Thread by @APompliano

1/ Institutional investors are not coming to save the crypto markets.

They’re coming to build the tokenized securities market.

Thread 👇🏽👇🏽👇🏽

2/ Blockchain has empowered three types of tokens:

- Cryptocurrencies
- Utility Tokens
- Tokenized securities

3/ Cryptocurrencies are highly speculative currently. Each asset can drastically increase in value, but they can also go to zero. This is high risk, high reward bucket with no compelling way to protect downside.

Institutional investors will put less than 1% of assets here.

4/ Utility Tokens are joke of blockchain tech right now. It’s early stage VC (most will go to zero) but investors don’t get equity, cash flows or recourse debt.

High risk, high reward (& not legal) w/ no downside protection. Institutions will back funds out of venture bucket.

5/ Majority of the utility token funds in the space aren’t bankable by institutions. No experience, no compliance depts, no risk controls, etc.

Can’t pass due diligence & fund sizes too small (some institutions write $50-100M min check size).

6/ Crypto investors ask “how much can we make??” & insitutional investors ask “how much can we lose??”

Also, institutional managers don’t get piece of profits — there is no upside for them personally to take more risk. Can lose job if lose $$ tho.

This is important distinction

7/ So what are institutional investors going to do?

They’re going to keep buying the same assets they understand and can underwrite the risk on.

Insitutitonal investors are going to fuel the tokenized security market.

8/ These institutions have allocated capital for stocks, bonds, real estate, etc.

When pitching tokenized securities, funds aren’t pitching blockchain but rather pitching stocks, bonds, & real estate.

9/ The institutions see an opportunity to keep buying the same assets but with new advantages:

- Higher levels of liquidity
- Better price discovery
- Lower fees
- Global asset portfolio

10/ Simply, tokenized securities are a lower risk way for institutional investors to enter this industry. It covers their ass, while giving them exposure.

11/11 Many people keep saying that tokenized securities aren’t “crypto.” They don’t realize that when you’re talking to smart money, this is an advantage.

Remember, smart money don’t gamble 🚀