Tokenized stocks in action
If you’ve been investing in cryptoassets for some time, you might have amassed some good gains in Bitcoin, Ethereum or other cryptocurrencies.
You might be considering rebalancing your portfolio so that crypto isn’t overly dominant, but there is one major problem. Banks still don’t like to deal with crypto exchanges, and you can have problems passing fiat currency through your bank account after withdrawing from an exchange. If your intention is to invest in stocks with that money, you can now bypass the banks entirely by using stablecoins to move money to an exchange that offers stock trading and accepts crypto deposits.
Buy fractional stocks on eToro
Disclaimer: Your capital is at risk.
FTX is one such exchange that accepts crypto deposits that you can then use to buy tokenized stocks, and I have reviewed this exchange in-depth here.
FTX offers tokenized stock trading markets on a number of large-cap companies that are listed in the US. For instance, TSLA/USD is a market that trades the tokens of Tesla stocks. This works similarly to other financial derivatives.
Read more: How to buy crypto from a traditional stock broker
Meaning – when you trade these tokenized stocks, instead of owning the underlying shares, you are trading tokens that reflect the value of its future stock price. With that said, you can redeem the tokenized stocks you own with CM Equity for the actual shares. FTX is also looking to add more ways for users to withdraw tokens from FTX.
Tokenized stocks are traded like any other asset on the spot market. The only condition is that you have to clear KYC level 2 with FTX.
There is an extra layer of risk with tokenized stocks, as you have to trust that the exchange keeps full reserves of stocks in correspondence with the tokens issued. However, if you’re stuck being unable to cash out in the traditional way, I think this is an acceptable risk to take.
Moreover, exchanges like FTX even allow you to speculate on pre-IPO stocks, such as Coinbase, which traded for weeks on FTX (as a derivative instrument) before being issued on the NASDAQ market officially.
One other big benefit of tokenized stocks is that you can trade them 24/7. That means that if some important piece of news comes out during the weekend, you can take action immediately and front run all the other investors who have to wait till Monday morning in the US (if that’s where the stock is listed) to trade. Another advantage of the 24/7 nature of tokenized stocks arises if you live in a different timezone to that of the exchanges you trade in. Let’s say you are in Asia but trade on the US exchanges. Instead of having to change your natural workday times to align with the stock exchange opening times in the US, you can just trade the tokenized stocks at your convenience during daytime in your own timezone.
On the other hand, you can also buy traditional stocks from platforms that allow trading in both cryptos and stocks, with eToro being my favorite for this purpose. The big advantage with buying stocks in eToro is that you can buy fractional stocks. Some stocks have risen so much over the years that they have become inaccessible to many investors. The solution is fractionalization. Not many stockbrokers offer this service, but eToro is one of them.
Of course, eToro also allows you to use your crypto deposits to buy full stocks (not fractions).
So what you would do in this case is to transfer your crypto to eToro, sell it for Euro or USD, then use those funds to buy stocks within eToro itself.
If you’d like to learn more about how eToro works, please head over to my in-depth review of eToro for a comprehensive look at what you can do on this popular platform.
Disclaimer: Your capital is at risk.
What are your thoughts? Have you found any other ways of buying stocks with crypto?
Hi Jean, your research is well-written and on point.
Cheers,
Percy