The team at Security Token Market (STM) notes that cryptocurrencies have been an exciting yet “controversial” center of discussion heading into 2022.
Virtual currencies like Bitcoin, Ethereum, and 8,000+ others have “maneuvered their way into everything from traditional Wall Street boardrooms, to innovation hubs in Silicon Valley,” the STM team noted in an extensive report.
But through all the “noise, uncertainty, and a striking -50% Bitcoin selloff going into 2022,” one important question remains on many institutional investors’ minds:
“Where lies the true intrinsic value in these alternative assets?”
As explained in the report:
“In traditional markets, …an asset’s valuation is … a function of (1) discounted future cash flows, (2) expected net value, and (3) miscellaneous macroeconomic uncertainty. In cryptocurrency markets, … that same question often points to emotion, speculation, distrust in central governments, and irrational chart patterns. A majority of cryptocurrencies as of 2022 do not possess real, tangible assets to back their value, instead only relying on an unabridged faith that the coins will overtake fiat currencies into widespread circulation.”
According to the update, this is where security tokens “truly beg to differ.’
The report further noted that a security token “consists of a tangible, real-world asset backing its underlying value, while still employing all the digital benefits of the blockchain.”
The team also mentioned:
“Examples of these tangible assets include real estate, venture capital funds, natural commodities, or even fine art. This provides the investor with an asset class devoid of the uncertainty, noise, and speculation many investors often encounter with mainstream cryptocurrencies such as Bitcoin.”
They added:
“Security tokens also trade in accordance with traditional fiat currencies – meaning, if Bitcoin’s or Ethereum’s price unexpectedly plummets overnight, investors will have nearly zero exposure to the cryptocurrency’s volatility. By being SEC-regulated and monitored, institutional investors can have greater diligence coverage compared to lesser-known cryptocurrencies.”
Aneesh Shinkre, a Research Analyst at Security Token Market (and the author of report), notes that tZERO’s security token started its tokenized raise back in August 2018.
The report explains that the dividend structure is “similar to that of INX, but paid 10% quarterly instead of a cumulative 40% annually.” Importantly, the dividend applies to Gross Profit, “as opposed to INX’s dividend of Net Adjusted Cash Flow from Operations
(CFO).”
According to tZERO, this dividend will only be paid if “consolidated GAAP net income exceeds 10% of [their] consolidated GAAP gross profit.” Assuming tZERO eventually posts a net profit in the coming years, this may be “a more attractive model for investors who want less exposure to a company’s SG&A, depreciation & amortization, or changes in working capital.”
The report concluded:
“2021 was a defining year that showed the world what security tokens are capable of in the years and decades to come. … A surging wave of companies tokenizing their assets, paired with a relatively less efficient market, provides investors with handsome investment returns, market-making opportunities, and pioneering status in an industry projected to grow into a multi-trillion dollars over the decade.”
You may review the complete report here.