Tokenized US Treasurys Forecasted to Exceed $3 Billion by Late 2024

As the adoption of cryptocurrencies continues to rise and treasury yields remain high, tokenized US Treasurys are projected to reach a market cap of $3 billion by the end of 2024.

Growth in Crypto Adoption

The swift increase in global cryptocurrency adoption, which has risen by 34% in holders since 2023, has driven the demand for reliable and low-risk digital assets. Tokenized US Treasurys allow users to access government bonds within the crypto ecosystem. Recent data illustrates a remarkable growth in tokenized products, with their total market capitalization soaring over 150% year-to-date.

A comprehensive analysis using various statistical models—such as Autoregressive Integrated Moving Average (ARIMA), Generalized Autoregressive Conditional Heteroskedasticity (GARCH), and Linear Regression—has been performed to estimate the sector’s potential market capitalization by the end of 2024. Below is a graphical representation of the forecasts for 12 tokenized US Treasury products combined.

Market Predictions

• ARIMA model predicts a market cap of $2.12 billion.
• GARCH model forecasts $3.93 billion.
• Linear regression estimates $2.47 billion.

These figures can be interpreted as different market scenarios—bear, bull, and base-case. When combining these models, a projected market capitalization of $2.66 billion emerges by the end of 2024.

DAO Interest in Tokenized US Treasurys

Recent engagement by decentralized autonomous organizations (DAOs) signifies a growing interest in tokenized US Treasurys, which may lead to significant capital inflows into these products. For instance:

• Arbitrum plans to invest approximately $25 million (around 1% of its treasury).
• MakerDAO intends to allocate about $1 billion (around 19% of its treasury).

While many DAOs currently lack stablecoin reserves that can be converted into yield-bearing bonds, some are beginning to consolidate their treasuries using real-world assets to foster long-term stability.

Typically, DAO treasuries consist mainly of their own tokens, creating uncertainty about how they may transition to tokenized bonds. Rather than liquidating these tokens for cash, partnerships with bond issuers could allow them to use such tokens as collateral or to gradually acquire tokenized bonds, reducing price volatility associated with large-scale sales.

Potential Inflows from DAOs

If additional DAOs allocate parts of their treasuries to tokenized US Treasurys, significant inflows could result. As of late July, total DAO treasuries were valued at $24.3 billion. Allocating:

• 1% would yield an influx of $243 million (bear scenario),
• 5% would bring in $1.22 billion (base scenario), and
• 10% would add $2.43 billion (bull scenario).

This could represent an increase of 13% to 31% from the current tokenized US Treasurys market cap of $1.85 billion.

Conclusion

The demand for tokenized US Treasurys is expected to rise as investors in the crypto space look for low-risk, yield-generating investment options. Nevertheless, challenges could emerge if the Federal Reserve begins to cut interest rates, potentially reducing their appeal as an investment choice.

For further insights on interest rates and market trends, visit the CME FedWatch Tool.