The Fading Middle Ground: Is Web3’s Endgame Wall Street’s New Poker Table?

A Dream of Revolution Meets Harsh Reality

For years, crypto fans dreamed big. They saw Web3 as a force to beat Web2. The idea was simple: put stocks from Nasdaq on blockchains. Use smart contracts instead of old stock exchange systems. Real-world assets, or RWAs, would change global money forever.

But watch the price charts jump up and down. Think back to one key date: November 10, 2023. Why? Strong hopes for the first spot Bitcoin ETF led big money to flow into safe paths. CME’s open interest shot past Binance’s.

CME numbers that day: About 111,100 BTC open interest. Value around $4.08 billion. That was 24.7% of all network open interest.

Binance: 103,800 BTC, worth $3.8 billion.

This shows a tough truth. Traditional finance, or TradFi, is eating crypto’s lunch. And it’s one-sided.

Two Paths: One Easy, One Blocked

Picture two roads. Road 1: TradFi enters crypto. Think CME futures or BlackRock ETFs. Road 2: Crypto enters TradFi. Like tokenizing US stocks or RWAs.

Markets give a clear winner. Road 1 races ahead. Road 2 crawls. Tech is not the issue. It’s compliance costs that kill liquidity on Road 2.

Why do Wall Street pros slip into crypto so easy? Crypto struggles to enter their world?

Marginal Costs Tell the Story

Economics has a key idea: marginal cost. The cost to make one more unit.

For big players like CME, CBOE, EUREX, or SGX, adding Bitcoin trades costs almost nothing extra.

• They have clearing licenses for decades.
• Risk models are top-notch.
• Links to top hedge funds ready.

Bitcoin is just like gold, oil, or soy. File with CFTC. Tweak settings. Boom – a market for billions in trades, all legal.

Now flip it. Crypto exchanges want to sell tokenized Tesla stock for USDT. Huge wall ahead.

Recall FTX equity tokens. They helped sink FTX. Regulators saw them as big sins.

To do it right, crypto platforms need:

• Broker licenses.
• Clearing licenses.
• Fix laws across countries.
• Heavy KYC and AML checks.

Costs skyrocket. Not step by step – they explode.

Crypto natives lose before starting. TradFi is born legal. They make the rules.

Why Compliance Wins Big Money

Compliance means safety. Safety opens doors for real cash.

Many retail traders think liquidity is their small USDT piles. Wrong. True liquidity comes from:

• Pension funds.
• Endowments.
• Sovereign wealth funds.
• Big market makers.

These giants have strict duties. They can’t risk it.

That’s why 2024 Bitcoin spot ETFs are game-changers. Before ETFs, a family office adding Bitcoin faced headaches:

• Who holds keys?
• Exchange fails?
• How to audit?

ETFs fix it. No keys to hold. No shady exchanges. All in a normal US stock account.

CME’s Rise and Crypto’s Shift

CME Bitcoin futures open interest hits records. Not from small traders. From Wall Street doing basis trades and hedges.

Firms like Jump Trading and Jane Street get super-low delay on CME servers. Better than cloud services.

CBOE eyes crypto again. SGX and EUREX build safe channels in Asia and Europe.

Trend is clear: Crypto prices now set on regulated TradFi exchanges. Not offshore spots like old BitMEX or some CEXs.

Oil futures don’t need oil trucks. Crypto future won’t need wallets for most.

Crypto Loses Its Edge

In this shift, crypto drops ‘money’ use and ‘no censorship’ ideals. Left is a wild price mover.

Pack it in ETFs. Wrap in futures. Slot into classic 60/40 portfolios (stocks and bonds).

Web3 trading likely joins Web2 finance. Just another TradFi type.

Crypto die-hards hate it. But it’s how assets grow up.

The Future Split

Blockchain (Web3) keeps base jobs: Make assets like BTC mining. Prove ownership.

But trading, clearing, derivatives? Web2 giants rule with cheap compliance.

They sit at the center table. Like a poker game where suits hold the cards.

What It Means for You

Investors, wake up. Liquidity leads to gains. It’s flowing to suits now.

Spot ETFs proved it. BlackRock’s funds pull billions. ETH ETFs follow.

RWAs grow slow. Tokenized treasuries exist, but volumes tiny vs TradFi.

Smart play: Follow the flow. Mix crypto with TradFi tools. ETFs for easy exposure. Blockchains for new assets.

The shrinks. Web3 tech lives, but finance bends to Wall Street rules.

Is this the endgame? A new poker table for pros? Signs point yes.

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