Investing Strategy: 6 Disruptive Crypto Tokens to Watch, Oppenheimer & Co. – Business Insider


  • Oppenheimer & Co. released a blockchain white paper listing 10 key themes to watch this year.
  • The rise of crypto tokens is one of those themes.
  • We list the six tokens the firm’s analysts say can disrupt traditional industries.
  • See more stories on Insider’s business page.

The investment-banking firm Oppenheimer & Co. expects blockchain technology to eventually upend many legacy industries, including banking, law, healthcare, and supply chains, it said.

In the firm’s most recent blockchain white paper, analysts said blockchain and crypto adoption had parallels to the widespread adoption of the internet in 1998.

“We are barely in the first inning of blockchain innovation, we think, similar to the Internet in the late 1990s, when an explosion of innovation (and speculation) took place,” the analysts said in the March 26 report.

Oppenheimer & Co blockchain hype cycle graph from March 26 research note

Oppenheimer & Co.’s blockchain hype-cycle graph from its March 26 research note.

Oppenheimer & Co


The analysts outlined 10 key crypto and blockchain themes to watch for in 2021.

One key theme is the rise of cryptocurrency tokens. The analysts said the tokens had the potential to disrupt legacy organizations and industries.

“Right now, we are seeing a surge in the number of new token-based community business models that disrupt rent-seeking middlemen,” the analysts said.

The total value of the cryptocurrency market is about $1.5 trillion. For tokens, it’s about $40 billion, but this is five times more than what was listed in the firm’s last white paper in November.

What are crypto tokens?

Cryptocurrencies are digital currencies that facilitate transactions. Bitcoin (BTC) and ether (ETH) are two of the most widely traded examples. 

Crypto tokens are a type of cryptocurrency that can represent a specific asset or use case on the blockchain. 

Tokens are usually created, distributed, and sold through an initial coin offering. An ICO is a crowdfunding exercise that typically enables funding of the project development.

There are two types of crypto tokens: fungible and nonfungible.

Fungible tokens are all the same and have no special value. They can be used as currency, credit, or an exchange of value. For example, fiat currencies are fungible, so are bitcoins. The uses of fungible tokens tend to fall into three main buckets: payments, utility, and securitization.

Nonfungible tokens (NFTs) are unique. So there is no standard value attached to a token, and they cannot be exchanged for one another equally.

For example, a nonfungible token can represent unique ownership of a real asset, such as art, music, or real estate, or a digital identity.

“Tokens have created new community-based applications with strong network effects that cut out the middleman,” the analysts said. “These token-based business models enable communities to work together using smart contracts that automate trust.”

The analysts said they expected tokens to be a game changer for blockchain and the economy. Tokens and digital assets can be embedded with new features that make them more robust than legacy fiat currencies, and, in turn, this drives usage and engagement of new platforms, the analysts added.

Why now?

Crypto tokens and ICOs have been around for some time. In fact, investors were cautioned about ICOs in 2017 by the Securities and Exchange Commission.

But Oppenheimer analysts now see a variety of practical use cases being developed in the crypto space, from interest accrual on crypto deposits to art ownership and cross-border payments.

The analysts said they expected financial-services, asset-management, and legal industries to become areas that are ripe for blockchain disruption.

Toward the end of 2020, the analysts said they saw a “step-function increase” in both interest and activity surrounding blockchain and crypto. They said they believed this came down to two reasons:

1) Supportive macro environment

The weakening of the US dollar, rising interest rates, and monetary supply expansion have supported bitcoin’s rise.

“The macro environment we have outlined above is typically an attractive environment for gold, but BTC, aka ‘digital gold,’ has massively outperformed in 2020 and early 2021,” the analysts said.

2) Unlocking new investors

“Greater institutional adoption on concerns around fiat currency has been a catalyst for digital asset performance,” the analysts said. “Tokens are creating innovative new platform-based business models, including DeFi, and non-fungible tokens (NFTs).”

DeFi

Crypto tokens underpin a concept called decentralized finance, which is gaining momentum in the crypto space.

Decentralized finance (DeFi) seeks to replace a variety of centralized and regulated banking institutions with decentralized systems and products, which are typically built on top of the Ethereum blockchain.

Oppenheimer & Co graph of the top 10 DeFi projects from March 26 research note

Oppenheimer & Co.’s graph of the top 10 DeFi projects from its March 26 research note.

Oppenheimer & Co


DeFi removes the middleman and leverages blockchain technology to enable complex financial use cases directly between parties.

“Finance and particularly decentralized finance is going to have the largest near term impact on public markets,” the analysts said. “According to Coinspeaker, a number of IPOs of DeFi companies are coming, including Coinbase next month and BlockFi within a few quarters. These valuations will be in the tens to hundred billion dollars, we think.”

With decentralized finance booming, we listed the six crypto tokens the analysts said had the potential to disrupt legacy industries and the companies those tokens could affect.

Oppenheimer & Co. said the white paper was in no way a recommendation to investors to buy any cryptocurrencies, ICOs, utility tokens, or security tokens.

Disruptive tokens:



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