More liquidity equals higher prices... if that's where the balance in opinion re value allows it ? Otherwise, liquidity equals stability... or liquidity for liquidities sake... if there are no drivers of change in value perception... with the driver being market makers looking for profit on markups in transactions, even with nothing there but a turnover going nowhere ? But, liquidity also means sharp sell offs in a panic, and massive spikes in a frenzied bull market with good news...
Translating that view of stocks traded in a market to tokenized real estate... not that linear, I think...
One of those where we have to try it and see what happens before knowing how the dynamic will be different than it is other markets...but I don't think the instincts are any different...
For one, I'd rather fund my next RE project with "token participation" in the market, instead of bank debt ?
A lot of publicly traded stocks are public because... they aren't of sufficient quality not to be... the public can be less discriminating than professional financiers or collateralized lenders when analyzing the risks...
The cost of capital issues... including the cost in care and feeding of the middlemen, and that cost element required in support for discounting others risks ? Seems to me tokenization might make a lot more sense for participants in real estate... on both ends, not in the middle... than it does in stock market context...
Collateral values don't attach to shareholders in the stock market... so the risks they take are subsidizing the lenders risks... and lenders are (debt is) creating larger shareholder risks that may amplify a lot with lenders making poor choices...over and above business risk, market risk, and debt risk, as all the while the value generated is siphoned out of the business, into lenders pockets. Lenders may have incentives to make a business fail... and end up owning it all at a discount price, at the bottom in the market. Not a great deal for shareholders or businesses... but a great deal for banks if they can limit market access to alternative sources of capital... thus greatly shifting the balance in risks, and in the terms in loans. Regulation "for safety"... raises costs... benefiting lenders at everyone else's expense.
RE businesses applying the capital... in the degree they have to sustain loan payments to lenders who are holding the business hostage for rents on capital with a hold on collateral that can be called... are always at the mercy of lenders controlling business survival based on the sustainability of cash flow. Shared business risks still flow to the lenders in proportion to their exposure, but most of the market risks stick to the business owners and/or shareholders. Disrupting that model with new capital tied to a token, enabling capital formation without any ongoing repayment obligations... leaves the RE business advantaged in being able to manage for longer term value... rather than sustaining short term cash flow and flowing the value created to the lenders, while reducing the future potential value by shorting the business of cash.
The diversion from the primary purpose in enabling capital formation... is killing the markets, today... or, more accurately, it is leaving actors in the real world without access to the benefit of functional markets, and in the aggregate is denying society of the benefit of markets.
HFT... is an exercise in "extracting value" from others in the market in an exploit made possible by parsing the market rules in an application addressing Zeno's Paradox. Divide the market more finely than others, by price increment, or time increment... and you can trade to infinity in the more finely divided space between clock ticks, or between the smallest increments in the currency used in pricing. The net value added is zero or negative.
In practice, it is massively negative... because real market participants are driven out of the market... leaving more shadows trading slips of paper with each other... notionally representing things others don't care about any more. The lack of caring by former participants... translates into accelerations leading to a lack of value.... eventually. It is high speed virtual monetary masturbation... delivering what it does in a serial dilution of potential that leads to statistical relevance in the form of impotence.
The more of that which is tolerated... the less REAL value a market has, and the less real capital will be induced into the market, to enable new business formation... As that trend extends, it hollows out the house of cards... eventually leaving it sustaining itself entirely on fictions instead of any real value created.
Irony in that discussion... maybe... given our focus on dividing RE into tokens to access a new range of market structural benefits, and to add market interest, including potentially enabling greater liquidity...
But that concept differs... as it attaches RE values that do exist to a tokenized ownership of real collateral. The real asset behind a token would generate additional reasons to have an interest, and to want to own and hold a token... as an RE holding... and as an alternative to owning things through physical possession, yes... but also as an alternative to the risks in holding currency as a store of value... or to holding other instruments that aren't asset backed... and have greater risk of evaporating.
Tokenizing RE brings new interests to the market, with new reasons for participants to want to play... while HFT is doing the opposite in the existing markets.
Perhaps one is the antidote to the problems enabled by the other... ?
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