The line between traditional finance and crypto continues to blur. Recently, the exchange platform Backpack announced the launch of 24/7 trading for tokenized US equities. This move joins a rapidly growing global trend where various firms compete to offer uninterrupted access to traditional assets using blockchain technology.
What is stock tokenization?
Tokenization involves representing a real-world financial asset, such as a share of Apple or Tesla, as a digital token on a decentralized network. This removes the constraints of traditional stock exchange opening hours, allowing you to trade at any time. However, it is vital to understand that you are not buying the physical stock directly on the exchange, but rather a digital derivative backed by that asset, which introduces specific custody intermediaries into the process.
Risks of trading around the clock
Being able to trade at midnight or during the weekend sounds attractive, but it involves technical and operational challenges you must know before participating:
- Lower liquidity: Outside of standard market hours, liquidity often decreases drastically.
- Wider price gaps: Low liquidity can cause the spread (the difference between the buying and selling price) to widen significantly, making your trades more expensive.
- Unexpected volatility: After-hours price movements can be sharp and difficult to predict without the volume of the primary market.
Because of this, rigorous risk management is vital. Just because the market is constantly open does not mean you should trade without rest; always set clear loss limits, understand who backs the tokenized assets, and never risk capital you cannot afford to lose in an environment that never sleeps.
Source: cointelegraph.com
Educational content, not financial advice.