In the wake of the current focus on the great potential security tokens hold, a large number of startups are focusing on serving the upcoming STO market. However, simply tokenizing assets is not enough as security tokens cannot be traded on existing cryptocurrency exchanges and that greatly limits them from having the greatest benefit tokenization can offer: liquidity.
A fintech startup, Smart Valor, is thus focusing on the creation of a security token exchange for alternative investments. Smart Valor also enables the creation and launch of security tokens but that’s a development pursued by others in the Crypto space. Combining a launchpad for security tokens with the development of a security token exchange ensures that STOs lead to the creation of tokens that have the liquidity benefits attached to utility tokens.
The Importance of a Secondary Market
Smart Valor is focused on making alternative investments accessible to the masses. It aims to achieve this by enabling fractional ownership of alternative assets, made possible by way of tokenization, and by allowing investments in the form of Crypto.
Alternative investments, unlike stocks or bonds, have limited liquidity. This is a major drawback that limits interest in them from even those who can afford the usual high entry capital demands of most alternative investments. Smart Valor’s strength in attracting asset issuers to its platform is that it makes alternative investments highly liquid as tokens, that represent alternative assets, will be traded on Smart Valor’s security token exchange.
This is a key competitive advantage that other platforms aiming to provide STOs lack. The factor of providing a secondary market along with the STO launch platform gives Smart Valor a tangible differentiation.
The Benefits of a Secondary Market
Tokenization provides advantages to those who aim to participate in alternative investments but currently cannot, those who can already participate in alternative investments, and those who want to issue alternative assets.
People who currently lack capital needed to invest in alternative investments will be able to buy fractions of alternative assets in the form of tokens. Additionally, those who currently do have capital to participate in alternative investments would be able to diversify their portfolio as fractional ownership would remove the demand of dedicating large sums in a single asset.
Asset issuers will benefit as tokenization will enable more capital, from the masses, to enter the alternative investment market, and it will also enable them to easily sell security tokens, that they retained during the STO, on the secondary market.
Cryptocurrency exchanges play an incredibly important role. They are the means to enter the market with fiat and the gateways to other tokens and coins. Similarly, security token exchanges will play an incredibly important role in the upcoming security token wave; secondary markets for security token will provide liquidity while ensuring people can access security tokens with ease after the token offering is complete.
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