Crypto Industry Loses Trust as Institutions Seek Token Value Link
Key Summary
Crypto institutions managing €800 billion in assets are seeking a clear connection between network activity and investable value, as the industry struggles to win trust and demonstrate sustainable revenue streams. Experts believe that partnerships and infrastructure development are crucial for institutional investors to build a strong case for crypto investments. The lack of transparency in tokenization and revenue distribution has raised concerns among allocators, who are looking for a more concrete test of the industry's maturity.
Institutions Seeking Token Value Link
Brendan Ma, head of investment strategy at the Arbitrum Foundation, met with representatives of institutions managing about €800 billion in assets to discuss crypto. They expressed concerns about the disconnect between network activity and investable value.
Private Bankers Weigh In
Private bankers and wealth managers emphasized the importance of building towards durable, sustainable network revenues and a P&L that can be geared towards investment and reinvestment. They asked how network activity connects to the asset an investor can own.
Stablecoins and Treasuries First
Stablecoins and Treasuries were among the first assets to be tokenized, and the race is now on to expand to private credit, equities, commodities, and hedge fund strategies. Private and publicly listed banks have advanced thinking about products and investments but have been less public about their ambitions.
Robinhood Chain Offers a Test
Robinhood Chain, an Ethereum layer-2 network built with Arbitrum technology, offers a concrete test of the distinction between allocators and builders. The network has seen significant growth, with 793.7 million transactions and $51 million in fees paid by users between July 1 and September 30. However, the fee stream was concentrated, with a 12-day burst accounting for 74% of the quarter's network fees.
Governance Documentation
Arbitrum's governance documentation describes ARB as a token for voting on DAO proposals. An investment case must explain how those governance rights connect network economics to returns. Institutions that value the infrastructure could build on it independently of an ARB position.
Industry Maturity
Experts predict that institutions will be very active and knowledgeable participants in the next 12 months, as they seek to build trust and demonstrate sustainable revenue streams. However, the industry still faces significant challenges in addressing the disconnect between network activity and investable value.