Analysis of the Development Trends and Investment Opportunities of Stock Tokenization

1. Introduction

Recently, stock tokenization has become a market hotspot, attracting the attention of numerous investors. This article will delve into the principles of stock tokenization, analyzing the arbitrage and investment opportunities in the current market, and providing a detailed introduction to different types of arbitrage logic, operational processes, and potential limitations to help professional investors better grasp market opportunities. At the same time, we will also explore the opportunities for individual investors in this trend, such as fragmented trading and diversified asset allocation as new avenues. Although stock tokenization has brought many opportunities, it still faces challenges in terms of technical implementation and price anchoring, requiring investors to maintain rational judgment.

2. The Mechanism of Stock Tokenization

2.1 Definition

Stock tokenization refers to the conversion of traditional company stocks into tokens on the blockchain through blockchain technology, allowing them to be held, traded, and combined on-chain. This is essentially a derivative of traditional stocks and does not represent direct ownership of the stocks; therefore, its value and risk are closely related to the underlying stocks.

2.2 Mainstream Implementation Path

Currently, there are three main implementation structures for stock tokenization:

1. Third-party Custody + Exchange Integration: Regulatory companies confirm that a third party holds real stocks, and after verification by an oracle, tokens are issued at a 1:1 ratio. The exchange is responsible for front-end display, user trading, and matching. This structure has high transparency and deeply anchors the price through the staking of real stocks.

2. Licensed Brokers + Proprietary Links: Some licensed institutions provide a complete issuance, settlement, and self-custody cycle on their own blockchain, ensuring high compliance, but the technical and legal complexities are relatively high.

3. Contract for Difference (CFD) Structure: Users trade contract products linked to stock prices rather than actual "mapped assets". These products are usually priced by the platform itself and bear the responsibilities of market making, without granting shareholder rights, and face significant disconnection risks.

3. Arbitrage Opportunities in Stock Tokenization

Currently, the market mainly focuses on stock Tokens issued by third-party custody, which have a strong anchoring relationship with the underlying stocks, resulting in relatively lower investment risks.

According to data from the platform, as of July 9, 2025, the total market capitalization of stock tokens is $422 million, while the market capitalization of just one stock, Nvidia, reaches $3.9 trillion. This indicates that the liquidity in the stock token market is still insufficient.

Insufficient liquidity combined with time differences in trading leads to deviations in token prices compared to corresponding stock prices across different platforms and time periods, creating arbitrage opportunities. Below are three classic arbitrage strategies applied to stock tokens.

3.1 Hedging Arbitrage between Spot Market and Token Market

Arbitrage Principle

When both the token exchange and the stock market open simultaneously, if the token price is significantly higher than the spot stock price, arbitrageurs can buy the spot stock while shorting the corresponding stock token in the token market. When the prices revert, they can sell the spot stock and buy back the token to close the position, earning the price difference. The reverse is also true.

Arbitrage Operation Process

For example, at a certain point in time on July 9, 2025:

1. Nvidia (NVDA) spot stock price is $160.00, while its corresponding stock token NVDAX is quoted at $160.40.
2. Buy NVDA spot stocks while short-selling NVDAX stock tokens in the token market.
3. Continuously monitor the price trends of the two markets.
4. When the prices of the two markets return to $158.00:
   • Buying spot stocks before selling in the traditional market
   • Place a market order to buy back the short position in the Token market to complete the hedging.
5. Each share completes a risk-free arbitrage, with profits derived from the initial price difference, resulting in a profit of $0.22 after deducting fees.

Arbitrage Conditions

This arbitrage strategy is highly sensitive to slippage and transaction fees, requiring quick identification of trading signals and execution of operations. It is suitable for quantitative institutions with high-frequency operational capabilities that can obtain lower transaction fees.

3.2 Arbitrage of price differences of the same stock Token between different exchanges

Arbitrage Principle

Buy tokens on a lower-priced trading platform and transfer them to a higher-priced trading platform for sale. The operation can be executed when the price difference between different exchanges is large enough to yield a profit after deducting fees.

Arbitrage operation process

Assuming the price of a certain Token on exchange A is 100 USDT, and the price on exchange B is 103 USDT:

1. Buy Token on exchange A
2. Transfer the Token to Exchange B
3. Sell at a price of around 103 USDT on exchange B.

Arbitrage Conditions

Arbitrage of this kind is limited by factors such as on-chain transfer speed, withdrawal restrictions, exchange deposit times, and trading pair depth. Arbitrageurs typically need to use pre-stored liquidity, quantitative trading, and multi-account collaboration to achieve "risk-free arbitrage".

3.3 time difference arbitrage

Arbitrage Principle

Traditional stock settlements typically have a delay of T+2 or longer, whereas the trading and settlement of tokenized stocks are based on blockchain, theoretically allowing for settlements in minutes or even seconds. Arbitrageurs can take advantage of the settlement time difference to arbitrage using the instant price adjustments in the token market before the traditional stock settlement is completed.

Arbitrage Operation Process

1. Deploy a monitoring system or rely on news sources to capture significant news during non-trading hours.
2. Analyze the direction and magnitude of the impact of the news on related stocks.
3. Buy or short related stock tokens on the token platform based on your judgment.
4. Wait to close the position after the spot market opens or wait to close the position in the token market when the token price returns.

Arbitrage Conditions

Arbitrage opportunities of this kind often last only a few minutes or even seconds, requiring a high-performance news push system and automated trading response. In addition, it is essential to ensure the accuracy of the news sources to avoid misjudging investment directions due to false news.

4. Opportunities for Individual Investors

Although arbitrage strategies are typically more suited for professional investors, there are also opportunities for individual investors in the wave of stock tokenization.

4.1 Purchase fractional stocks

After the tokenization of stocks, investors can purchase smaller units of stocks, such as 0.1 shares or even 0.001 shares, reducing the investment threshold.

4.2 Diversified Asset Allocation

The round-the-clock trading system allows users to trade at any time, achieving diversified asset allocation and mitigating regional financial risks.

4.3 Lower transaction costs

Trading tokenized stocks through a decentralized exchange platform can significantly reduce transaction fees and lower costs for investors.

5. Risks and Challenges

Although stock tokenization arbitrage offers new opportunities for investors, it also comes with various risks:

• The risk of losses caused by the continuous expansion of price differences
• Slippage risk, delay risk and transaction fees eroding profits
• The risk of price decoupling due to oracle failures or attacks
• Uncertainty in legal and regulatory aspects

6. Conclusion

Stock tokenization is an important path for the cryptocurrency market to penetrate "real-world assets," providing new opportunities for both professional and individual investors. Investors can choose different investment strategies based on their own characteristics, but at the same time, they need to pay close attention to the security of the underlying assets and the associated systemic risks.