurrencies by then. Despite the strong growth within the next few years, the tokenized market will still cover only a small portion of the total market, which is expected to grow to 259 trillion euro in Europe. The tokenization share will be 0.35%, indicating that the tokenized market will still be pre-mature with attractive growth rates beyond 2026.

In the past, the majority of security tokens were issued on Ethereum, with a reported market share of 94%. The other 6% are held by solutions such as Tron, Stellar, and Neo.

4. Outlook of market size for security token

The security tokens market is evolving dynamically and can still be considered to be in its infancy. In 2017, only five reported security tokens were issued. This number has increased to more than 100 in 2020. Our projections forecast continuous growth within the next five years, up to a total market volume of more than 918 billion euro by 2026 in Europe alone, including fiat-backed stablecoins.

Based on the analysis of four major market segments – real estates, stocks, debts and fiat currencies – regarding the future growth of security tokens, it can be concluded that the growth from 2021 to 2026 will be around 81% per year.

The increasing interest in digital assets drives this trend, mainly focused on cryptocurrencies such as Bitcoin, but more and more around tokenized assets, which provide high liquidity and come with low management fees. Furthermore, upcoming regulations like the German crypto security are amplifying the whole trend. With that, the aim of the European Union Commission to create a harmonized digital asset market is also a notable positive action. This regulation shall be issued by 2023 at the latest, introducing MiCA (Markets in Crypto-Assets) which can be considered as the pendant to existing MiFID II regulation of traditional financial instruments and activities.

Europe can be described as being at the forefront of security tokens. It is mandatory that innovative startups, traditional companies and institutions – just as governments and regulators – keep handling this area progressively and positively to secure this position.

Conclusion

The overall market of digital assets will keep growing at a swift pace. While the market currently consists almost exclusively of cryptocurrencies in terms of market capitalization, the area of security tokens will grow strongly in the coming years. Progressive regulation in countries like Germany and the EU-level will lead to Europe being the global leader in security tokens. Based on our data model, which for the first time does not rely on approximations such as GDP, the volume of security tokens will exceed the volume of cryptocurrencies for the first time in 2026.

From a European perspective, a look at the crypto market also yields exciting results. With regard to blockchain adoption, it should be noted that Europe accounts for around 40% of global cryptocurrency users. Although European users ‘only’ hold approximately 25% of the worldwide cryptocurrency market capitalization, this clearly shows that the retail segment, in particular, is highly receptive to digital assets.

TL;DR

The market for digital assets today

  • 55 million cryptocurrency users (~7,5% of the European population)
  • 40% of global cryptocurrency users come from Europe
  • 25% of the global market capitalization in cryptocurrencies held by Europeans
  • Security token market is still in its early days with major regulation upcoming

The market for digital assets in 2026

  • The total market capitalization of digital assets will be 1,820 billion euro
  • Security token volume (50.39%) will be larger than cryptocurrencies (49.61%)
  • Tokenized stocks will contribute with 32.77% to the security tokens market

References

Cambridge Center for Alternative Finance: “Global Cryptocurrency benchmarking study,” 2017

Cambridge Center for Alternative Finance: “2nd Global Cryptoasset Benchmarking Study,” 2018

Cambridge Center for Alternative Finance: “3rd Global Cryptoasset Benchmarking Study,” 2020

Statista: “Cryptocurrency adoption in 55 different countries worldwide 2020,” 2021

Statista: “Number of Blockchain wallet users worldwide from November 2011 to April 13, 2021,” 2021

Statista: “How Common is Crypto?,” released 2021

BusinessOfApps: “Coinbase Revenue and Usage Statistics (2021),” 2021

Binance Blog: “Binance 2019: Year in Review,” 2019

Cointelegraph: “PayPal purchases digital asset security firm Curv,” 2021

CNBC: “Goldman Sachs is close to offering bitcoin and other digital assets to its wealth management clients,” 2021

Coindesk: “JPMorgan to Let Clients Invest in Bitcoin Fund for First Time,” 2021

CNBC: “Coinbase closes at $328.28 per share in Nasdaq debut, valuing crypto exchange
at $85.8 billion,” 2021

Blockstate: “Global STO Study 2019,” 2019

Visual Capitalist: “All of the World’s Money and Markets in One Visualization,” 2020

Statista: “Volumen des weltweiten Aktienhandels von 1980 bis 2019”, 2020

Visual Capitalist: “All of the World’s Money and Markets in One Visualization,” 2020

Wikipedia: “Geldmenge,” last viewed May, 2021


Benjamin Schaub is the head of digital hub at Plutoneo. His interests include blockchain use case development and integration in the financial industry, as well as crypto custody. Besides that, he works as a senior consultant at INTAS.tech, a blockchain consulting firm established by the Frankfurt School and Plutoneo.

Martin Kreitmair is one of the co-founders and CEO at Tangany. He is responsible for business development, together with Julian Richter. Furthermore, he is a member of the board at Bundesblock e.V., the German blockchain association.

Julian Richter is head of business development and sales at Tangany. He is an expert when it comes to market insights, market trends and custody of digital assets. Before Tangany, Julian used to work at other companies, such as FinTecSystems, in the asset management field at Continentale Versicherung and in the treasury at the LfA Förderbank Bayern.

Featured Image: Shutterstock/phoelixDE

 

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

Source: https://dailyhodl.com/2021/05/30/tokenization-in-europe-current-state-and-future-outlook/

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Commodity strategist predicts Bitcoin ETF could get the nod in US next month

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Bloomberg Intelligence Commodity Strategist Mike McGlone believes it is only a matter of time before the U.S. Securities and Exchange Commission (SEC) approves the country’s first Bitcoin exchange-traded fund (ETF).

In an interview with Stansberry Investor host Daniela Cambone on Sept. 21, McGlone asserted that Canada is extending a competitive lead over the United States after approving Bitcoin ETFs from 3iQ and Coinshares in April.

He emphasized that capital is flowing from the U.S. to Canada’s institutional crypto products, including from Cathie Wood’s Ark Invest. However, he believes that lawmakers in the United States will not want to miss out for much longer.

When asked about a timeframe on potential U.S. Bitcoin ETF approval, McGlone said it could happen “potentially by the end of October.” He maintained that it was likely to be a futures-backed product first, adding that it would open a “legitimization window for a massive amount of money inflow.”

McGlone also reiterated the latest report from Bloomberg Intelligence that stated Bitcoin prices hitting $100,000 was a possibility this year, and this would be driven by the approval of an ETF.

Crypto YouTuber Lark Davis shares McGlone’s price targets, observing that in previous bull markets in 2013 and 2017, the latter quarters saw huge price rallies.

Related: Canadian Bitcoin ETFs quickly hit $1.3B in AUM while US acceptance lags

The SEC is currently yet to approve a crypto ETF despite the number of applications it has received from prospective issuers continuing to mount.

Earlier this month, multinational financial services firm Fidelity Investments, lobbied the SEC to approve an ETP arguing that Bitcoin markets have already reached maturity under the regulator’s own standards.


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Source: https://cointelegraph.com/news/commodity-strategist-predicts-bitcoin-etf-could-get-the-nod-in-us-next-month

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TA: Ethereum Topside Bias Vulnerable If It Struggles Below $3K

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Source: https://www.newsbtc.com/analysis/eth/ethereum-struggles-below-3k/

Ethereum settled below the $3,000 support zone against the US Dollar. ETH price could resume its decline unless there is a clear break above the $3,000 resistance zone.

  • Ethereum started a fresh decline below the $3,100 and $3,000 support levels.
  • The price is now trading below $3,000 and the 100 hourly simple moving average.
  • There is a major bearish trend line forming with resistance near $3,000 on the hourly chart of ETH/USD (data feed via Kraken).
  • The pair could resume its decline unless there is a clear break above the $3,000 resistance zone.

Ethereum Price Remains At Risk

Ethereum started another decline from the $3,100 resistance zone. ETH traded below many important support zones near $3,000 and the 100 hourly simple moving average, similar to bitcoin.

The price even broke the $2,800 support level to move further into a bearish zone. A low is formed near $2,651 and the price is now correcting losses. There was a break above the $2,800 and $2,850 resistance levels.

The price recovered above the 23.6% Fib retracement level of the recent drop from the $3,105 swing high to $2,651 low. An immediate resistance on the upside is near the $2,880 level. There is also a major bearish trend line forming with resistance near $3,000 on the hourly chart of ETH/USD.

Ethereum Price

Source: ETHUSD on TradingView.com

The trend line is close to the 50% Fib retracement level of the recent drop from the $3,105 swing high to $2,651 low. A close above the $3,000 resistance could start a decent recovery. The next major resistance might be near the $3,105 level. A clear break and close above the $3,105 level could start a steady increase. The next major resistance sits near $3,135 and the 100 hourly SMA.

More Losses in ETH?

If ethereum fails to correct higher above the $2,880 and $3,000 resistance levels, it could start another decline. An initial support on the downside is near the $2,800 level.

The next major support seems to be forming near the $2,650 level. A downside break below the $2,650 support zone could lead the price towards the $2,550 zone. The next major support is near the $2,500 level, below which ether price might decline towards the $2,420 support zone.

Technical Indicators

Hourly MACDThe MACD for ETH/USD is slowly losing pace in the bullish zone.

Hourly RSIThe RSI for ETH/USD is still below the 50 level.

Major Support Level – $2,650

Major Resistance Level – $3,000

Source: https://www.newsbtc.com/analysis/eth/ethereum-struggles-below-3k/

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Evergrande crisis: Buy the dip or bail? Pundits weigh in

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As the prospect of Chinese property giant Evergrande defaulting on $305 billion worth of debt looms, pundits are weighing in on how the firm’s bankruptcy could impact the legacy and crypto markets.

Speculation as to whether the real estate investment giant will default has coincided with a downturn across the crypto and stock markets, leaving many analysts divided on whether traders should be buying the dip or looking to take profits in preparation of further bearish momentum.

At the time of writing, Bitcoin (BTC) is down by around 13% since the downturn started on Sept. 18, while the S&P 500 is down by 1.7% and the Hang Seng has dipped 2.8% within the same time frame.

Some are asserting that Evergande’s possible default could represent another Lehman Brothers moment — citing the major investment bank’s 2008 declaration of bankruptcy on $600 billion worth of debt that kicked off the Global Financial Cris.

However, speaking at the Greenwich Economic Forum on Sept. 22, Bridgewater Associates co-chairman and co-CIO Ray Dalio downplayed the significance of an Evergrande default and suggested that the debt is “manageable.”

Dalio admits that while investors will be stung, he thinks that Evergrande’s debt won’t cause structural damage, as the Chinese government may swoop in to restructure the firm and strike deals with the company. He said:

“[The] Lehman moment produced pervasive structural damage through the system that wasn’t rectified until the Treasury came across in terms of its borrowing and then the Fed came across with quantitative easing, but this is not that kind of a shake-up.”

Ming Tan, a director at the credit rating agency Standard & Poor’s (S&P) predicts the Chinese state will intervene to restructure Evergrande.

Speaking to Financial Times on Sept. 20, Tan speculated that said restructuring is likely to see the “profitable parts of [Evergrande’s] business bought up by rivals,” with its debt obligations likely to be underwritten by either a consortium of commercial Chinese banks or the local central bank directly.

Influencer Lark Davis also isn’t too concerned:

Not everyone is so optimistic. The host of CNBC’s Mad Money show, Jim Cramer asserted Evergrande’s debt issues will likely impact the crypto market because nearly half of the reserves backing the leading stablecoin Tether (USDT) are held in commercial paper

Cramer urged for investor caution while Evergrande awaits a verdict on a potential government bailout, stating:

“I know the crypto-lovers never want to hear me say sell, but if you’ve got a big gain as I did, well, I’m begging you: Don’t let it become a loss. Sell some, stay long the rest, then let’s wait and see if China changes its attitude toward an Evergrande bailout.”

While Tether has denied holding any commercial paper issued by Evergrande, analysts have warned that the fallout from an Evergrande restructuring could have significant impacts on the broader commercial paper markets.

“Tons of Chinese businesses stand to get crushed by this fiasco, and they have Evergrande exposure, and that could spell real trouble,” said Cramer.

Marty Bent, a podcaster and the co-founder of Great American Mining, also sounded alarm bells in his Sept. 20 newsletter.

Bent suggested that an Evergrande default will unveil how “exposed the Western world is to China’s economy” via investments in the large real estate players, their debt instruments, and the debt issued by the Chinese Community Party (CCP).

“Evergrande is going under and it is dragging other large real estate developers in China down with it. The world is witnessing another Lehman moment,” he said.

Bent questioned the assertion that Evergrande is likely to be bailed out by the government, noting the party’s recent push to rein in Chinese capitalism and tighten regulations on the real estate market.

“The CCP has come out and stated that they do not plan on backstopping the real estate developers who are currently plummeting toward bankruptcy. It will be interesting to see if they keep this posturing as things get worse,” he said.

The podcaster also noted that while he unsure how the fallout from Evergrande will impact Bitcoin in the short to medium term, he is “thankful” he can hold Bitcoin as a hedge against the fiat-backed global financial system.

Related: ‘Extreme fear’ as Bitcoin falls below $40K … and then bounces

The share price of Evergrande has been steadily declining during 2021 as its credit woes have mounted. After opening the year at roughly $14, the price sits now at $2.20 — a loss of more than 84%.


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Source: https://cointelegraph.com/news/evergrande-buy-the-dip-or-bail-pundits-weigh-in

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