Tokenization: the driver of the next bull market?
Whenever a new bull market begins, the search commences for developments that can accelerate growth. Tokenization, for example, is the process of giving existing financial products an onchain equivalent. Stablecoins are a proven example of this. Their success is reflected not only in the charts, but also in this week's headlines. Read more about this in todayās edition of the Bitvavo Market News.
Market update
Nearly 300 billion dollars in stablecoins have been issued on public blockchains, mostly within the Ethereum ecosystem. Three years ago, that figure stood at 125 billion and less than 20 billion six years ago. The crypto dollar is arguably crypto networksā biggest success story.
In Europe, a consortium of 37 leading banks plans to launch a euro stablecoin this year. Several banks in the US are also taking steps in this direction, though the sector is waiting for the stablecoin law to take effect on January 18, 2027. A major driver is the rise of tokenization, the process of representing financial instruments as crypto tokens. Compared to stablecoins, tokenization is still in its infancy.
If this growth continues, crypto networks will become an important part of the global financial infrastructure. It is plausible that the tokens of the crypto networks and protocols used will capture some of this value.
For many analysts and investors, the base case is that we are transitioning from a bear market to a new bull market. A breakthrough in tokenization could become one of the defining narratives and driving forces behind it.
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Banks and payment giants move onchain
With little news from the crypto sector this week, itās a great opportunity to look at what banks and payment companies have been up to. As it turns out, they've been anything but idle.
Last week on Monday, JPMorgan's digital dollar wentĀ live on Ethereum. JPM Coin is a so-called deposit token from the largest bank in the US. Each token represents one dollar held in a JPMorgan account and itās available exclusively to corporate clients.
On Thursday, US online bank SoFi launched a deposit token for retail clients. Each SOFIE token earns interest and US deposit protection up to 250,000 dollars. Customers can convert tokens at a 1:1 ratio into SoFiUSD, SoFi's stablecoin, to buy crypto or transfer money. However, they lose the interest and deposit insurance protection when they do so.
In Hong Kong, HSBC launchedĀ its first stablecoin on Friday: RedCoin, pegged to the Hong Kong dollar. More than 3.3 million users of the PayMe payment app can activate a wallet for the token in the coming days. RedCoin is not a public stablecoin like USDT or USDC; the coin runs on HSBC's own network.
Standard Chartered signed an agreement on Wednesday for the fullĀ acquisition of Zodia Custody. The bank helped set up the company in 2020 and is now choosing to integrate Zodia's technology into its own offerings. The reason? Standard Chartered wants to expand its presence in the crypto world, starting with services for institutional clients. The parties did not disclose the acquisition price.
On Thursday,Ā Axios reported that Visa is in advanced talks to acquire Fireblocks for about 2.5 billion dollars. Fireblocks provides the software banks and exchanges use to store and transfer crypto. The company responded much as banks often do when rumors leak: denying that any negotiations are taking place. "This is news to us, and not true at this time," a spokesperson said.
We finish our roundup with venture capital firm Andreessen Horowitz, which dropped the word 'crypto' from the name of its crypto fund, previously a16z Crypto. Now calledĀ a16z Frontier, the fund invests in AI, robotics, and biotechnology alongside crypto. Chris Dixon,Ā who leads the fund, noted: "Wall Street and fintech companies now regularly launch products on blockchains. Does that make them crypto companies? The label matters less."
Banks, payment companies, and investment funds moving into the crypto sector, and vice versa, is nothing new. This momentum has been building for some time. You might think we are approaching a point where this trend slows down instead of picking up, but last week's banking news shows there is no sign of that happening yet.
In other news
The US has finalized its first set of stablecoin rules. Regulator OCCĀ published on Wednesday the requirements issuers must meet under the Genius Act passed in 2025. The rules will take effect on January 18, 2027. Stablecoins must have one-to-one backing, and anyone redeeming them must receive their money within two business days. The Genius Act bans issuers from paying interest on stablecoin balances, however crypto companies that hold stablecoins on behalf of their customers can still offer rewards on those holdings.
JPMorgan includes Bitcoin in annual long-term report for the first time. Professional investors useĀ the report to build their portfolios. The asset manager expects a 10 percent annual return, with sharp price fluctuations along the way. Even so, the bank is yet to include Bitcoin in its model portfolios. The reason? JPMorgan still finds Bitcoin's changing correlation with other assets difficult to assess. Nevertheless, the bank acknowledges that the market is maturing and has put Bitcoin firmly on its radar as an asset class.
Strategy likely be removed from MSCI stock indexes. The index provider considers the Bitcoin company more as an investment fund than an operating company. Since companies that primarily hold investments can distort the composition of a stock index,Ā exclusion is likely. MSCI will release the final, new version of the index on November 11. If excluded, funds tracking the index may have to sell their shares. Saylor believes the resulting selling pressure would be manageable. According toĀ his estimate, this represents around 3.1% of shares outstanding.
Crypto exchange MEXC shutting down operations in the Netherlands. The company does not hold a MiCA license, and is believed to have been asked by Dutch regulator AFM to cease operations. The exchange is asking customers to move their assetsĀ before October 31. The final offboarding process will take place on November 16. It is unclear what will happen to assets of Dutch users left on the exchange after that date. In total, the exchange has now withdrawn from 13 jurisdictions, including the US, Canada, and the UK.Ā Bitvavo meanwhile, holds a MiCA license issued by the AFM, allowing it to continue offering its services in the Netherlands.
Satoshi Radio: Last week the internet seemed to go up in flames. One service after another went dark. In the latest episode of Satoshi Radio youāll learn why this is only the beginning and how to protect yourself. We also cover centralization among miners, the inclusion of bitcoin in JPMorganās long-term report, and the precarious position of Strategy in major stock indices.
This article is for informational purposes only and does not constitute a marketing communication or recommendation. None of the content herein should be considered as investment advice or a substitute for it. Bitvavo makes no guarantees regarding the accuracy or completeness of the provided information. Investments involve risks. There is a possibility of losing your entire invested capital.