These benefits have led to a huge new wave of institutional interest in cryptocurrencies, thanks to the launch of spot bitcoin exchange-traded products (ETPs) in U.S. markets. The level of engagement and excitement – this new enthusiasm – is infectious. As regulatory clarity grows in areas such as Europe with the recent MiCA framework, institutions are poised to take on digital assets at a larger scale. Dreamers in the cryptoverse are beginning to see their visions become reality as intrepid startups continue to pioneer through the digital wild west.

VanEck, a well-known investment management firm, offers insights into this evolving landscape, particularly regarding the tokenization of assets and its potential impact on the altcoin market. The firm does not provide direct guidance in this regard. The tide is turning, and traditional assets will find new life on the blockchain — unlocking interesting new opportunities for institutional and retail investors alike.

Institutional investors are increasingly drawn to the benefits of tokenization, primarily focusing on accessing new investors and capital (52%), cost savings and lower administrative fees (46%), and operational efficiencies (40%). These considerations reflect the growing recognition of the potential and promise of blockchain technology. It holds enormous potential to improve efficiencies and reduce administrative burden across the financial system.

The Allure and Challenges of Tokenized Assets

Tokenization of assets such as real estate, bonds, and commodities means creating digital versions of ownership rights on a blockchain. This entire process comes with a multitude of benefits, most notably greater liquidity, wider access to the market, and possibilities such as fractional ownership. It creates new and different challenges, especially when it comes to liquidity provision.

The most cited Stickney worry is of course, the fragmented liquidity. Even as tokenized assets have started to trade on blockchain platforms, largely the liquidity remains fragmented. This is primarily because institutional investors favor other blockchains and siloed liquidity pools. That fragmentation can result in great slippage and increased spreads, particularly in market recessions, even on large exchanges.

Understanding the Risks of Liquidity Tokens

LPs need to be aware of multiple types of risks before joining tokenized asset pools. These include:

  • Impermanent Loss: This occurs when the price ratio of pooled assets changes, potentially reducing the value of the LP's holdings compared to simply holding the assets.
  • Risk of Exploits: Flash loan exploits, such as the 2020 Harvest Finance hack ($33.8 million loss) and the AnubisDAO incident in 2021 ($60 million loss), can result in significant losses for LPs.
  • Concentration Risk: If one token in a pair significantly outperforms the other, LPs may find that they would have been better off simply holding the tokens individually.

Tokenized Equity: A Catalyst for Altcoin Growth?

The benefits include:

  • Increased Liquidity: Tokenized stocks can attract more investors to the market, leading to increased liquidity, which can also benefit the altcoin market.
  • Broader Market Participation: By lowering the minimum investment threshold, tokenization can attract a wider range of investors, promoting a more inclusive financial ecosystem that can also include altcoins.
  • Regulatory Compliance: The growth of tokenized stocks may lead to more established players entering the market, which can help drive regulatory clarity and legitimacy, benefiting the altcoin market as a whole.
  • Maturation of Blockchain Technology: The increasing adoption of tokenized stocks can contribute to the maturation of blockchain technology, which can also improve the infrastructure and credibility of the altcoin market.
  • Diversification of Investment Options: Tokenized stocks can provide investors with more diversified investment options, which can lead to increased interest in other alternative assets, including altcoins.

The emergence of tokenized assets is inextricably linked with the state of play regarding crypto regulation, both globally and specifically within the United States. The US is aiming to lead in decentralized digital assets, as seen in the executive order “Strengthening American Leadership in Digital Financial Technology”.

The US Regulatory Landscape

Under Acting Chair Mark Uyeda, the SEC has taken a decidedly less aggressive approach. Despite this, the agency has not moved to enforce actions against large crypto firms such as Coinbase, Kraken, and Ripple. The industry would benefit from having clear rules that limit market uncertainty. In his confirmation hearing on March 27, 2025, Atkins made this point the centerpiece of his testimony. Tackling digitization challenges, like many experts, Bishop is calling for a national digital asset stockpile. This should include confiscating illicit cryptocurrencies in order to strengthen the U.S. position in global finance.

Institutional interest is skyrocketing, with massive impetus from technological innovation and regulatory evolution. Together, this convergence is making for a more mature and accessible digital asset ecosystem. Tokenized assets have the momentum and are poised to change the world of finance as well as the altcoin market altogether. At the same time, this change poses significant dangers and opportunities for those bold enough to ride the wave into the decentralized future.