The Convergence Of Stocks And Cryptocurrency

Business, Computer, Security, Currency, Finance

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In five or ten years, there might not be any difference between trading stocks and trading crypto. The two asset classes are converging in ways we couldn’t have imagined just a few years ago.

More than 9.5 million Robinhood customers traded crypto in the first quarter this year. Robinhood is most commonly known for giving everyday investors wider access to the stock market. On Robinhood (and Charles Schwab), investors don’t have to buy whole shares of companies anymore. They can buy fractional shares, which are just small pieces of individual shares. Fractional shares were popularized by crypto. In fact, crypto was designed for fractional ownership.

Fidelity already allows its wealthiest clients to buy and sell crypto. It also wants to launch a bitcoin ETF. So do Van Eck and several others. And last week, crypto exchange Binance announced it was launching a token pegged to the price of Tesla stock.

Each Binance Tesla token represents a Tesla share (future tokens will represent shares of other stocks). The token is backed by a depository of underlying securities. And it will behave much like Tesla stock. As the price of Tesla goes up, so will the token’s price. And as the price of Tesla goes down, so will the token. According to Binance, “stock splits will be respected,” and dividend payments will be honored. The whole goal of the stock token is to participate in the economic development of the underlying asset.

The tokens will be purchased and settled in the Binance USD stablecoin. And Binance isn’t charging a commission to trade the token. That gives Binance users the same “stock investment experience” as people that use Robinhood, Charles Schwab, TD Ameritrade and E*Trade (among others). And investors can buy fractional shares of the token, just like they would any other crypto.

The stock token is a major breakthrough for investors. It just won’t help American investors — yet.

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