Our Contribution to Tokenized Investments
As the realization of tokenization’s crucial role in the financial landscape unfolds, the need for investment strategies to become adaptive is critical. While institutions expect smart contracts to elevate operational efficiencies in finance, opportunities presented in tokenization will test the resilience of investment strategies and products by allowing investors to evaluate how investments perform without the hindrances of frictional procedures in traditional finance (TradFi). As a response to these developments in early 2024, Laplace is introducing a platform that curates seasonally adaptive investment products with a client-centric custody solution for investors. Our product suite is engineered with advanced risk-managing strategies tailored to help each client optimize stability and growth while anticipating the rapidly evolving financial and investment markets.
Institutional vs. Individual Investment Dynamics
One institutional standard for accountability relies on the precise use of basis points to measure investment value, which is especially beneficial in facilitating large-scale investment decisions. A basis-point perspective often yields minor variances rather than substantial monetary differences when applied to smaller investments. Blockchain technology reduces the opportunity cost of capital movement and thus opens institutional-grade investment opportunities to individual investors with smaller investments. The programmable nature of digital assets, coupled with reduced settlement times, lowers entry barriers and provides global accessibility to institutional-grade servicing with the potential to increase individual returns. This progression shapes our approach to issuing investment products with transparent objectives that adapt to real-time economic conditions.
Fixed-Income Opportunities and the Current Outlook
World Bank’s Global Economic Prospects and International Monetary Fund (IMF) have unanimously projected slow economic growth in 2024. Given the uncertain economic outlook, fixed-income investments are recognized as a hedge and a stable investment option. Their guaranteed capital through diversified products serves as a safety net against the volatility of higher-risk investments, such as stocks, where risks may result in reduced dividends and returns. Additionally, fixed-income investments have the historical tendency to move inversely compared to stocks, which balances a stock-focused investment portfolio by providing a stable income source that is particularly beneficial in slow-growth environments. According to a Franklin Templeton article, high-quality fixed-income opportunities “can play a valuable role within a balanced portfolio to help reduce overall risk and provide diversification” and show resilience in their use to align investor returns throughout market corrections.
Investment Shift Tested in Decentralized Finance and Market Making
Industry experts have profoundly navigated the investing journey of traditional finance, naturally raising an inevitable question, “When will investment dynamics undergo a revolutionary shift?”
Transformation in finance typically occurs when groundbreaking developments integrate with investment landscapes. While blockchain technologies were publicized following the 2008 financial downturn, it was not until 2017 that the digital asset market’s adoption and liquidity truly captured global attention in the finance and marketing sectors. With the increased utility trajectory of digital assets, we realized this potential by capitalizing on our trading insight to develop a 24/7 automated market maker (AMM) for cryptocurrencies in 2018. After executing $90 billion in trades since Q4 2020 and expanding our comprehensive understanding of cryptocurrency trends, we decided to share our DeFi trading strategies in a tokenized product form for investors to explore and invest in.
Crypto Strategies: A Macro-Friendly Approach and Hedge to Diversify Investments
Blockchain-backed digital assets continue to gain prominence in the current digital age, similar to industry giants such as Amazon and Google during the previous technological revolution. This has increased demand for global regulation in trading, network infrastructure, user adoption, and investor interests.
Larry Fink, CEO of BlackRock, stated in a CNBC interview, “ETFs are step one in the technological revolution in the financial markets. Step two is going to be the tokenization of every financial asset.” The first cryptocurrency-based Exchange-Traded Fund (ETF) references Bitcoin as the underlying asset approved on January 10, 2024, by the U.S. Securities and Exchange Commission (SEC) in the U.S. The international exposure of a U.S.-based ETF legitimizes crypto assets and yields investor confidence in cryptocurrencies worldwide. While regulatory and utilitarian uncertainty over crypto assets in some countries position cryptocurrencies as high-risk assets, numerous blockchain ecosystems, and their native crypto assets have proven capacity to contribute to long-term growth in investment frameworks.
Instead of hedging against the challenges of the current slow-growing economy through direct investments in cryptocurrencies, Laplace offers exclusive crypto strategies, or AMM-based liquidity provision, as token investments for investors. According to Monica Long, President of Ripple on Cointelegraph, “In 2024, crypto will break the speculative hype cycles that have defined the booms and busts for the industry since Bitcoin’s invention. […] The biggest breakthrough will be pioneering compliance for decentralized finance.” As networks and applications gain resilience across major markets in the coming years, tokenized cryptocurrency strategies, while betting on largely speculative assets, are considered an optimistic macro hedge against factors contributing to the current economic conditions. This presents new opportunities for investors to diversify their portfolios and timely explore alternative investment models while broadening their investment access and inquisitiveness towards transformational technologies similar to the previous revolutionary cycle.