We've seen the rise of cryptocurrencies. They're here to stay. Bitcoin, for instance, has lived in the mainstream consciousness for several years now. Though crypto assets are very much known at this point, very few realize just how much tokenization is going to disrupt absolutely everything. Stock market equities? Forget about it. That's the dinosaur way to build wealth. It's also very clear that US equities are a completely rigged game. Millions jobless, the economy shut down, yet stocks go up. Why? Because they must go up. Beyond that, this year alone we witnessed ridiculous instances of overleveraging from Melvin Capital and Archegos. A hedge fund and a family office gaming the system to such a degree that it destabilized broad markets. Younger Americans are sick of this and they're building a better version. Tokens are the new stock market and nobody in finance aside from maybe Raoul Paul realizes it yet.
This system is begging to be disrupted
One of the big misconceptions about tokenized offerings is that they're just speculative instruments made by scammers and coin pumpers. There is certainly an element of that in the space. But this characteristic isn't unique to tokens. To be sure, there are numerous scam equities trading on US stock exchanges. I've covered one here. To truly disrupt a system such as our current financial investment system, tokenization must solve a problem. I believe it does. Not only that, but there is actually a paradoxical overlay between what traditional equity value investors look for and what these early stage tokens are providing early adopters.
Tokens are like Value Stocks
Not to sound like a crusty old "back in my day" curmudgeon, but stocks used to not suck. While total return annually has obviously stayed elevated through the years, that return is almost entirely from price appreciation. There is almost no dividend yield in the S&P in 2021.
Why does this matter? When publicly traded companies only reward shareholders through price appreciation of STONKS rather than through dividend payout, it means the shareholders can't direct that capital the way they might like to. It also means without selling, these returns are never actually realized. This might not matter if you never plan to sell your stocks, but if you're not an accredited investor or a landlord and you're looking for passive income from capital you can't really get it anywhere BUT from DeFi and staking projects. Stocks won't do it. Bonds won't do it.
Stocks are just collectibles now
There really isn't any fundamental difference between stocks and baseball cards at this point. Both investment avenues are driven by speculation of higher prices at a later time. If I have $1,000 to put into something, what offers risk/reward upside while also generating yield? Growth stocks? Nope, odds are there isn't any yield. What about sports memorabilia? No again for the same reason. So where should that money go? Tokens. Value investors can get same or better risk/reward upside from something like Algorand (ALGO) and also get 6% APY by holding it in a COINBASE account.
Beyond Yield
It isn't all about yield though. Sometimes we just want to find a horse and make a bet. Again, tokens seem like the best way to make those bets going forward as the economy changes. There are a variety of projects that provide the potential of price appreciation with staking rewards for the user base. One company that I'm pretty excited about is Decentral Games (DG). This project is a bet on gambling in the metaverse. There is a rewards system for players and liquidity providers who help build out the adoption. LBRY is another very cool project that rewards loyalty that has been well covered. Tokens like Celsius (CEL) and Nexo (NEXO) allow for greater yield on assets under custody while also providing price appreciation. I view bets on CEL or NEXO the same way I'd view a traditional equity stake in a bank years ago.
Tokens are the answer
Hopefully I've explained my thesis well enough at this point. Whether you're searching for passive income or just looking to make a speculative bet on a company, tokens fit the bill. This makes tokenized projects a very unique asset class at this time because they satisfy what stocks and bonds used to satisfy. Namely, the mix of price appreciation and yield. You can get both from tokens. Value investors should really take a hard look at this space. Investors can analyze a project the same way they'd analyze an equity. What does the company or organization do? Who is working on it? What is the market potential for the monetization model? Value investors are already inherently good at asking these questions, they just need to shift their paradigm from the old way to the new way. We are still at the ground floor of this. The early adopters are going to be handsomely rewarded. When you can wrap your mind around the idea that tokens are the new stock market, the sky is the limit.
