The saying “If you cannot beat them, join them” is becoming a reality in traditional financial institutions. After demonizing cryptocurrency for years, now they come to realize that they cannot do anything to harm the space, for despite the attacks and misrepresentation, it keeps growing. So finally, they decided to join the league and, after seeing vast opportunities, to hijack the space. Many were glad when Blackrock introduced the Bitcoin ETFs, while others were unhappy. The latter see in such a move a frustration of the original vision of why BTC was introduced in the first place. As such, a lot of crypto projects claim to continue that seemingly lost fight.
Last year, I published a post about Digital Asset 2030. I shared it on Reddit, and it attracted 4,000 eyeballs. I also published it on publish0x, and it gathered 38 likes and received a $1.42 incentive. On Hive, I divided it into three articles, with each article receiving a reward of $10.23, $11.81, and $8.41, respectively; that’s $30.45 in total. The theme of the article explores the vision of digital assets by 2030, emphasizing the Hive blockchain's role in shaping a new economic frontier. It highlights the importance of mainstream integration, education, tokenization, NFTs, and empowering the unbanked while addressing the challenges of communicating Hive's value to Web2 users and promoting financial inclusion.
In this article, I want to explore the growing integration of digital assets into traditional finance, highlighting trends like tokenization, regulatory clarity, and institutional adoption while emphasizing the Hive blockchain's unique advantages in fostering financial inclusion and innovation.
A year ago, the idea of digital assets was still not so popular. Today, traditional financial institutions are embracing it. A recent example of this is research published by Roland Berger with the title “Capturing the multitrillion-dollar digital asset market.” It appears that since the growth of digital assets is inevitable, traditional financial institutions have finally decided to join the roller-coaster ride.
The above European management consulting firm claims to have an international presence with 3,000 employees and operates 51 offices in all major markets. The goal of publishing the above document is to inform executives who are contemplating leading their companies for success in the digital asset space. With this in mind, the writers gave an overview of the trends, clients, major players, and strategies to capture the expected growth and to come up with a competitive advantage.
Trends
Increasing demand is expected due to the following trends, including changes in macroeconomic conditions, a rise in retail trading, regulatory clarity, institutional adoption, and tokenization.
Under macroeconomic conditions, three factors are identified. They include the decrease in the federal funds rate, an increase in the market capitalization of digital assets, and inflation in several fiat currencies. Examples given to illustrate the last factor are the Argentine Peso and the Turkish Lira.
As for growth in retail trading, social networks are identified that contributed to the rising prominence of retail trading as a social phenomenon. The US is cited as an example. From a 3% retail trader in 2021, it is expected that the number will grow to 23% in 2025. Moreover, the experience of crypto.com is particularly mentioned as evidence of such growth, for the crypto exchange surpassed more than 100 million users in May 2024.
Though I don’t like the third trend, the idea of clarity in regulation is anticipated to have positive consequences for the digital asset space. Among 43 countries, 70% have already provided clarity in regulation as of January 2024. The Roland Berger team believes that this trend will fast-track global adoption.
Traditional financial institutions have been riding such adoption since the success of Bitcoin ETFs. Banks are now offering digital assets, showing their increasing influence in traditional finance.
The final trend that the Hive community is most familiar with is tokenization. We have a lot of bloggers here on Hive who have written articles about this for months, if not years. I heard about real-world assets (RWA) first here on Hive. It is projected that RWA could reach 10.9 trillion USD by 2030. So far, in my previous articles, I already identified at least six RWA in my list: stablecoins, treasuries, shares in the automotive sector, gold, real estate, and agricultural products. The article added two: art and intellectual property.
Clients
The clients or customers are classified under two categories: long-term and short-term. The long-term customers are those whose strategy in digital assets is just to buy and hold, whereas the short-term customers are those who trade.
The long-term customers are further subdivided into three classes: entry-level investors, defi specialists, and institutional investors.
The same thing with short-term customers. They too are divided into three groups: passive retail traders, active retail traders, and algorithmic traders.
Reviewing these six types of customers, I see myself falling under the defi specialist category. This type of customer is further described in terms of their product needs, preferred assets, price sensitivity, custody preference, transaction frequency, and risk tolerance.
Defi specialists have access to a wide variety of digital assets, including layer 2 tokens and even emerging tokens. They also utilize charting tools and DeFi platforms. They prefer self-custody and direct token purchases.
As I reflect on the description of defi specialists, I observe that some of them do not apply to me. Moreover, the article does not include the idea of microinvestment and microtransaction. Furthermore, the writers seem to be clueless when it comes to a blockchain network that offers feeless transactions. As such, I see Hive as the leader in these unique services.
Major Players
As for major players, seven categories were enumerated:
- CEX
- Brokers
- DEX
- Banks
- Wallet providers
- Payment service providers (PSPs)
- Infrastructure providers
Again, among the above major players, though CEX dominates the market, capturing 90% of the share, I see DEX as very attractive. Defi specialists boast of the absence of an intermediary. We prefer direct wallet-to-wallet trading, enhanced privacy, personal control over our assets, and enjoying the widest coin selection. PSPs, on the other hand, are working toward “seamless integration of cryptocurrency transactions into everyday financial activities.”
Strategies
Under strategies, four topics are discussed: product portfolio, target customer, geographical boundary, and value proposition. Geographical boundaries confused me. We are talking about digital assets. It seems that conventional finance cannot give up the idea of a boundary that is only applicable in the physical space. How can such a boundary be consistently implemented in the digital space?
As for the value proposition, four items are specified: fees, customization, trust, and innovation. Again, when it comes to fees, I believe that Hive is the leader!
I won’t touch on customization and innovation, for they are self-explanatory. As for trust, I find it anomalous for the writers to think that regulatory standards can promote such. They seem to forget that Bitcoin and cryptocurrency were introduced in the first place to render this “trust” factor obsolete.
Grace and peace!
Reference:
Pierre Samaties, Gabriel Socha, Akshit Adani, and Mohamed Sharafeldin. Capturing the Multi-Trillion Dollar Digital Asset Market: Strategies to Win the Race (Dubai, UAE: Roland Berger Middle East, 2024), accessed December 16, 2024, https://www.rolandberger.com/en/Insights/Publications/Capturing-the-multitrillion-dollar-Digital-Asset-market.html.