BlackRock (NYSE: BLK), which pioneered the Bitcoin ETF, is returning with a new Ethereum (CRYPTO: ETH) blockchain investing product. This innovative product could change Wall Street if it works. That's a lot to ask, but Ethereum may be ready to capitalize on this trillion-dollar market opportunity. With that in mind, let's examine this new product, why it launched on Ethereum, and how it could change banking.
A tokenized asset fund? The BlackRock USD Institutional Digital Liquidity Fund (BUIDL) is a tokenized asset fund that follows Wall Street's long-term asset tokenization trend. The word "asset tokenization" sounds scary, but it just means turning a financial asset into a blockchain-based digital asset.
BlackRock is "tokenizing" nearly $100 million in cash, T-bills, and repos. Institutional investors receive a unique Ethereum blockchain crypto token when they buy the fund. It works like a stablecoin but can offer a daily payout. Stablecoins, normally linked 1:1 to the U.S. dollar, shouldn't do that! Blockchain technology's efficiency allows BlackRock's crypto token to do this.
This product could be groundbreaking, even though it's hard to grasp. Blockchain-based digital assets should outperform real-world assets. They should therefore attract more investors. BlackRock said the new tokenized asset fund offers institutional investors transparency, liquidity, and settlement time.
Smart experts believe asset tokenization could be a multitrillion-dollar trend in the future. Citigroup reportedly termed asset tokenization a $4 trillion market. Boston Consulting Group is even more optimistic, calling it a $16 trillion opportunity.
Why Ethereum? So you get my point, right? Once investors realize the potential of this multitrillion-dollar development, any blockchain spearheading it might see a huge valuation boost.
So it's important that BlackRock chose Ethereum for its first tokenized asset fund. The Wall Street titan chose Ethereum above other blockchains. That's because Ethereum is the 800-pound gorilla of decentralized finance (DeFi). Ethereum has 57% of all blockchain DeFi activity, according to the total value locked statistic (TVL).
Of course, you can argue that this is just one product. So what? BlackRock manages almost $10 trillion in assets, making it the largest asset manager in the world. Additionally, BlackRock CEO Larry Fink has stated that asset tokenization is a Wall Street megatrend. After Bitcoin ETFs started, he told CNBC asset tokenization was next. Clearly more is coming.
Potential valuation impact If you think asset tokenization is the future of finance and Ethereum will stay the DeFi leader, Ethereum might rise in value as this trend gains traction. By how much?
The Ethereum TVL indicator might be tracked over time to see if it is rising as planned. Ethereum should start showing up in the figures as more tokenized asset funds debut and Ethereum gets more involved in asset tokenization. Ethereum's TVL is $52 billion and its market cap is $425 billion. Every $1 billion TVL gain adds $8 billion in market cap.
Ethereum may not be able to lead this trend. Blockchains are inherently decentralized. No CEO at Ethereum headquarters is calling the shots to jump into this business.
Instead, thousands of Ethereum developers worldwide are improving the Ethereum blockchain, making it more appealing to corporations like BlackRock when they launch new products. While you should keep your Ethereum expectations low, this might be a trend to watch.
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