Tokenization is the process of converting over $1 billion worth of US Treasury bonds into digital representations that are stored on open blockchains. These tokenized Treasury securities, which are exchanged as tokens on the blockchain, stand in for US government securities.
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How Tokenization Works with Public Blockchains and the New Era of US Treasury Bonds
The market for tokenized US Treasury debts is rising significantly, as expected.
The total value of US Treasury notes tokenized on public blockchains like Ethereum, Polygon, Avalanche, Stellar, and others has recently surpassed one billion dollars, according to data provided by analyst Tom Wan of the cryptocurrency company 21.co.
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Digital copies of US government securities, known as tokenized Treasuries, are exchangeable as tokens straight over the blockchain.
When compared to January of last year, the market value of this type of investment has increased by nearly ten times.
Moreover, since the traditional financial behemoth BlackRock announced the tokenized BUIDL fund based on Ethereum on March 20, it has seen an increase of 18%.
With a tokenized value of $245 million, BlackRock’s BUIDL fund is currently the second largest fund of its kind, only surpassed by Franklin OnChain U.S.
Franklin Templeton’s Government Money Fund (FOBXX), which has a 360.2 million dollar total value and a share represented by the BENJI token.
Historic purchases of Bitcoin ETFs
Wan claims that the demand for tokenized versions of these securities has surged due to the sharp rise in Treasury yields over the previous two years.
The 10-year yield, also referred to as the risk-free rate, has increased from 1.69% in March 2022 to 4.22%, which is the main driver of the trend.
In the decentralized finance market, this increase has affected how appealing loans and loans of stablecoins anchored to the dollar are.
Net inflows of $243.4 million have been recorded in the Bitcoin ETF market, and the value of BTC is expected to rise to $72,000 the next week after falling below $63,000.
After BlackRock’s IBIT and Fidelity’s FBTC, ARKB is now the third Bitcoin ETF to cross this mark in a single day. On Wednesday, FBTC experienced a record low of 1.5 million dollars, while IBIT saw inflows of 323.8 million dollars.
Hashdex ETF is the first Bitcoin ETF available in the US.
The number of spot Bitcoin exchange-traded funds (ETFs) offered in the US has increased to eleven. This action was taken more than two months after the first ten spot BTC ETFs were introduced.
The most recent addition to the list is the asset manager Hashdex’s Bitcoin Futures ETF, which has been traded under the ticker DEFI on the New York Stock Exchange since 2022.
This fund was changed from a futures-based fund to a spot Bitcoin ETF, and it is now known as the Hashdex Bitcoin ETF.
In contrast to other spot Bitcoin ETFs, the DEFI can retain up to 5% of its assets in BTC futures contracts that are traded on CME, according to a press release from Hashdex.
The company claims that by making this choice, DEFI will be able to provide a more predictable fund creation and redemption process as well as more precise tracking of the price of Bitcoin over time.
This strategy is novel for Bitcoin ETFs, but most S&P 500 ETFs attest to its widespread application in other settings.
The DEFI currently owns a small number of futures contracts in addition to 5,500 BTC. The fund has an expense ratio of 0.90%, which is higher than the other nine spot products but lower than Grayscale Bitcoin Trust (GBTC)’s1.50%.
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