Crypto exchanges are gaining market share from traditional financial (TradFi) trading venues through tokenized products, but mainstream adoption of tokenized precious metals remains limited by price and liquidity issues.
Permanent silver accounts for about 40% of the peak volume of Comex Silver (SI) contracts, the world’s largest silver futures market and more than 70% of the silver futures volume traded on global exchanges, according to a Thursday report from Binance Research.
In March and April, tokenized silver accounted for 14.90% and 14.98% of Comex trading volume, up from just 1.37% in January.
While this growth suggests that crypto exchanges are capturing more demand for 24-hour exposure to traditional assets, particularly metal-related perpetual assets, Kaiko analysts said that depth of liquidity and price formation remain major obstacles to widespread adoption among traditional investors.
Crypto TradFi professionals need reliable pricing and strong liquidity
Tokenized products offer 24/7 trading, which can create vulnerabilities compared to TradFi’s gold and silver futures, and holiday and weekend closings create “a natural circuit breaker that really protects the quality of the market,” Kaiko research analyst Laurence Frausen told Cointelegraph.
This exposes tokenized products to worsening order book debt, widening spreads, and lower reference prices from shuttered traditional exchanges.
Traditional commodity products avoid these issues through centralized clearing, unified liquidity, standardized contracts, and “coordinated business hours that prevent liquidity deserts,” Frausen said, adding that cryptocurrencies need “better chain abstraction and unified liquidity aggregation” to compete with TradFi.
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Despite infrastructure concerns, tokenized gold trading volume has outpaced gold futures trading volume on some regional commodity exchanges, a trend that is accelerating every month, according to Binance Research.
Binance Research also said that gold perpetual trading outperformed several regional commodity exchanges in March, reaching 401% of gold futures traded on Japan’s energy commodity futures exchange TOCOM, compared to 228% on India’s Comprehensive Commodities Exchange (MCX) and 216% on Dubai Gold and Commodities Exchange (DGCX).
Binance attributed some of this growth to “market-moving events” that occur regularly over the weekend, exposing investors to gap risk through traditional exchanges operating during normal trading hours.
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