3 months ago
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Global crypto adoption surge drives demand for stable digital assets, with tokenized US Treasurys projected to hit $3B in 2024.
The growing crypto market is creating a space for tokenized versions of traditional assets like US Treasurys. As crypto adoption rises – marked by a 34% increase in holders since 2023 – investors are turning to stable, low-risk digital assets. Tokenized Treasurys meet this demand by offering exposure to government bonds within the familiar crypto space.
Moreover, this trend is evident in the significant expansion of tokenized products overall. Since January 2023, the total market capitalization in this sector has surged by over 150%. The potential size of the tokenized Treasury market by year-end is estimated using Cointelegraph data using ARIMA (Autoregressive Integrated Moving Average), GARCH (Generalized Autoregressive Conditional Heteroskedasticity), and linear regression statistical models.
DAOs Drive Tokenized Treasury’s Surge
The analysis suggests a positive outlook for tokenized Treasurys, with varying predictions from different models. The ARIMA model projects a market capitalization of $2.12 billion by December 2024, while the GARCH model forecasts a higher $3.93 billion. In contrast, the linear regression model estimates a mid-range figure of $2.47 billion. Weighing these forecasts produces a combined market capitalization estimate of $2.66 billion by year-end, likely the most accurate outcome.
Moreover, the growing interest from Decentralized Autonomous Organizations (DAOs) in tokenized Treasurys could further drive market growth. These community-driven investment entities view them as a potential source of capital. Notably, Arbitrum and MakerDAO have already announced investment plans. Arbitrum intends to allocate approximately $25 million, or 1% of its treasury, while MakerDAO plans a much larger investment of $1 billion, nearly 19% of its treasury.
This surge in DAO interest is primarily due to their limited stablecoin reserves, which can be easily converted into yield-bearing bonds. However, a significant challenge remains: DAO treasuries are often dominated by their own illiquid tokens. Directly converting these tokens into tokenized bonds could disrupt the market.
DAOs Eye Treasury Bonds for Stability
To address the challenges of illiquid token treasuries and disruptive market conversion risks, DAOs could consider forming partnerships with bond issuers. By using their tokens as collateral or by gradually acquiring tokenized bonds, DAOs can reduce volatility and avoid price crashes from large token sales.
If more DAOs allocate parts of their treasuries to tokenized Treasurys, the effect could be substantial. As of July 30, DAO treasuries held $24.3 billion. A small allocation, from 1% to 10%, could add $243 million to $2.43 billion. This would increase the market capitalization of tokenized US Treasurys by 13% to 31%, which currently stands at $1.85 billion.
