When it comes to investments, liquidity is an important part of the equation. After all, a liquid market means you can easily enter and exit a market without suffering from excess slippage.
However, there are a number of asset classes that generally offer a range of incredibly lucrative investment opportunities, but currently suffer from either poor overall liquidity, or are simply difficult to enter and exit.
Now, thanks to the advent of blockchain technology and a few innovative platforms, these untapped opportunities are becoming increasingly accessible. Here, we take a look at three projects using blockchain technology to unlock the hidden potential of illiquid markets.
Long-tail assets are a relatively untapped investment class, and are typically leveraged only by the few that can spot and take advantage of niche products with low market capitalization and liquidity.
Until recently, investing in many long-tail assets was a challenging affair, and was largely the domain of long-term investors that often had to rely on intermediaries to broker a deal with a buyer at a later date.
This is exactly the issue that Liquidify looks to address with its blockchain-powered platform that looks to accelerate the liquidity of long-tail assets by allowing users to easily swap them over the blockchain through a unique asset pooling system — known as a liquidity accelerator.
It achieves this through a unique combination of two utility tokens. These are LAT, a token that can be used for collateralizing long-tail crypto assets in a reversible process, and LFY — the token used for governance of the protocol, including asset whitelisting and rating.
The platform provides a simple entry channel for investors to gain exposure to a range of long-tail assets that would previously be either unfeasible to invest in, or impractical due to problems with fair price discovery.
Version 1.0 of the Liquidify platform is scheduled for launch in April and will bring with it collateral synthetization — allowing users to load their long-tail assets into a liquidity pool. These are then converted into a number of LAT and LFY, which can be used throughout the Liquidify ecosystem.
Real estate and blockchain are an unlikely combination, but when done right, the result is surprisingly effective.
Right now, investing in real estate can be a challenging task. Not only is there a high barrier to entry due to the simple cost of many properties, but there are also geographical restrictions and countless intermediaries to deal with, while quickly liquidating a property investment is typically unfeasible without taking a serious hit.
But LABS, a platform that uses blockchain technology to bridge the worlds of real estate and DeFi, might be the first to solve these issues. It does this by allowing the tokenization and fractionalization of real estate investments. Whoever purchases and holds these tokens will be the equivalent of a fractional owner in the underlying real estate.
This not only unlocks the liquidity of potentially illiquid real estate assets by making them more accessible to the everyday investor, but it also makes building an international real estate portfolio far more accessible, since investors can avoid the technicalities that come with securing property in other countries.
The security tokens created through the fractionization process will be tradable on a fully licensed securities exchange, and also LABS in-platform swap platform, ensuring holders can always source liquidity for their real estate shares.
The popularity of non-fungible tokens (NFTs) has grown immensely in recent months, as a wide range of new use cases became apparent, including NFTs that represent albums, virtual critters, real estate, and much more. We even saw the most expensive NFT sale of all time just weeks ago, with a recent Beeple NFT selling for a cool $69 million.
But despite interest in NFTs reaching record highs, they still suffer from one glaring issue — a lack of liquidity. Unlike regular cryptocurrencies that can change hands dozens of times in a day, NFTs generally move far slower, and have limited liquidity. But this might be not the case for much longer if NFT Tech has its way.
— NFT Tech (@TechNFTT) March 11, 2021
Although NFT Tech seeks to help users create non-fungible tokens (NFTs) and display their NFT portfolio, it has several intriguing features that could help seriously boost the liquidity of NFT markets. The first of these is its automatic valuation system, which assigns a value to NFTs to enable automatic NFT arbitrage.
But perhaps more important is its powerful order book-based NFT exchange, which allows users to place bid and ask orders for NFTs, helping investors easily buy and sell tokenized works of art and other NFTs on its marketplace.
The platform also features incentives for liquidity providers who can fill orders between multiple NFT marketplaces, further boosting the liquidity of NFTs.