Tokenized Real-World Asset Market Hits $8 Billion: BlackRock and Ondo Finance Leading the Charge
Summary:
The tokenized real-world asset (RWA) market has reached $8 billion in total value locked this year. The rise was fueled by traditional finance bond yields outperforming low-risk decentralized finance yields during the 2022-2023 bear market. BlackRock has become the largest provider of tokenized U.S. Treasurys and RWA token performance has surged, despite the risk associated. Ondo Finance achieved the highest returns and strongest Sharpe ratio thanks to new product launches.
This year, the market for tokenized real-world assets (RWA), excluding non-interest-bearing stablecoins, has swelled to an impressive $8 billion in total value locked (TVL). RWAs that have been tokenized on blockchains span multiple categories - from private equity, real estate, government securities, to commodities and additional financial liabilities. Tokenized RWAs found their footing in decentralized finance (DeFi) when traditional finance bond yields overtook those of low-risk DeFi during the 2022-2023 bear market. The bold interest rate increases implemented by the United States Federal Reserve made the yields of U.S. Treasury competitive with DeFi stablecoin yields, despite significantly lesser risk. As of June 13, the one-year Treasury bill boasts a three-month average yield of between 5% and 5.24%, all the while Aave offers fluctuating annual returns on stablecoins from 3.73% to 7.46%. The market cap of real-world asset projects has hit $8 billion. Several protocols have exploited higher borrowing costs and a lull in DeFi activity to introduce tokenized U.S. Treasurys and tokenized private loans in blockchain environments. In the early days of June, the average annual yield of these tokenized private loans was 9.57%. With new institutional activity sparking a recovery of the crypto market in 2024, the TVL of RWA projects hit their current capitalization of $8 billion. Asset management behemoth BlackRock has broken into the field and rapidly become the biggest supplier of tokenized U.S. Treasurys with its BUIDL fund. It attained an immediate market cap of $180 million upon its launch and has since swelled to $462.27 million. Accounting for 30% market share, it is the top issuer of tokenized Treasurys, leaving Franklin Templeton’s Benji Investments fund in the dust. Nevertheless, the augmentation of the RWA market can be seen not only in TVL but in the token performance of allied projects. In May, RWA tokens surged by 55.20% and increased by 224.57% year-to-date. The tokens majorly contributing to this remarkable figure include TrueFi, Ondo, Dusk, Clearpool and TokenFi. Cointelegraph Research calculated the daily Sharpe ratios, a metric of excess return per risk unit, to evaluate the risk-adjusted year-to-date performance of RWA tokens, using daily returns from January 1 to May 31. The Sharpe ratios for RWA tokens were as follows: Ondo: 4.78, TokenFi: 2.66, TrueFi: 1.88, Dusk: 1.4, Clearpool: 0.4. In contrast, Bitcoin (BTC) and Ether (ETH) each netted a Sharpe ratio of 1.37 and 1.36, respectively. These ratios were determined using a risk-free rate obtained from the daily annual yield of a one-year Treasury bill. With Clearpool as the sole exception, all tokens displayed a superior risk-adjusted return compared to a BTC/ETH portfolio, which came in with an average Sharpe ratio of 1.37 during the time frame. The elevated Sharpe ratios of the RWA tokens suggest that they have provided a more equitable risk-return balance for short-term long trades. Predictably, they have also outshone a BTC/ETH portfolio regarding straightforward price performance, save for Clearpool. Coming out on top, Ondo Finance offered the highest returns with a year-to-date increase of 461.62% and the strongest Sharpe ratio at 4.776, thanks to the introduction of new products on its platform, such as a tokenized derivative of BlackRock’s U.S. Treasurys ETF – the U.S. Government Bond Fund (OUSG), which encompasses short-term U.S. Treasurys. After making a place for itself on the Solana blockchain and offering instant investments and redemptions, Ondo has ascended to the position of third-largest issuer of tokenized U.S. Treasurys as of June 13.
Published At
6/14/2024 7:30:00 PM
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