This week, the Security Token Group released its yearly comprehensive study – The Security Token Market Secondary Trading Analysis: 2019. The study provides direct insight into the current state of security token adoption. Additionally, it sheds some light on the major hindrances encountered by investors looking to participate in the secondary market.
The study produced some interesting data. For one, the stats revealed a lack of progress on multiple fronts concerning security token adoption. The report highlighted areas of concern ranging from a lack of understanding surrounding the new technology, all the way to postponements due to regulatory approval. Perhaps the most glaring piece of data the report confirmed is a surprising lack of global investor demand for these regulated tokens.
Security Token Market Secondary Trading Analysis: 2019
As part of the Security Token Group’s comprehensive approach towards the market, researchers chose to evaluate all international jurisdictions. In this manner, the report is able to reflect a global metric of the market’s performance over 2019. This approach provided much-needed insight into the overall health and performance of the secondary markets internationally.
2019 STO Secondary Trading Market Overview
As one of the first reports published regarding 2019’s security token secondary market progress, readers are privy to a huge amount of previously unknown data. For example, the report indicates that the secondary security token market peaked in January at $229,501,221.25. Interestingly, this peak is the direct result of tZERO‘s TZROP preferred equity token trading.
Notably, by the end of the year, the secondary market experienced a 67% decline with December’s market cap at only $76,062,199.46. Currently, the total volume for the secondary markets is around $2,410,607.94. This volume breaks down into a monthly average of $214,682.90 or broken down even further, a daily average of $7,156.10.
Despite a flourishing STO market, 2019 only saw three security token exchanges go live. Interestingly, all three exchanges meet US jurisdictional compliance requirements. This data proves the growing desire of blockchain firms to enter the US markets. The three exchanges that went public in 2019 are tZERO, OpenFinance Network, and Uniswap Exchange.
The tZERO exchange entered service in January 2019. At that time, tZERO only hosted one security token, the TZROP preferred equity token. Despite the lack of variety the platform provided, tZERO maintained the highest market cap all year. As such, tZERO represented a remarkable 58% of the entire secondary market cap. Consequently, TZROP is the largest token in the industry to be traded over 2019. In addition to the most activity, TZROP also receives the title for being the most consistently traded security token on secondary markets regarding daily volume.
The OpenFinance Network opened its doors before tZERO in the fourth quarter of 2018. Unlike the competition, OpenFinance managed to provide investors with a selection of security tokens to trade. As of December, the exchange trades five live security tokens: Blockchain Capital, Lottery.com, SPiCE VC, 22x Fund, and Protos Asset Management.
Uniswap opened later in the year. Uniquely, this exchange focused on real estate-backed security tokens. The exchange hosted three RealT tokenized properties in Detroit, Michigan. Since Uniswap primarily trades real estate tokens, the exchange provides investors with a host of new and unique investment opportunities. Importantly, analysts see tokenized real estate as having unprecedented upside potential.
Security Token Market Secondary Trading Analysis – 2019
The report also shed some light on the pace at which these tokens gained popularity. Notably, the start of 2019 was strong. Importantly, there were five live security tokens trading in Q1. Despite the strong start, most of these tokens did not see daily trading. In fact, the report revealed the vast majority of security tokens only experienced a few trades per month.
Security Token Market Secondary Trading Analysis Reveals Two Truths
After reviewing all the data presented, the Security Token Market Secondary Trading Analysis proved two important points regarding security token activity on the secondary markets. One, it showed that security token infrastructure is beginning to permeate across traditional markets. This adoption is evident as many of the world’s largest institutions decided to trial blockchain tech as an alternative to the current business systems surrounding transactions and settlements.
This decision makes sense when you consider the improved efficiency and reduced costs a company gains from the integration. As examples of major institutions seeking to enter the security token sector, the report lists Santander Bank’s latest blockchain venture. Also, the tokenization of a $700B asset management firm by Franklin Templeton and Deutsche Boerse settling digital securities trades on-chain are listed.
The second, and perhaps most important takeaway from this report is that most retail investors (crypto and traditional) don’t have much interest in the current batch of security tokens on secondary markets. This lack of interests translated into the lackluster performance of most of the security tokens examined.
This dismal investor participation can be attributed to a number of causes. Analysts pointed to regulatory roadblocks, investor fatigue, and low expected returns as some of the main reasons behind the lack of participation. In turn, this disinterest translates into trading platforms struggling to provide much-needed liquidity to the sector.
Future Looks bright
While the Security Token Market Secondary Trading Analysis proved that there is much work to be done in the space, it also demonstrated that the market is developing slowly. Notably, the report showed that there are over 60 security token exchanges slated for launch in 2020. These exchanges span the globe including the United States, Canada, United Kingdom, Germany, Liechtenstein, Estonia, Netherlands, Switzerland, Gibraltar, Malta, Seychelles, Belarus, British Virgin Islands, Singapore, China, Philippines, Antigua, Jamaica, Barbados, Cayman Islands, Mauritius, United Arab Emirates, and Greenland.
Security Token Market Secondary Trading Analysis – A View into the Future
You really have to hand it to the Security Token Group. This team managed to put together a treasure trove of valuable information that is sure to help guide investors and organizations moving forward. For now, those interested in a geographic breakdown of these statistics can find the info here.