By Tiana Laurence, EVP at ABE Global, a next-generation securities exchange
Crypto’s Place In The New Economy
The long-term viability of any economic model is only as good as its short-term stability. That in itself makes blockchain-based markets somewhat of a paradox. The blockchain industry sees the potential for blockchain-based equity and currency to be the present and future of economics. At the same time, it’s the digital wild west, with the technology sometimes learning as we go — and as much as governments and big businesses have invested, high-risk/high-reward situations come out of nowhere.
Thus, you have a little bit of both sides going on. People trust these markets enough to invest in them but there are certainly instances when it feels more like gambling against the odds rather than investing.
It turns out transferability is both a blessing and a curse for blockchain-based markets. A prime benefit of tokenizing assets such as equity is the overall ease of transferability. However, the market is learning that transferability does not equal liquidity. This presents a major obstacle for promoters of security tokens: how to deliver a path to liquidity and how to communicate that to investors.
That remains a critical issue as the industry tries to gain not just a foothold with the investment market, but a real significant piece of the pie. Crypto exchanges have failed to deliver daily liquidity to tokenized deals. In fact, 90%+ of token deals collapsed due to liquidity failures. Meanwhile, traditional exchanges cannot give clear guidance to how security token offerings (STOs) can reach markets structures optimized for low-cost liquidity.
This conundrum leaves STO issuers stuck between a rock and a hard place thanks to the double-edged sword presented by global 24-hour trading. Sure, it’s convenient for traders to be always on, but that pace has a ripple effect not found in traditional markets. The high accessibility of 24-hour…