If you’re the kind of person who likes to keep a diversified portfolio of investments across cryptocurrencies and traditional stocks, then as things stand, re-balancing your portfolio is a real headache. Let’s say your stocks have done particularly well and you want to convert some of that value into crypto. There are several cumbersome steps you’ll need to follow.
First, you’ll need to sell the stocks from your brokerage account, for which you’ll have to pay a brokerage fee. Once the sale proceeds are deposited into your checking account, you’ll have to make a transfer to a fiat-to-crypto exchange. Once that’s cleared, you can then finally buy some cryptocurrency, although you’ll probably incur some more fees for that transaction too.
Let’s hope your target crypto purchase isn’t one of the altcoins that are only available on a crypto-to-crypto exchange. If it is, you’ll have to make yet another transfer to a second crypto exchange for your funds to eventually end up invested where you want them.
It’s hardly a smooth process, and the prospect of paying fees to multiple parties along the way makes it almost prohibitively expensive. Your new investment would have to start providing returns pretty quickly to cover the expenses you incurred making the switch. The process isn’t any easier in reverse—buying stocks with crypto involves all the same steps and costs.
However, the entire process will now be much more comfortable. DX.Exchange is launching a brand-new service which will allow users to trade real stocks as digital tokens.
— DX.Exchange (@DXdotExchange) December 23, 2018
How to Trade Tokenized Stocks on DX.Exchange
The trading process on DX.Exchange is very straightforward. As a user, you set up an account and deposit your fiat or crypto. You then put in a buy order for the tokenized stocks you want to purchase, whether they are Amazon, Google, Intel or any other publicly traded company. You can pay directly with your crypto funds.
When the purchase is complete, you will see the digital stocks on your account, and you can track their value the same as a paper-based stock in a brokerage account.
Because DX is a company operating under license from the Estonian Financial Intelligence Unit, it’s fully regulated in the EU. The technology powering the exchange is provided by NASDAQ, meaning users are assured of a fully compliant, secure trading experience that’s free of manipulation.
Alongside NASDAQ, DX partners with MPS Marketplace Services Ltd, which is a company providing liquidity solutions to financial markets, registered in Cyprus. Behind the scenes, when you put in a buy order for tokenized stocks, MPS Marketplace Services will purchase the physical securities from the open market.
Using the Ethereum blockchain, the company then creates ERC-20 tokens that correspond to the purchased stocks. As the purchaser, your ownership is recorded immutably on the Ethereum blockchain.
From there, it’s precisely the same as owning a paper-based stock. The token value is the same as the stock value, and you’re eligible to receive any dividend payments that are made. If you decide to sell, then you can easily convert your stocks back to cryptocurrency using DX.Exchange, again without having to go through a broker.
Not a CFD
It’s important to make a distinction that this service provided by DX is not the same as the current Bitcoin futures offered by traditional exchanges like the Chicago Mercantile Exchange. These Bitcoin futures are actually a contract for difference (CFD), which are settled in cash involving no physical trade of Bitcoin itself.
In contrast, DX.Exchange is offering the opportunity to trade crypto for digital tokens that are underpinned by real stocks. It provides the same experience as trading in physical stocks, just without the friction associated with using a broker and a traditional stock exchange. Because it’s based on the blockchain, you can trade tokenized securities at any time, not only during stock exchange opening hours.
Multi-Country Support and Reduced Friction
DX.Exchange offers its website and customer support on a 24/7 basis, in multiple languages including Russian, Spanish, and Mandarin. An official sponsor of Bloomberg’s Crypto Summit, the company has been building some impressive credentials in the run-up to this launch.
By introducing a frictionless way to exchange crypto and stocks, this new offering from DX has the potential of becoming a landmark in the evolution of cryptocurrencies. For anyone who has been looking for an easier way to rebalance their diverse portfolio, this is the ideal solution.